Misguided Patent Reform: “First-to-File” and Weakened Grace Period

March 15, 2011

Patent reform is finally coming.  While I hope and agree that shortening the process will be good for innovators (see this hopeful presentation from the whitehouse), one change, from first-to-invent to first-to-file (FTF), GREATLY favors large companies over startups and universities.  The primary argument made by FTF proponents like the NY Times is that it costs a lot to litigate the first-to-invent issue and that large companies prevail anyway …give me a break.  With all due respect, the NYT is neither a small innovative company or a technology innovator.  In this thoughtful article from the web site “The Hill”, an experienced entrepreneur raises a great question (that I will paraphrase here): While harmonizing with the rest of the world is a nice idea, what if the nuances of the US patent system are what drive our historic innovation advantage versus the rest of the world?

An excellent, detailed explanation of why the new patent reform is misguided is found in Medical Innovations & Business.  In this article, the authors point out that the problem identified as FTF change is really the weakened grace period (WGP) that tags along with it. I agree, though it is part and parcel of the FTF so lets just call it FTF/WGP.  Under the new law, the US inventor would no longer be allowed a year to tinker with the invention in secret, figure out whether it is valuable or discuss it with investors before spending the money on a patent filing.  Instead, the inventor would need to run down to the patent office and file quickly on any new invention – whether valuable or not.

My biggest concern is what happens with universities. Sure, filing a provisional application is cheap but the fact is that universities struggle to keep up with the process:

  • First, secrecy is hard in a university.  The current US academic system rewards publications not invention disclosures to the technology transfer office.  Research in a university is not really very secret – graduate students come and go, faculty from other universities visit, proposals with confidential information are shared with “peers” through the NIH/NSF funding process (more on this one in a moment).
  • Second, technology transfer offices are drinking from a firehose when it comes to new intellectual property and cannot possibly pursue everything with their limited budgets.  It takes some time to shake out what IP is valuable and what is not.

FTF/WGP supporters argue that there have only been 500 or so interferences as proof that we are practically FTF now.  That’s kind of like saying that the 35 mph speed limit can be raised to 100 mph because there are so few accidents.  My opinion is that passage of the new law could dramatically change behavior.

Here’s how: currently a large corporation will not bother filing patent applications when it hears about a new technology now because some startup or university appears to have it locked up (the large company would not know whether the IP is in a grace period and not filed yet or a patent application or provisional application is filed).  Under the new law, the large company’s logical behavior would be to file more patent applications (or provisional applications) to try to beat the slower startup or university researcher to the patent office.   Don’t believe it? Well, Canada went to FTF/WGP in 1989 and patent applications went up 50% in two years.  It is hard to attribute that behavior to increased innovation.  In fact, studies have shown that FTF/WGP did not produce any increase in Canadian R&D but it did skew ownership of patents toward large businesses.

Bottom line – we should be very careful about changing a process that seems to work.  Making the patent office faster, letting it keep its own fees, and general modernization are are all good things but I am very concerned that the FTF/WGP that tags along with these changes favors large corporations to the detriment of universities and the smaller inventors.  And, as I have said in prior blogs, these are the exact entities that disproportionally contribute to job growth in this country.

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