Patent Reform Favors Corporations, Multinationals

America’s 200-year-old patent system is about to be reformed, and the changes will cut out the very heart of innovation in this country, warn many independent inventors, small business owners, and manufacturers, angel investors and venture capitalists.

“We are playing Russian roulette with the basis of the American economy, which is innovation,” said Kevin Kearns, president of the U.S. Business and Industry Council (USBIC).

Critics say the reforms will devastate opportunities for the disruptive innovators of the future—the start-ups and independents who could invent the next iPhone challenger, for example. It will also promote the domination of patents, and patent license ownership, by larger companies, while small business operations decline.

Favored are large companies that have engineers and management teams in house, and patent lawyers on the payroll who can bring applications to the United States Patent and Trademark Office (USPTO) frequently, and quickly. The model supports incremental innovation, meaning the continuous updates to existing technologies, such as bi-yearly releases of the iPhone, the iPhone3G, the iPhone 3GS, the iPhone 4, and so on.

We are playing Russian roulette with the basis of the American economy … innovation,
–Kevin Kearns, president, USBIC

With each patent application requiring time and attention away from the creative process of innovation, thousands in lawyer’s fees, sufficient documentation to prove that an idea is original, and a potential legal defense against challengers to the patent, a key change in the law will push the little guy out of the field a lot more than those who crafted the law intended, critics say.

“It is no problem for [large companies] to pull over a couple of guys to get applications down to the office, but for the rest of us Americans who depend on university spin offs, little research centers, and just individual brilliance, I think its a massive problem,” Kearns said.

The biggest flashpoint centers on a proposed shift away from the current “first to invent” system, to a “first to file” model similar to that used in Europe, and how the change will affect the creative innovation process.

Until now, a one-year grace period has protected inventors like Eli Whitney, inventor of the cotton gin, the Wright brothers, Alexander Graham Bell, and Thomas Edison—men who revolutionized their respective industries.

What the grace period allows is the ability of inventors to publicly display their inventions, and use the exposure to attract investors who can help commercialize the product—all before having to file for a patent. First to invent protects the inventor during this grace period and gives struggling inventors a leg up. Some inventors may opt to keep their innovation secret to protect it, and then still use the grace period to claim first to invent.

If someone else tries to file with the same invention, as long as the inventor can prove the date of conception of the original idea, and it is within a year, the patent goes to him. This is what is called the first to invent system, and this process has guided the nation for two centuries, spurring innovation and the dynamism of the current economy.

Todd O. McCracken, President of the National Small Business Association wrote in a letter to Senate Majority Leader Harry Reid, the “grace period patent system has been a major mechanism for the dynamism of small-business innovation,” guaranteeing that “only carefully and well-developed inventions are patented and at much less expense to the applicant than in first-to-file countries.”

Most other industrialized nations use the “first to file” model, meaning whoever wins the race to the patent office, gets the patent. Supporters of the bill argue that harmonization on a global scale is preferable, and makes it easier for companies to compete on a level playing field.

The NSBA suggested in a letter that other nations should harmonize with the United States, not the other way around.

“It is clear that the weak or (entirely absent) grace periods used in the rest of the world’s first-to-file patent system throttles small-business innovation and job creation,” said McCracken.

“Some small firms will lose their patent protection altogether, as they will be unable to afford a doubling of their application filing rate,” he added.

Bill Mashek, spokesperson for the Coalition for 21st Century Patent Reform, which is a coalition of multinational companies, said the first to invent system “is not a real clear system, and it causes conflict, and delays.”

“If you move the country to a first inventor to file, it provides greater clarity. It is pretty clear who gets to the office and makes a filing,” he said.

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