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Can the U.S. patent system be saved?

By Gina Smith
July 19, 2012 06:00 AM ET

Speeding up the process

Another new capability, part of the AIA and in effect now, allows small companies to accelerate patent examination more cheaply. It'll cost $2,400 for entities with fewer than 500 employees, and double that for larger companies. The new fee structure is explained here. It is unclear at this point how much this will accelerate the process, as it changes from patent to patent.

But it should make a difference to small inventors and is perhaps the AIA's greatest change to the patent system, former USPTO staffer Gill says.

That's Section 25, he explains, but he worries that it is one of the lesser-known reforms. Only companies with the legal chops to unearth it will know how to take full advantage of the new acceleration options for all inventors. Getting the word out is something the USPTO must do, Gill says.

Gill knows the problems first-hand. As an executive at a once-promising but now-defunct startup called OQO, holder of a Guinness World Record for the smallest computer ever, he managed IP with an all-star engineering team.

I fail to see how innovations are being stifled.
Patrick Ross, USPTO deputy communications director

The tiny OQO faced off in three separate patent-related lawsuits. The firm settled one and the other two were still pending when the company went under, he says.

But the firm had other issues. As the company struggled to stay above water, OQO had some 90 patent applications languishing in the patent office, making it difficult for the firm to raise money, Gill says. "You need assets investors can put money into -- but 18 months just to get the application published and over 30 months to get approval -- well, that is an eternity in tech," Gill says.

So much of the AIA needs to be tested in the real world, he says, and how it all will shake out remains to be seen.

Reaction to AIA

"It's certainly a step in the right direction," the NAS' Merrill says. "We're delighted we had an impact," he adds, while conceding that though the AIA is the biggest change to patent law since 1952, it still "is a modest change" overall.

"My biggest problems with the AIA are problems of omission," the EFF's Samuels says. For example, she explains, there are new opportunities for third-party challenges of questionable patents, but "those challenges are expensive and hard to access."

Another issue, Samuels continues, is that one of the promising new ways to challenge issued patents allows for those challenges to happen only in the first three months.

Even with lower fees and patent acceleration for small companies, Samuels says, "the new law provides virtually no tools for small innovators or inventors -- specifically those who may not participate in the patent system but find themselves affected by it all the time -- to fight for their interests without serious financial backing."

Chien adds, "It's too early to tell how much the AIA will improve the patent system."

Defending the status quo

The patent system is, by design, a way to get inventors to clearly disclose what they've invented -- their "secret sauce" -- in exchange for a temporary (now 20-year) monopoly on the invention.

The USPTO's Ross says, "I fail to see how the innovations are being stifled" by the patent system. "Patents are being filed by companies in Silicon Valley, leading to millions of dollars in revenue. IP-intensive industries support at least 40 million jobs and contribute more than 38% of GDP; that's five trillion dollars annually," he explains, referring to a recent report(PDF) by the U.S. Bureau of Economic Analysis.

Ross points out that patent trolling, litigation and other problems happen largely after the patent process is complete on the USPTO end.

Some experts blame the proliferation of too-broad patents on the USPTO, saying that young and inexperienced examiners hand out patents with abandon, besieged as they are.

Ross concedes that point but says the USPTO is hiring more examiners right now, thanks to new AIA provisions, and is able to pay higher salaries for examiners with more experience.

Also, the agency is opening a satellite office in Detroit and is looking for examiners with more experience than the fresh-out-of-college candidates it typically has relied upon. The hope is that the new office will lure patent examiners, who make between $50,000 and $100,000 on average, to work for the agency if they have an option to live outside of ultra-expensive Washington.

Understanding prior patents, and other problems

The EFF's Samuels explains another common complaint about the patent system. "Most people actually can't understand what the patents cover, regardless of whether they have to. And the inability to really understand has resulted in a world where inventors are incentivized to ignore patents."

Gill agrees. "With so many patents from so many companies and all the legalese to wade through, you're in a situation where so few inventors even can understand what previous patents cover," he says.

Other issues abound, experts say. Craig Opperman, a Silicon Valley patent attorney at DLA Piper, points out that the U.S. legal system doesn't force the losing party in a suit to pay the winning party's legal fees. As a result, litigation is cheap and easy for companies who can afford it.

Also, he says, "It is very inexpensive, relative to Europe, for example, to get a patent."

Ewing trains patent agents around the globe as part of his work for the World Intellectual Property Organization. He explains that "attorneys' fees are typically higher in Europe, and patent holders must pay annuity fees for each European country in which they want to keep their patent active. Any one of these fees tends to be equal to or higher than the U.S. fee."

In other words, if the cost of a patent in any one of the EU countries is equivalent to the U.S. cost, then one must multiply that by the number of countries in which the patent is being applied.



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