Who’s first? Featured

7:00pm EDT February 24, 2008

Patents exponentially increase an invention’s earning power. That means any changes to patent laws carry high stakes for inventors and companies. Over the past 10 to 15 years, various parties have tried to reform U.S. law to align with the standards found throughout most of the rest of the world.

“Most other countries follow a first-to-file system where the first individual or company to file is entitled to the patent,” says Mitchell J. Weinstein, head of the IP service area at Levenfeld Pearlstein LLC. “The U.S. has always followed a first-to-invent system, but the Patent Reform Act of 2007 would include the significant change of making it a first-inventor-to-file system.”

Smart Business spoke with Weinstein about the potential implications of the Patent Reform Act of 2007 and how companies should prepare for them.

What changes would occur if the Patent Reform Act of 2007 became law?

The first-inventor-to-file system is a compromise between the longstanding U.S. first-to-invent system and the global first-to-file system. For example, let’s say you and I are working independently on inventing the light bulb. I invent it today, and you complete it next week. Whichever one of us files first is entitled to the patent. [If you steal the idea from me, you’re not entitled to the U.S. patent.]

Even with reforms, the U.S. law will still be distinctly different from those in other countries because patents in this country are filed under the name of the inventor instead of, as often happens in other countries, under the inventor’s employer. Also, U.S. law would still include a grace period of one year under the first-inventor-to-file system. In other places, once individuals disclose an idea, everyone has rights to it. This new system really promotes individuals preparing and filing patent applications as quickly as possible.

What forces are driving these possible changes?

Three underlying forces have pushed these modifications forward. The first involves the desire to streamline the patent system so that it’s easier, faster and more effective. The second encompasses making the system itself more transparent. And the third aims at reining in the rising cost of litigation as well as damages, awards and royalty rates awarded to nonmanufacturing owners.

Greater disclosure requirements during the patent application process shift the responsibility onto the patent applicants and off of the examiner. By revealing details to the public early on, the patents should come through the system better examined and tested — and quicker. At this point, a patent application related to computer technology can sit for five to seven years before it’s examined. During that interim period, the inventor has no rights to protect himself against patent infringement.

What’s the history behind U.S. patent law?

The last true reformation of U.S. patent law happened in 1952. Over the past 15 to 20 years, legal battles occurred when inventors kept their patents secret until a whole industry had developed around the new technology. After many companies invested billions of dollars, nonmanufac-turing patent owners would come out of the woodwork and sue everyone in the industry. These ‘submarine patents’ were sometimes very questionable, and their owners would use the cost of litigation as leverage to enter into licensing programs.

To alleviate this issue, earlier attempts at reform throughout the past five to 10 years tried to do away with these questionable patents. The 2007 reforms are trying to take this a step further. There has especially been a big push to move the changes through with a Republican administration in power.

What recent developments have occurred?

This year there’s been a renewed bipartisan push to get legislation through so that the patent system doesn’t create a disincentive for research and development in high technology areas. Government leaders feel the national system needs to conform to the capitalistic, entrepreneurial and competitive global society.

How should companies prepare themselves?

The most important step businesses should take right now is to develop and implement a good process to identify, vet and patent the most important inventions as quickly as possible. Another crucial action is to identify your company’s core competency areas and to stay aware of what your competitors are doing in terms of the marketplace and patent protection. Researchers intimately familiar with the technology and the patent system can help identify potential opportunities and concerns. These individuals should work hand in hand with an IP attorney to determine the scope of patent protection and to avoid stepping into someone else’s territory.

To remain competitive, businesses need to be smart about their patents. You can’t patent everything but, for your areas of focus, you should have an effective patent program in place. You also need to consider whether you should go beyond a U.S. patent to global protection in new markets.

MITCHELL J. WEINSTEIN is the head of the IP service area at Levenfeld Pearlstein LLC. Reach him at mweinstein@lplegal.com or (312) 476-7593.