🔒Expectations surface around new intellectual property laws

Patent law reforms that were passed in September are intended to bring U.S. patent laws in line with global patent practices and spur job growth through changes in the costs, time and complexity of the patent process.

But what they will ultimately do is anyone's guess as opponents and proponents of the changes assess their impact on Maine's intellectual property community. Chief among those concerns is whether the reforms will level the playing field between small, independent inventors — most of Maine's inventor community — and large corporations with well-financed R&D departments and cadres of legal advisers.

It will take at least a year for the rulemaking component of the Leahy-Smith America Invents Act to work out the details of the 352-page act. But in general, the AIA does a number of things, including broadening the role of the U.S. Patent and Trademark Office from simply examining and ruling on patent applications to resolving disputes; offering an expedited track for patent applications; dedicating a revenue stream to support the administration of the PTO and ease its backlog of 679,000 cases; and streamline the process to conform with patent processes used throughout the world.

Perhaps the most-discussed provision of the new law gives dibs to the first inventor who files for a patent, rather than to the first person to invent, a change expected to take effect in March 2013.

To suss out what it means, Mainebiz spoke with Dennis Haszko, a patent agent with Eaton Peabody, who started his career in Washington, D.C., as a patent examiner at the PTO assessing the validity of patent applications. Holding degrees in engineering and law, Haszko now heads up the Eaton Peabody patent practice. The following is an edited transcript of that conversation.

Mainebiz: Is there a way to summarize the reforms?

Dennis Haszko: I can try. They are quite extensive. If you're familiar with any kind of law, there's the legislation that gives an outline of what the government wants to do. Then there's rulemaking that enacts what the law requires. Right now we've got a general outline of the new law enacted in September. Some features are fairly self-explanatory, like Track 1, an expedited procedure where you pay an extra fee to the PTO and move your case along very quickly. That was enacted quickly because the law was specific about it. But there are lots of aspects of the new law that require significant behind-the-scenes work at the patent office figuring out the details.

Over the course of the next 12-18 months, we'll see a notice and comment period. Based upon those comments, the USPTO will issue final rules. There's a lot to be determined.

Is there any change that's especially compelling?

In broad brush strokes, one of the most significant changes is the first-inventor-to-file rule. Now most people hear the first-to-file part and don't realize it's specific to an inventor. If you rush to the patent office with someone else's idea, you won't get a patent because you're not the first inventor to file. The first-to-file system is typical all over the world and helps us take another step toward creating harmonization with foreign laws. That's one of the things the U.S. has been trying to do — facilitate local laws to harmonize international rules in each country. This is one of the AIA's big steps in trying to put us on an even keel with the rest of the world.

How is that different from the way people previously sought a patent?

It's the first inventor to file, rather than the first inventor. This encourages early patenting and discourages inventors from keeping their inventions secret for a long time. Overall, it still allows inventors to file and protect their ideas and provides some benefit to their R&D work and excludes others for a limited time. It's a subtle distinction for most lay people, but really important.

What changes are likely to have the most impact in Maine's intellectual property community?

In that regard, every time a client comes to me, they want certainty. If they've made a commitment to pursue a new commercial product, or to protect their current business somehow and the products they have in development, they want certainty as they shovel resources into the patent process. One of the things AIA does is create an expedited procedure where you can ideally go from initial filing to final decision in your case within a year. You pay an extra fee to do that. The fee was set at $4,800 and there's a 50% discount for small entities, defined almost exclusively as all my clients in Maine. The threshold is 500 employees – if you're below that, you're a small entity. That's a $2,400 expedited fee. The current backlog for a non-expedited application is well over 18 months and closer to 24 months for even a first review. This part of the act is very important for small businesses in Maine.

Another aspect is the micro-entity [category]. That rule will allow you a 75% discount, so for $1,200 you can expedite the application and have some certainty within a year. Presumably — the details are to be determined — companies with fewer than five employees and new to the patent system, that's where this discount is geared toward.

Has the threshold for the micro-entity been established?

I'm not sure it's been set in stone yet and there are several variables. The applicant has to be a true startup, an independent inventor or a very small company. I have a lot of clients for whom inventing is not their day job. They dream about a new business. They have a new idea around a hobby, or they come up with a widget that relates to their jobs or hobby [and are seeking a patent]. It's just them and their idea … this micro-entity will apply to them. It's very good for the wannabe small business.

So if a business falls under the broad category of a micro-entity, can it apply for expedited review now, or is the patent office still in the rulemaking mode for that as well?

Still in the rulemaking mode. I expect there will be final rules and costs and details coming out of the patent office in 12-18 months.

Do you see any immediate use of the expedited reviews?

I do have clients who have utilized, in the past, a pilot patent program that is set to expire at the end of December of this year for green technology. Anything related to saving energy and resources could be filed under what's called a green technology petition — I did about five of them, all successful. But that special program is set to expire and presumably the patent office will segue into using the new track for green technology.

There's also the fine print. In the Track 1, there are some procedural limitations and a limitation of 10,000 of these Track 1 applications per year. The patent office has committed to monitoring whether it's being overused by large corporations and underused by smaller entities. They reserve the right to cap the categories of large and small entities. I think about what the patent office has done and everything that I've seen so far in the AIA is a good thing.

If the patent office has a huge existing backlog of cases, how can it promise an expedited option to filers? Is it creating a new division?

The patent office is trying to move things more efficiently. David Kappos, the director of USPTO, has a background in IBM — he was chief patent counsel there — and has a very good business sense. One of the things the AIA does is change the funding for the patent office. For years and years, users would pay their fees to the patent office, which sent that money to the U.S. Treasury and then Congress would appropriate X number of dollars back to the patent office and no more. So those user fees were diverted to things like road repairs. The AIA creates a reserve fund for the USPTO [funded by fees] that can't be appropriated by Congress for other purposes. Previously, the patent office couldn't hire as many people as it needed or wanted, and couldn't react to a wave of new applications.

[The funding mechanism] also should help with the backlog of cases before the appeals branch of the patent office, cases that number in the tens of thousands. There's a lot of work to review these cases by the appeals board because there aren't enough administrative law judges within the patent office to do the work. This should help hire more ALJs.

Anything else especially pertinent?

Well, we all know people like to complain about government. But there has been a consistent drumbeat that the patent office is not issuing valid patents. That it is issuing software patents that have been done forever and a day and are not valid. That's what they've been saying among software groups and some aspects of the business community. One of the things the AIA is trying to do is prevent any perception of frivolous patents, patents that shouldn't have been issued.

Two of the proposals they have in the pipeline are post-grant review and inter partes review. The nuts and bolts are yet to be determined, but post-grant review would allow the public to challenge an issued patent that they do not feel is worthy. This [challenge] is typically a process hammered out in court after a patent has been granted. Challenging the validity of a patent in a court of law outside the patent office domain is extremely expensive. The cost is beyond small businesses typically, often at least a $1 million in legal fees. To avoid that, the patent office is putting in this post-grant review process. You can do more or less the same thing — challenging the validity of patent over inventorship issues, or how novel it is, and so on — within the patent office system that basically helps the public to vet patents they see as invalid. For instance, you might have a small company in Maine that has been using a product that, turns out, looks and smells a lot like a product that was just issued a patent. Your immediate reaction is, "Oh my God, what do we do?" You can go the costly route and challenge the patent in a court of law, or you can utilize the new post-grant review procedure. The fees for this procedure are still to be determined … but I guarantee you, it will be tenfold cheaper than going through litigation after the fact.

The inter partes review process is geared more toward the application process. At a certain time after an application is filed — applications are generally published 18 months after they are filed — this provision will allow the public to put in their two cents. A business owner can say, "This is something I've seen before," or, "It's something my business has been doing and I don't want this patent issued because it will kill my business." They can file prior art — anything they might know related to its patentability, such as prior patents, [descriptions of the process or product from] prior publications or trade journals — any sort of printed public matter, and they can send it into the patent office and be involved in the review process during examination of that application. The involvement should be early on enough to affect examination and the decision of the patent office.

Is there some worry that bigger corporations will abuse these provisions?

Well, to begin with, we only want true inventions to patent. It's about getting good valid patents issued. If a big corporation is challenging a patent process to derail it, to muck up the works, that would be considered fraud on the office and in this notice and comment period, someone will bring that issue up and the patent office may inject some kind of [punitive action] if you're found abusing the system.

But if the big corporation is sending in actual prior art that shows it's not a true invention, that's another thing. There's always fear in the independent inventor community. I personally feel the AIA helps to put small companies on a better playing field. The larger companies will always have more resources to throw at something. But if all you have to do [as a small inventor or company] is pay $2,400 or $1,200 to expedite your application and get some certainty within a year to help you compete in a market with the others, that's a good thing for small companies. It puts them on an even keel.