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04.11
House Introduces
Patent Reform Bill
By IEEE-USA Staff
After the Senate
passed Senator Patrick Leahy’s American
Invents Act (S. 23) by a 95-5 vote on 8
March, all eyes turned to House Judiciary
Committee chair, Rep. Lamar Smith (Texas) to see
how the House of Representatives would respond
to the Senate’s take on patent reform. On 30
March, Rep. Smith introduced his own version of
the America Invents Act (H.R. 1249),
followed by a full committee hearing on the bill
held on 31 March. [See a
side-by-side comparison
of the two bills.]
Some of the key
reforms outlined in Smith’s House bill
include:
As various
groups rallied to support or oppose particular
proposals contained in the House bill, one issue
of contention emerged in sharp focus, the bill’s
proposal to move the United States from a “First
to Invent” to a “First to File” system.
In the 30 March
hearing, U.S. Patent and Trademark Office
Director David Kappos indicated the
Administration’s support for this transition,
noting it would “reduce legal costs, improve
fairness, objectivity and transparency, and
support U.S. innovators seeking to market their
products and services in other countries.”
Steven Miller, of
the Proctor and Gamble Corporation, also
testified in support of the “First-to-File”
reform, arguing that “First-to-Invent” has not
protected the interests of small inventors, and
noting that “an inventor can be first to make
the invention and first to file a patent
application, but still forfeit the right to a
patent because the inventor cannot sustain the
cost of the 'proof of invention' system.”
Mark Chandler, of
Cisco Systems, representing the Coalition for
Patent Fairness, observed that “prior user
rights are vital to a functional first-to-file
system” and indicated that the Coalition would
oppose a shift to the “First-to-File” system if
the legislation doesn’t ensure prior user
rights.
In a similar
vein, John Vaughn, testifying on behalf of the
American Association of Universities, indicated
university support for the bill as long as it
maintained “three components of the current U.S.
patent system: (1) a 12-month grace period for
publishing articles containing a disclosure of
the invention, (2) the opportunity to file
provisional applications, and (3) the
requirement of current U.S. patent law that an
applicant sign an oath that he or she is an
inventor of the claimed invention.”
Missing from the
hearing panel was a witness to represent small
business and individual inventor interests.
Highlights from IEEE-USA’s
response to the House Judiciary Committee and
other commentary on key patent reform issues is
appended below. [Also see “2011’s Patent
Reform Legislation,” Glenn Tenney,
Today’s Engineer (March 2011) ]
+++++++++++++++++++++++++++
Introductory
Remarks by Rep. Lamar Smith, Texas (Chair of the
House Judiciary Committee and Sponsor of the
America Invents Act, H.R. 1249.
Excerpted from
Press Release, “Chairman Smith: Patent Reform
Creates Jobs,” U.S. House Committee on Judiciary
(30 March 2011):
“The strength of
our economy relies on our ability to protect new
inventions and build on innovation. Patents
protect intellectual property and encourage the
creativity that generates jobs and increases
productivity.
“Unfortunately,
our outdated patent system has become a barrier
to innovation and invites lawsuits from holders
of questionable patents seeking to extort
millions of dollars from companies. We cannot
protect the technologies of today with the tools
of the past.
“We need reforms
that discourage frivolous suits, enhance patent
quality and streamline international principles.
Better patents lead to products and innovations
that generate jobs and drive economic growth.
After six years of bipartisan efforts, I look
forward to crossing the finish line on patent
reform.”
+++++++++++++++++++++++++++
Response by
IEEE-USA, American Innovators for Patent Reform,
National Small Business Association, the U.S.
Business and Industry Council and Others to
America Invents Act, H.R. 1249
Excerpted from
IEEE-USA/Coalition Letter to House Judiciary
Committee leaders on America Invents Act (H.R.
1249):
While the
current bill makes important progress in efforts
to fund the U.S. Patent Office, the bill
contains troubling provisions pertaining to
matters that are critical to small businesses.
The current proposals will inflict substantial
harm on our members, who need strong reliable
patents to build our businesses and create jobs.
The proposed Act has several features that will
increase our costs sharply and reduce our access
to the patent system, increase the Patent
Office’s delay and backlog, and decrease our
ability to enforce our patents. By making
patents less certain, and adding costs and
delay, the bill impairs our members’ ability to
raise capital.
The weakening of
the grace period, as part of the “first inventor
to file” section of the bill, raises risk of
loss of patent rights by our members, as it
impedes the important process of incubating and
vetting inventions. The proposed Act provides a
grace period only for early publication by the
inventor, which our members seldom risk due to
competitive reasons. The Act limits the grace
period to that which is commercially similar to
a failed system that the U.S. abandoned in 1839,
when the U.S. recognized that inventors need a
commercially-reliable opportunity to work and
market their inventions before the deadline for
patenting. Current law provides inventors a
pre-filing grace period, permitting inventors to
share ideas without fear of leaks and piracy, to
raise capital, to refine those ideas, and the
discard the ones that prove worthless, before
the legal deadline forces the investment of tens
of thousands of dollars in a patent application.
The proposed Act disrupts the unique American
start-up ecosystem that has led to America’s
standing as the global innovation leader—the
ecosystem that is vital to our businesses, but
with which large firms have less expertise.
Within the “first to file” section, the change
to the filing grace period disadvantages small
companies, startups and independent inventors
that must seek outside financing and strategic
partners, in favor of firms that can arrange all
of their investment, testing, manufacturing and
marketing internally. It is this necessary step
of early disclosure of inventions to outside
third parties prior to filing an application
that will put our members at greater risk under
the proposed weakened grace period.
+++++++++++++++++++++++++++
Playing A
Dangerous Game With Job Creation
Excerpted from
“Playing a Dangerous Game With Job Creation”, by
Henry N. Nothhaft, Harvard Business Review, The
Conversation Blogsite (31 March 2011):
Representatives
of some of the largest companies in the world
testified that the new patent reform bill will
enhance job creation in America. Yet the one and
only group that actually creates all new job
growth in the U.S. and could challenge those
claims — i.e., startup entrepreneurs and small
businesses — was not invited to speak.
Too bad. Because
if only Congress and the American people could
hear the voices of entrepreneurs, they might
learn how key elements of this new patent reform
bill will in fact enrich the giant technology
multinationals at the expense of American job
creation.
Take the patent
bill's plan to end our nation's 221-year-long
practice of granting a patent to the "first and
true inventor" and give it instead to those who
get to the patent office and file their
applications first — usually those with large
financial and legal resources.
The problem with
replacing "first to invent" with "first to file"
is not simply that it tramples upon the core
American belief in merit which holds that the
person who actually invents something first
ought to own the rights to it. This measure will
also reduce a patent system
expressly designed by the Founders to
serve small business inventors into one in which
Big Business has the advantage and entrepreneurs
are shut out. This cannot help but stifle job
creation and undermine U.S. technological and
economic leadership in the world.
Why? Because as
multiple studies
old and
new confirm, only small startups
create new industries and the millions of jobs
that go with them. Indeed, over the last
century, virtually every new industry was
launched not by a big established firm but by
entrepreneurial innovators.
+++++++++++++++++++++++++++
Open
Innovation and the Evolving IP Marketplace
Excerpted from
“The Evolving IP Marketplace: Aligning Patent
Notice and Remedies With Competition,” Federal
Trade Commission (March 2011):
Understanding
what changes to the law of patent notice and
remedies would increase innovation and better
align the patent system and competition policy
requires that we first examine how the pathways
to innovation and the role of patents in
promoting innovation have evolved. In one
significant change, many firms have increasingly
embraced “open innovation.” In a traditional or
closed model of innovation, a firm relies on its
own research and development (R&D) to create the
products it markets. But a firm that pursues an
open innovation strategy recognizes that
valuable ideas can originate with others and
seeks to acquire those inventions that fit its
business model. Many of the inventions acquired
and commercialized by large firms originated
with start-ups and small companies, which have
accounted for a steadily increasing percentage
of R&D spending over the past 30 years.
Consumers
benefit from open innovation strategies. The
growth of technology transfer has permitted a
division of labor to emerge between those who
invent and those who manufacture most
efficiently. This division of labor speeds up
the rate of innovation and results in broader,
faster distribution of new products to
consumers. By providing a pathway for invention
without commercialization, technology transfer
also lowers barriers to entry for inventors who
do not have access to the capital required to
build manufacturing facilities and establish
distribution channels. Easier entry supports
additional sources of invention, which increases
competition among technologies to be further
developed and incorporated into products. That
competition benefits consumers by generating
better, cheaper products. Moreover, competition
among early-stage technologies for development
funding is an important mechanism for allocating
scarce resources to those inventions having the
greatest chance of generating the products most
valued by consumers.
+++++++++++++++++++++++++++
Reality-Based
Patent Reform
Excerpted from
“Reality-Based Patent Reform”, by Chris
Gallagher and Kevin L. Kearns, The Hill,
Congress Blog (24 March 2011):
The seminal
importance of the Federal Trade Commission’s
(March 2011) report is that it describes a very
different IP reality than the one assumed by S.
23 and similar versions of congressional ‘patent
reform.’ The report highlights the emergence of
today's ‘open innovation,’ which most often
emanates from public and private transfers of
technology through licensing and the
collaborative interactions of universities and
smaller start-ups, spin-outs, and research
firms.
This new,
open-innovation dynamic is gradually replacing
the formerly dominant, internal ‘closed
innovation’ efforts of large companies. The
scientific innovation model of our smaller
firms, universities, and research consortia and
the incremental innovation model of the large
market incumbents both contribute to our
world-class innovation. Unfortunately, S. 23 and
its ilk ignore the needs of the fast-developing
independent start-up model.
If S. 23
reflected the forward-looking FTC perspective,
it would not be promoting the unwieldy
‘first-to-file’ procedure, which eliminates
inventors’ critical ‘grace period’ protections.
This and other provisions will cripple
early-stage innovation by ‘harmonizing down’ our
first-class patent system to the inferior
systems of other countries, which should be
persuaded to ‘harmonize up’ instead.
Europeanizing
our system for the filing convenience of global
multinational firms — that overwhelmingly
practice the internal, ‘closed innovation’
approach — will cripple today’s innovation
evolution with costly procedures while
curtailing the beneficial ‘creative destruction’
inherent in technological progress.
It is easy to
understand why market-disruptive innovation
might distress large incumbent firms, but
forcing the American economy into a single,
narrow innovation model favoring outsourcing,
offshoring global giants will stamp out the
local jobs generation capability of smaller
firms.
Congress should
not intervene to distort the technology
economy’s continued evolution by crippling the
open, independent innovation efforts of small
businesses, our nation’s leading job creators,
at the very time we can least afford it.
+++++++++++++++++++++++++++
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todaysengineer@ieee.org.
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