Major Patent Overhaul Becomes Law

By Melinda Rose, Senior Editor

President Barack Obama today signed the most significant reform of US patent law since 1836 and the first major changes to the system since 1952.

On stage with a bipartisan group of legistators, Obama signed the Leahy-Smith America Invents Act into law at Thomas Jefferson High School for Science & Technology in Alexandria, Va. Thomas Jefferson was the first official to issue US patents.

"This much-needed reform will speed up the patent process so that innovators and entrepreneurs can turn a new invention into a business as quickly as possible," President Obama said.

The law changes the patent application system from one that awards patents to the "first to invent" to one that favors the "first inventor to file." The White House said it will help businesses, inventors and entrepreneurs by implementing a "fast track" option for patent processing, shortening the average three-year wait time at the Patent and Trademark Office (PTO) to 12 months; adding resources to reduce the current backlog of 1.2 million applications (there are almost 90,000 patents awaiting review from California alone); and tightening standards for issuing patents.

The new law also brings the US into compliance with the patent system used by the rest of the world, which will make it easier American inventors to protect their intellectual property abroad, according to its supporters. The law also expands the PTO's resources by letting it retain fees it collects, enabling it to modernize its operations.

"Many key industries in which the United States leads, such as biotechnology, medical devices, telecommunications, the Internet, and advanced manufacturing, depend on a strong and healthy intellectual property system," said Quentin Palfrey, senior advisor to the CTO for jobs and competitiveness in the White House Office of Science & Technology, in a White House blog.

Duke University officials hailed the bill's passage Friday, saying it makes it easier for university researchers to move innovations into the marketplace where they might create new industries and jobs.

Duke researchers filed 189 applications and were issued 91 patents in fiscal year 2010. The number of applications has roughly doubled over the past five years, according to campus officials, but the number of those approved has stayed about the same, reflecting delays in the federal approval process.

"We hope this change will speed things up at the patent office, where long backlogs have been a real problem, but it makes it super-important to get things filed promptly," said Rose Ritts, director of Duke's Office of Licensing & Ventures (OLV). The law also changes the rules about what sort of prior disclosure about an idea limits an inventor's ability to get a patent."

In March, a number of organizations representing small businesses, startup entrepreneurs, independent inventors, and technical professionals, such as the Institute for Electrical and Electronic Engineers, the National Small Business Association and the US Business and Industry Council, sent a group letter to the House of Representatives opposing the Act.

Among their specific objections they cited replacement of the old law's one-year grace period, which gives small companies and early stage investors the time to refine their ideas as they search for the funding required to patent, develop and commercialize them, with a much shorter set of deadlines for filing patent applications.

"The Act provides a grace period only if the inventor publishes a disclosure of the invention. However, very few startups publically disclose their invention right after they make them," the organizations said. "The Act proposes features that return to an antiquated system that provides no grace period for nondisclosing public-use and on-sale activity, ignoring inventors’ need to work and market their inventions before the deadline for patenting.

"This grace period is a key reason that the US patent system is the best in the world at generating innovation, at building industries from computers to biotech to blossom here as nowhere else," they said. "The change in grace period has features that favor foreign and multinational firms over American startup firms that often seek an initial foothold in US domestic markets. The bill favors market incumbents over new entrants with disruptive new technologies."

The organizations said Canada's switch from first-to-invent to first-to-file in 1989 did not spur Canadian inventors on to additional research and development efforts, and also appeared unfavorable to independent inventors and small businesses, channeling inventive activity towards large corporations.

"There are some who think this bill hurts small business and independent inventors, but they are wrong," said Judiciary Committee Chairman Lamar Smith (R-TX) in a statement on the House floor in support the bill in June. "It ensures that independent inventors are able to compete with larger companies both here and abroad. American inventors seeking protection here in the United States will have taken the first step toward protecting their patent rights around the world."

For more information on the Act, visit: www.uspto.gov or www.whitehouse.gov