The Cost of Conformity: Patent Reform for Small Business Entrepreneurs

For many early stage life science, biotech and other tech companies, intellectual property is the entity’s most valuable asset and protecting that asset is tantamount to success. U.S. Federal patent law is set to change dramatically in the coming months and a clear understanding of how this affects your company is critical. The following offers a snapshot of the key changes upcoming through patent law reform. – Alan Rosenhoch, BNE Business Development Manager

The Cost of Conformity:

Patent Reform for Small Business Entrepreneurs

By Randolph V. Clower, J.D., Ph.D., Associate, Phillips Lytle LLP

Considered by many to be the most comprehensive revision to the United States patent system in over 50 years, the America Invents Act (“AIA”) represents progressive legislative reform intended to align U.S. patent policy with global precepts, i.e., systems which reward the “first to file” a patent application. Many AIA provisions modify–or completely change–the current patent system, but the most immediate and conspicuous AIA component establishes a filing-based system in the U.S. as of March 16, 2013.

The U.S. patent system currently operates under the rubric of “first to invent,” awarding priority to the first in time to invent. On March 16, 2013 (the transition date), however, U.S. patent law will transition away from the strictures of a first to invent system in favor of rules similar to the prevailing international model, albeit not in toto. This new patent regime, termed the “first inventor to file,” affords priority to the first inventor (or assignee) to file for patent protection. While the implications ascribed to this paradigm shift are considerable, the recurring theme for small business entrepreneurs concerns the cost of conformity.

The first inventor to file system has no retroactive effect. Thus, obligatory exceptions to the rule notwithstanding, U.S. patent applications having a priority date prior to the transition date will be examined under the current rules, while applications with priority dates on or after the transition date will be covered by the new provisions of the AIA. In this regard, general consensus within the patent community holds that the new rules afford less protection for small business entrepreneurs. While the reasons for this are nuanced in many respects, the overarching consideration relates to the cost of applying for a patent, which can run anywhere from $5,000 to $15,000 or more.

To this end, current U.S. patent law provides for a “grace period” which allows an inventor to file a patent application for up to one year after his or her invention is publicly disclosed, e.g., published, thereby providing a “patent cost deferral” option until it is absolutely necessary to file. Moreover, this one year window allows small entities such as universities and sole inventors to disseminate their research and discoveries without fear of another party–who invented second, but filed first–securing an earlier priority date. This is no longer the case under the AIA, which contains a significantly diluted version of the current grace period.

Consequently, with respect to obtaining the earliest possible priority date, filing early and often is the key to minimizing risk while optimizing patent protection under the AIA. This new regime therefore appears to favor business enterprises with unlimited patent budgets at least insofar as prompt and frequent patent filings are status quo for larger corporations. While such reform may not stymie innovation per se, it is likely to exacerbate the cost-related obstacles associated with patent procurement for smaller business concerns and individuals. Time will tell.

Other Notable AIA Provisions
Post Grant Review Proceedings
False Marking Statutes
Prioritized Examination
Supplemental Examination
Third Party Pre-Issuance Submission
Prior Commercial Use Defense
Inter Partes Reexamination