By: EILENE ZIMMERMAN | Published: February 8, 2012 | Article: Link
The most sweeping patent system changes in more than 50 years became law in September with enactment of the America Invents Act, which the White House has said will help turn inventions into businesses faster. Entrepreneurs and small-business owners who rely on the patent system to protect their intellectual property are just starting to understand the changes, which phase in over an 18-month period that ends in March 2013.
For this small-business guide, business owners were asked about three of the most significant changes — the shift from a first-to-invent system to first-to-file and the additions of a fast-track approval process and a postgrant review process. (Patents are sought by inventors to protect original inventions, processes and designs; they are different from trademarks, which protect brand names, logos and anything else that signifies something’s source.)
FIRST TO FILE One of the most debated changes was the move to first-to-file. Before America Invents, patents went to the person who invented first, which had to be proved using “prior art” — documentation like dated sketches, notebooks, academic papers and models. Starting next year, patents will be issued according to who files first, aligning the United States’ system with Europe’s.
Bryan Pate, co-founder of ElliptiGO in Solana Beach, Calif., said the change would force his company to file quickly, even if it was not ready. ElliptiGO, which has about 3,000 customers and more than $5 million in revenue, sells a bicycle that uses an elliptical motion to propel it — essentially an elliptical trainer that can be ridden on the street.
Mr. Pate and his co-founder Brent Teal had the idea for the fitness device in 2005 but did not file a patent application for 14 months.
“We needed the time to experiment and develop a proof of concept,” Mr. Pate said. “If it had been first-to-file back then, a bigger company with an engineering staff and money could have heard about us doing this and filed before us. If we rushed our filing to prevent this, we would have ended up with a much less valuable set of patents.”
The old system also allowed them to delay spending money. “If we had to start the patenting process immediately, we would have had to commit to spending $20,000 to $30,000 before we were certain which attributes of our invention were the most valuable,” Mr. Pate said.
But Nick Blitterswyk, chief executive of Urban Green Energy in New York City, says he thinks moving to first-to-file will make his company less vulnerable to infringement.
“With this change, you will know what else is out there because inventors will file as soon as possible, and so you’ll see their prior art,” said Mr. Blitterswyk, whose company makes vertical axis wind turbines, which are smaller and quieter than the more common horizontal axis turbines used in wind farms.
Mr. Blitterswyk said it would be reassuring to potential investors to know a business had filed first, which would “make it easier to secure investment.”
Louis J. Foreman, founder of Edison Nation, which produces the PBS show “Everyday Edisons,” agrees. “With first-to-invent you run the risk of going through the patent process and at any time someone can I say, ‘I thought of that two years ago, here’s my notebook,’ ” said Mr. Foreman, who is also chief executive of Enventys, a product-design company that has more than 500 patents. “It makes it difficult to raise money.”
While it will still be possible to challenge a patent, he added, being first to file “gives you a stake in the ground.”
THE FAST TRACK A new expedited examination will allow businesses to get around the patent applications backlog, which today stands at about 668,000. It can take three to four years just to get a first response, said John A. Dragseth, a lawyer in the Minneapolis office of Fish & Richardson, an intellectual property firm. The examination, known as Track One, will set a target of 12 months for getting applications through the process for a $4,800 fee. “Sure, it costs more, but a business could use it to expedite their core idea, their home run,” Mr. Dragseth said.
Since September, the United States Patent and Trademark Office has received 2,000 fast-track requests. But Mr. Pate of ElliptiGO said he was not likely to try it. “Having to spend more money to speed up the process favors big companies, not small ones,” he said. “Accelerated patents also mean accelerated cost.”
Skyline Solar in Mountain View, Calif., took advantage of a similar fast-track program, the Green Technology Pilot Program, which is being phased out in favor of Track One. Skyline Solar, which manufactures photovoltaic systems that track sunlight and produce energy, was able to get a patent in 10 weeks through the Green Tech program. “We went from an unforecasted length of time to instantly in the patent office,” said Tim Keating, vice president of marketing and field operations. “And that’s innately good for innovators.”
THE POSTGRANT REVIEW With the new postgrant review process, anyone can challenge claims in a patent for nine months after it is granted. And the case goes before a patent examiner, not a court. “If you have a big competitor creating a cloud over your product with a patent,” said Mr. Dragseth, the intellectual property lawyer, “this is a way to take care of that without spending millions on litigation.”
Chris Hulls, co-founder of Life360 in San Francisco, says he believes the postgrant review will make it tougher for very broad patents to be issued, and that could mean less frivolous litigation. “Those broad patents are scary,” said Mr. Hulls, whose 15-employee business created an application that uses a cellphone’s location to enable family members to keep track of one another.
By EILENE ZIMMERMAN
Parents, for example, can have their children check in via the app or they can see for themselves when their child has arrived at a destination. There is also a panic button that will send an e-mail alert to every family member.
“Every start-up is probably infringing on someone’s I.P. but it might be completely bogus,” Mr. Hulls said, in reference to intellectual property. “It’s just because the other patent is so broad. Now it will be easier to oppose a patent like that.”
In addition, Tate Scott, chief executive of KFx Medical, said patent examiners were generally more knowledgeable about patents than judges. “If you go through that review process and survive,” he said, “your patent will be stronger and less likely to be challenged.” KFx Medical, a 12-employee company based in San Diego, created a device and method for reattaching tissue to bone during orthopedic surgery.
THE CHANGE THAT WAS NOT MADE Chris Allen is chief executive of a nine-person Boston start-up, Brass Monkey, which has an application that turns smartphones into game controllers for its browser-based video game console. He had hoped America Invents would address the issue of so-called patent trolls, companies and individuals that sue to protect patents even if they are not using them.
“This was one of the biggest concerns small businesses had,” Mr. Allen said. He added that he wished the law “included a provision that said you have a certain window of time to use your patent, and if you don’t, you lose it.”
James R. Klaiber, an intellectual property lawyer with Pryor Cashman in New York, says he believes there is another side to the issue: many start-ups defend patents they are not using, he said, to maintain the company’s value. And some small companies get broader patents than they need to create a kind of fence around themselves. “They do that to protect themselves from others moving into their space,” Mr. Klaiber said.