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Patent Reform Sparks Misleading Rhetoric

September 22, 2011 By Tyler Hanson, Undergraduate Research Fellow

Patent law has been making a lot of headlines lately. President Obama just signed the America Invents Act, some of the most substantial patent reform in over fifty years. In the run up to this law, Google acquired Motorola’s mobile phone division in order to secure their extensive patent portfolio and NPR’s Planet Money recently shed light on the “patent trolls” that are wreaking havoc on the software industry.

Among the America Invents Act's key features is a switch from a first-to-invent to a first-to-file system, expanded opportunities to oppose existing patents, and expansions to the U.S. Patent and Trademark Office.

Its proponents have argued that these reforms will streamline the patent process, reduce litigation, and create thousands of new jobs by making it easier for inventors to patent and protect their innovations. 

“This bipartisan legislation will transform our patent system, enhance our nation’s competitiveness, and promote economic growth and job creation,” said David Kappos, director of the Patent Office.

But branding the bill as a job-creating initiative may be a bit of a stretch. “[T]he bill has been in the works for six years or so,” said Jim Hallenbeck, an attorney at Schwegman, Lundberg, & Woessner in Minneapolis. “No time until recent weeks have I heard the bill referred to as a jobs bill.” 

In an effort to pivot away from this summer’s politically damaging debt ceiling debate, lawmakers in Washington seem eager to link patent reform to the flagging economy. The bill’s supporters tout measures that will allow startups and small businesses to more easily obtain patents and begin marketing new and innovative products and services. But a new post-grant review process and the first-to-file system are more likely to put new firms at a disadvantage compared to larger, more legal-savvy businesses.

Although many policymakers claim that patent reform will create new jobs by making it easier for entrepreneurs to obtain and protect patents, the bill seems to do the opposite by changing the filing process and making it easier to challenge patents. 

Proponents of the bill also argue that it will reduce costly interference litigation. The first-to-invent system creates some amount of ambiguity because it’s not always clear who thought of a new product or idea first. Switching to a first-to-file system would help clear up some of the confusion. However, despite the priority issues surrounding first-to-invent, the patent office’s records show that less than fifty interference proceedings take place in a typical year.

“Going to first-to-file is a rather drastic change in view of the small number of incidents where priority is at issue,” said Hallenbeck. 

In addition, first-to-file gives the advantage to established firms with well-staffed legal departments. Independent inventors may not be able to file patents quickly enough if they are unfamiliar with the process. As a result, they’ll lose the advantage they have under the first-to-invent system. All in all, the marginal benefits of changing the filing process don’t seem to outweigh its negative consequences. 

As for the software industry, Hallenbeck thinks the patent system has been working well. However, he worries that patent reform may be a step in the wrong direction. “Software is … an industry where small companies and large companies can compete in many areas on quite equal footing,” he said. “While strengthening patent protection for software would be pro-job and pro-domestic economy, the patent reform bill does not directly strengthen patent protection for software and … arguably weakens available protection for software.”

The policy issues surrounding patent law are rather complex. Unfortunately, our nation’s lawmakers have grossly oversimplified the nature of the America Invents Act to score political points. As a result, they have promoted a weak understanding of the bill’s provisions.

A closer examination reveals that switching to a first-to-file system and implementing post-grant review won’t revitalize the economy. If anything, these reforms will benefit entrenched interests and make it more difficult for small firms to gain a footing in competitive industries. 

If our lawmakers really want to promote economic growth through patent reform, they should focus on the fundamentals of the system and understand how it incentivizes innovation. Instead, they’ve hastily mislabeled the America Invents Act as a jobs bill, hoping that citizens aren’t discerning enough to notice that their rhetoric doesn’t match reality.

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