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U.S. Patent System Gets an Overhaul

Under new U.S. patent laws, the original inventor must file for patent within one year of publicly disclosing the innovation or lose the right to do so.

November 2011
The recently passed America Invents Act is designed to remove some of the obstacles that slow companies' progress on patented ideas, which - under the best of circumstances - can produce profits and employment opportunities. Whether it achieves that in practice is far from a sure thing, according to several patent attorneys who discussed the new law, which takes effect in March 2013, with Area Development.

Passed and signed by President Obama in September, the act's primary reform is to change the United States from a first-invented to first-filed patent system. Prior to this change, an inventor who was the first to file a patent could later be challenged by someone who claimed - and could prove - to have invented the same thing earlier. This gave rise to what some call "patent trolls," who would challenge the patents of major corporations that were ready to go into production on an innovation, claiming that they, in fact, were the first to develop the invention.

Under the new rules, someone claiming to be the original inventor would not only have to be the first to file for the patent, but would also have to do so within a year of publicly disclosing the invention. That rule is designed to cut down on the number of cases involving inventors who disclose an innovation but don't have the ability or the resources to actually bring their inventions to market, thus preventing others with more resources from doing so. It is also designed to clear the way for companies that want to develop an idea but cannot do so because someone else who disclosed a similar idea years earlier still has not gotten around to filing a patent.

What Effect Will the New Law Have?
While the America Invents Act was criticized by some advocates for smaller inventors as a giveaway to big corporate interests, several patent attorneys interviewed for this story questioned whether the law would have the intended effect.

Kurt Leyendecker, a partner with Centennial, Colorado-based Leyendecker Lemire and Daley, LLC, which mainly represents smaller investors, says he is relieved by the law's final form.

"There has always been some concern that patent reforms are going to negatively impact the ability of the small guy to use patents in an effective manner," Leyendecker says. "Any way you look at it, patents are expensive to obtain, so that puts the small guy at a disadvantage to begin with."

But Leyendecker does not see the reform that passed as representing the kind of dramatic changes many smaller inventors feared.

"Not many people have pointed this out, but we're not so much changing from a first-to-file country as a first-to-disclose country," Leyendecker points out. In other words, if Inventor A discloses the invention before Inventor B discloses, Inventor A could end up with the patent even if Inventor B files first. The public disclosure by Inventor A would cause the patent office to put Inventor B's application on hold until Inventor A either files, fails to do so after a year, or ultimately does not qualify for the patent.

While that would seem to be an incentive to inventors to disclose or file as quickly as possible to prevent others from beating them to it, Leyendecker doesn't think it will play out that way.

"You shouldn't go around disclosing [your idea] to anyone unless you put them in a nondisclosure agreement, because you don't want your one-year grace period to start to tick," warns Leyendecker. "And the reason you don't often rush to file the minute you invent is that it may not be fully enabled. To get a patent on an invention, you must be able to describe it in the patent application in a manner that enables someone of ordinary skill in the field to which the patent pertains [to understand it]. If I'm not certain it works yet, I don't necessarily want to file."

In addition, inventors often use the period between disclosing and filing to hone the invention, working out issues and changes, and ultimately filing a patent on an invention that may be significantly different from the one they disclosed. Under the new law, they will still have a year from the disclosure date to do that.

Understanding How the Law Will Work
Kent Erickson, a partner with Kansas City, Missouri-based Erickson Kernell Derusseau and Kleypas, LLC, expects the 18-month period leading up to implementation to keep patent attorneys busy trying to understand how the law will work in practice.

"Patent lawyers and the patent community are going to be spending the next several months getting a better handle on what the changes to the statute mean," Erickson says. "After that, we'll be going out and advising our clients as to the implications." Erickson said he is glad Congress preserved the yearlong grace period between disclosure and filing.

"A lot of times, especially for small and medium-sized businesses, they want to test the market to see whether or not the product is going to be successful before they invest the funds in pursuing patent protection," Erickson notes. "Sometimes inventors and manufacturers like to see some limited production and use that to work out the details before they spend the money on patent protection. Oftentimes, some of the most important features are developed late in the process."

Kevin Noonan, a partner with Chicago-based McDonnell Boehnen Hulbert & Berghoff LLP, believes the reforms are likely to result in unintended consequences.

"You're going to have this parallel system working in two tracks for 10 years, maybe more," Noonan says, predicting that a rush of applications will come into the U.S. Patent and Trademark Office just before the new law takes effect in March 2013, overwhelming the office's resources and stunting any presumed new efficiencies. After that, the Patent Office will have to sort out who filed under the old system and who filed under the new, and - at least for awhile - it will have to apply both sets of rules, depending on which one applies in a given situation.

"Lots of things have been piled on the Patent Office's plate, and I frankly don't believe Congress isn't going to continue to raid its coffers because it's a voluntary tax," Noonan says. "So to believe in the short term this is going to aid innovation - absolutely not. Fifty years from now? Maybe."

Another change in the law, particularly of interest to manufacturers, is that companies who have been using a business practice for a while can no longer be sued by someone who claims to have developed and patented the process. But the company will need good documentation as a defense.

"I can tell you right now that if I were a big manufacturing company, I would have my (standard operating procedures) and my manufacturing methods all tied up in a bow," Noonan advises. "Because if you're going to assert prior use rights, if that's going to be a defense, it's got to be proven by clear and convincing evidence."

And the best time to put together the documentation, Noonan says, is before any question is raised.

"Thinking about it like a juror or a judge, I would be a lot more impressed if you made these things before you got sued," Noonan says. "It would be a lot less ex post facto."

No matter how the changes ultimately work out, Noonan says that most in the intellectual property field find the claim that it will result in massive job creation hard to take seriously. "It was a great sound bite," Noonan says. "This is going to make 200,000 jobs. Well, no, probably not. Everyone who looks at that kind of laughs at it."

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