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America Invests Act of 2011

Chad Moutray

I recently wrote about the tremendous backlog of patent applications at the U.S. Patent and Trademark Office (PTO). Indeed, with a backlog of over 700,000 patent applications, investors have become frustrated with long processing times. Yet, as I was writing about the PTO budget, the U.S. Senate was considering a major reform of the patenting process. On March 8, the Senate passed the America Invests Act (S. 23) with an overwhelming vote of 95-5. Debate over this bill, which was introduced by Sen. Patrick Leahy (D-VT), will now shift to the U.S. House. While the bill does many things (including increasing agency resources), it has become mostly known for establishing a first-to-file rule in the U.S., replacing the existing system of first-to-invent. This is a dramatic change bringing this country’s patent filing system in line with the rest of the world.

The debate over first-to-file has been heated at times. Some business leaders, for instance, have said that the first-to-invent system benefits larger entities. As Henry R. Nothhaft, the chairman and CEO of Tessera, recently wrote in an op-ed for The Hill, “A `first to file’ system may prove beneficial to established corporations like my own, which are financially better situated to quickly file patent applications and thereby beat smaller, less sophisticated inventors and startups.” With this in mind, a number of organizations which represent innovative entrepreneurs sent a letter on February 23, 2011, to Sen. Harry Reid (D-NV), the Majority Leader, urging him to oppose passage of the America Invests Act. They wrote that the bill would have “unique adverse effects on small business, startup entrepreneurs, independent inventors, and U.S.-based technology professionals. It 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.” It was for that reason that both California Sens. Barbara Boxer and Dianne Feinstein, which represent Silicon Valley, voted against the bill.

On the other side, businesses say that the first-to-invent system produces greater uncertainty, especially for global firms wishing to defend their inventions overseas. The biotechnology industry, for instance, says, “This bill would remove these uncertainties, while providing adequate protections against misappropriation of an invention by someone other than the true inventor.” For his part, Sen. Leahy argues that the switch to first-to-file will ultimately benefit the patent community. He says, “It will simplify the patent application system and provide increased certainty to businesses that they can commercialize a patent that has been granted. Once a patent is granted, an inventor can rely on its filing date on the face of the patent. This certainty is necessary to raise capital, grow businesses, and create jobs.”

From here, Rep. Lamar Smith (R-TX), who chairs the House Judiciary Committee, has said that he will introduce a bill similar to S. 23 later this month. After Senate passage, he issued a press release praising the bill, saying:

“Adopting a first-inventor-to-file standard creates certainty about patent ownership and makes it easier for American innovators to apply for patents around the world. The post-grant review process helps to reduce frivolous lawsuits filed by holders of weak or overbroad patents. And allowing for the third party submission of prior art helps prevent bad patents from being granted in the first place. These are just a few of the many provisions for which there is widespread support. Today’s vote is an important development in our efforts toward meaningful patent reform. I look forward to achieving much-needed patent reform for American innovators and job creators.”

President Obama has also voiced his support for the bill. Therefore, assuming the House passes a similar bill, the U.S. could soon make its largest patent reform in decades by adopting a first-to-file system. The switch to this new patent “ecosystem” should help to improve certainty to the marketplace for ideas. It should also help to encourage filers, both large and small, to file sooner in the process. So, despite some of the criticisms and possible hiccups in making this switch, the adoption of a first-to-file patent process should provide pragmatic benefits overall, especially for firms that intend to commercialize their intellectual property in foreign markets.

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