Entrepreneurs are eager to understand the implications of the America Invents Act, which was signed into law by President Obama on September 16, 2011. The new rules substantially change America’s patent system, but many provisions will not take effect for a year or more.
The Act, which achieved bipartisan support in Congress, was signed into law with broad language and a stipulation that the U.S. Patent and Trademark Office (USPTO) create rules to fill in the gaps. Although the specific details of the reforms to our nation’s patent laws are not yet set in stone (the USPTO is expected to publish them by the beginning of the year), the American Invents Act provides increased certainty around patent awards and solves for a portion of the costly delays caused by an inefficient patent process. Over the past decade patent applications have nearly tripled and, currently, it takes an average of three years to attain a patent because of a backlog of more than 750,000 applications. Policymakers hope this legislation will improve the system, helping innovators bring their inventions to market sooner. Here are some of the changes made to the U.S. patent laws sure to impact entrepreneurs:
- “First to invent” rule replaced with “first to file” system (beginning March 16, 2013): Prior to the passage of the America Invents Act, the USPTO awarded patents to the first inventors of new technologies. Under the old rules, patent filers could face interference proceedings initiated by first inventors (who may or may not have filed for a patent with the USPTO) trying to prevent them from attaining the award. Representing a change for entrepreneurs who face a disproportionate burden in defending their intellectual property, the law nixes the “first to invent” rule, creating more clarity and predictability around patent ownership. However, the new system may lead entrepreneurs to face new challenges. According to the National Small Business Association, this change from “first to invent” to “first to file” could be disadvantageous to new ventures that need time to develop prototypes, fine-tune their products, and raise capital before spending money on the patent process. Additionally, if entrepreneurs choose to hold off on filing for patents, they risk losing the right to do so if a competitor files first.
- New post-grant review process (beginning September 16, 2012): The new law creates a “post-grant review process” that affords disputers of patent awards a one-time opportunity to challenge the validity, scope, and quality of patents issued during the nine-month period following the award. According to the National Venture Capital Association (NVCA), the language around this rule may not be strong enough to prevent established companies from harassing small firms until they are out of money because the law permits challengers to “raise only one issue in post grant and ‘reserve’ all the rest for litigation.” Additionally, an NVCA letter to Congress states that the stipulation to initiate post grant review challenges within nine months of the award could be detrimental to young companies as they will have to face such disputes at their earliest and most critical stages of development. The association estimates that such challenges could cost upwards of $500,000, forcing entrepreneurs to divert funds from their business operations to legal battles.
- A fast-track option (took effect on September 26, 2011): The America Invents Act includes a “fast-track” (i.e. prioritized examination) option that enables inventors to pay an additional fee ($4,800 or $2,400 for small entities) to have their patents reviewed within 12 months, one-third the average wait time. This alternative may be beneficial to innovators looking to develop their technologies faster, enter the market sooner, hire employees more quickly, and outpace their competitors.
- Micro-entity status (took effect on September 16, 2011): The America Invents Act enables “micro-entities” to save 75 percent on fees for filing, searching, examining, issuing, appealing, and maintaining patent applications and awards. In order to qualify for micro-entity status, patent applicants must have fewer than 500 employees, not be named as an inventor on more than four previously filed patent applications, have a gross income less than three times the median household income for the year proceeding the year of application, and file an application that has not been assigned to an entity that does not meet the above guidelines.
Although the America Invents Act may not reduce litigation from nuisance lawsuits, the bottom line for entrepreneurs is that this more efficient patenting process will result in increased certainty and predictability around patent ownership and faster turnaround for patent awards enabling entrepreneurs to go to market sooner.
Leah’s primary focus as JumpStart’s Market Analyst is developing a deep understanding of the key challenges and opportunities facing entrepreneurs and early-stage companies. Using her experience leading research projects and framing problems to identify creative solutions, Leah works to build stakeholder relationships, ensure the growth and success of client and portfolio companies, and drive organizational strategies. Additionally, Leah brings her insights to life through communications and advocates for and connects entrepreneurs to additional capital and service resources beyond those provided by JumpStart.