Patent reform act of 2011 will deter innovation and send jobs overseas
2/25/2011 5:12 AM EST
On Monday, February 28th, the U.S. Senate is going to vote on S. 23 – the Patent Reform Act 2011. The bill was unanimously approved by the Senate Judiciary Committee without the testimony of a single inventor. If voted into law, it will hurt American innovation.
President Obama, in his recent State of the Union speech, made innovation a priority for empowering the U.S. economy and ensuring its long-term competitiveness. The President laid out his vision as follows: “The first step in winning the future is encouraging American innovation…In America, innovation doesn't just change our lives. It's how we make a living.”
The President continued the “innovation” mantra in the speech he delivered along with his budget on February 14, stressing the need to “invest in those things that are absolutely critical to preparing our people and our Nation for the economic competition of our time… We do this by encouraging American innovation and investing in research and development.”
Yet despite the President’s newfound commitment to innovation and R&D, he is supportive of legislation that will severely discourage innovation which has been reintroduced in the Senate by Democrats as the Patent Reform Act of 2011. The President is not the only one who adopts an inconsistent position characterized by public statements supportive of innovation while advocating legislation that will have the opposite effect. Sen. Patrick Leahy (D-Vt.), the Senate Judiciary Committee Chairman and the chief proponent of the Patent Reform Act of 2011, paid lip service to the idea of encouraging innovation in his enthusiastic response to President Obama’s State of the Union address, even as he pushed for ratification of legislation that will do just the opposite.
As the founder and president of American Innovators for Patent Reform (AIPR), I was disappointed to see not only the same bad ideas that characterized previous failed patent reform proposals, but also some new ones. For example:
• New fees. The President’s budget would have the Patent Office impose a “temporary surcharge,” which “will better align application fees with processing costs.” Last year, the U.S. Patent and Trademark Office (USPTO) collected approximately $51 million in fees over and above the agency’s authorized budget for fiscal year 2010, which ended September 30, 2010. That’s money the Patent Office could have used for hiring more patent examiners. However, the Patent Office wasn’t allowed to keep all the money it generated – only the amount Congress had allocated for it in the 2010 budget. The rest went to the Treasury for use elsewhere. The use of fees collected from inventors for government needs completely unrelated to the functioning of the USPTO amounts to nothing short of a tax on innovation. If you want more innovation, taxing it more heavily is not the best approach.
• Post-grant review. Another provision in the legislation called “post-grant review” is touted as a way to evaluate the validity of a patent that is “potentially 50-100 times less expensive than patent litigation” in the White House State of the Union Fact Sheet on Patents. Yet, this provision will add more work to the already overburdened Patent Office with the likely result that patent backlog will grow even greater. More expensive than existing reexamination proceedings, post-grant review will be unaffordable for many small businesses, universities and especially independent inventors. Driving up the costs of what is already an expensive process will diminish intellectual property rights by forcing many inventors to abandon their patents.
• “First-inventor-to-file” standard. In the United States, patents have always been awarded on the “first-to-invent” basis i.e., to the first inventor. If two parties file for patents on substantially the same invention, the patent will be awarded to the one who was the first to invent so long as such inventor was diligent in reducing the invention to practice. Other countries follow the “first-to-file” system where the patent is awarded to the inventor who is first to file the patent application, regardless of who was the first to invent. As a result, inventors rush to patent offices around the world with half-baked applications, many of which ultimately translate into low quality patents. The Patent Reform Act of 2011 proposes to change the traditional American first-to-invent system, firmly rooted in the U.S. Constitution, to the inferior foreign first-to-file regime.
• Judges as Gatekeepers. In order to reduce infringement damages awards, the Patent Reform Act of 2011 proposes provisions that require judges to prevent juries from even considering slapping an infringer with a large judgment The purpose can only be to further devalue patents by decreasing legitimate damage awards.
• Raising the Bar for Proving Willful Infringement. This provision seeks to make it harder for patent owners to prove willful infringement in order to obtain treble damages. If the Patent Reform Act of 2011 makes treble damage awards highly improbable, infringers will have less of a reason to settle, thereby clogging the courts with longer litigation.
Many of the reforms undertaken recently by the USPTO under Director David Kappos have improved efficiency. Experimental programs such as the Peer Review Pilot, Accelerated Examination, the Green Technology Pilot and the Multi-Track Patent Examination proposal indicate that the Patent Office is streamlining its processes and issuing higher quality patents. The goal of future reforms should be the continuation of encouraging innovation by making it quicker and less expensive to obtain patents.
The real reforms our patent system needs, should address the speed and quality of patent examination. One way to do it is to create a two-tear patent system with junior patent application examined only for novelty and senior patent applications also examined for non-obviousness, as any patent application is examined today. A junior patent (such as Australian Petty Patent, German Gebrauch Patent or Utility Model adapted in most other countries) would have shorter terms and lower filing fees so that many inventors and cash-strapped small business can avail themselves of this form of protection. While a determination of non-obviousness requires a subjective human judgment that only a qualified patent examiner can make, the examination for novelty can and should be computerized. Advances in artificial intelligence in general and semantic search in particular makes it possible. Anybody who doubts it should watch IBM Watson computer win hands down against best human players Jeopardy game last week. Machine-based examination of junior patent application will free off examiners to focus on senior patents. This will speed up the examination process and assure higher quality of issued senior patents.
Patents are critical to encouraging innovation by enabling inventors to keep the fruits of their labor. They are also the primary drivers of job creation in the U.S. The Senate should reject these harmful changes to the U.S. patent system.
Alexander I. Poltorak is the founder and chief executive officer of General Patent Corporation (GPC), an intellectual property (IP) management company focusing on patent licensing and enforcement, IP strategy and valuation. He also founded and serves as President of American Innovators for Patent Reform (AIPR), a nonprofit organization dedicated to strengthening the U.S. patent system.