What You Need to Know About the New Patent Law

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The America Invents Act has been widely described as the biggest reform of American patent law in some 50 years, and that's certainly true. An overhaul of our patent system was long overdue, and there have been high hopes as to what it could accomplish.

patent reform
Now that the Act has been signed into law, however, there's growing realization that it doesn't do nearly enough. Some provisions are a step in the right direction, to be sure, but on the whole the legislation is a pale shadow of what it should have been, and with some potentially harmful inclusions to boot--particularly for small businesses.

How will it affect you? You can be sure it will, at least indirectly. Here's a summary of some of the key points you should be aware of.

1. 'First to File'

Certainly the most obvious change made by this new legislation is that from now on patents will be granted to whichever party files for the patent first. This is in contrast with our former “first to invent” system, whereby inventors had to prove--often via a protracted legal battle--that they were the first one to come up with the idea.

Pro: This will certainly make it quicker and simpler to decide who should get the patent; it's also more in accordance with the way things work in many other parts of the world. For those unable to file a full application quickly, there's also the possibility of filing a more limited “provisional application” that can serve as a placeholder for up to 12 months, as Washington and Lee University economics professor Alan C. Marco recently pointed out.

Con: In the long run it will still likely favor big companies with the staff and resources to get patent applications in quickly, putting smaller companies and individual inventors at a relative disadvantage.

2. 'Micro Entity' Status

A special “micro entity” status included in the new law will benefit individual inventors. Specifically, for inventors with fewer than five previous patent applications and a limited household income, among other requirements, the law reduces the fees required to file a patent by some 75 percent, as California patent attorney Andrew Schroeder recently pointed out.

Pro: A clear financial benefit for qualifying inventors.

Con: Only that you must meet a fairly detailed set of requirements to be included.

3. No Real Change on Software

Of critical importance to those of us in the information technology industry are software patents, which I've long opposed. While this reform could have been a great time to deal with this problematic issue, that didn't happen. Only two narrow niches--financial products and tax strategies--are addressed in a limited way, but nothing broader is included to fix the problem overall.

Pro: Patents are limited or clarified somewhat in two narrowly defined business niches.

Con: Overall, the ongoing software patent debacle continues unchanged, and that can only hurt small developers.

4. Patent Trolls Unabated

Relatedly, the America Invents Act does nothing to limit the damages that can be sought in a patent lawsuit, and it also doesn't address the harm done by patent trolls like Lodsys, which have become a scourge on the software industry, especially.

“We hope legislators won’t treat the passage of patent reform legislation in 2011 as an excuse to ignore the growing troll problem, which stymies innovation, hurting individual inventors, small businesses, and our economy at large,” writes the Electronic Frontier Foundation's (EFF's) Julie Samuels.

Pro: There isn't one, except for patent trolls.

Con: With the continuing motivation of sky-high legal rewards, these trolls will continue to be a problem for companies large and small.

5. No Limit on 'Forum Shopping'

There's a reason so many tech-related patent lawsuits have been filed in the Eastern District of Texas, and that's that it is widely known to be unusually patent-friendly. This new law does nothing to limit the ability of trolls and others to pick where they file their lawsuits in the hopes of more favorable results.

Pro: None, except for trolls and the Eastern District of Texas.

Con: Leaves another part of the trolling and lawsuit problem unaddressed.

6. Fee Setting Authority

Up until now, Congress has been in charge of setting the fees charged by the patent office, and it has diverted a lot of those funds--some $900 million over the years--toward other purposes. While Congress will still have some say in this area, the USPTO has been granted more authority to set its own fees and keep much of what it collects.

Pro: This will surely provide a much-needed revenue boost for the patent office--one that should help it tackle the monumental backlog of applications waiting for examination.

Con: The revenue boost isn't as big as it should be since Congress will still keep control of some of the money. Another consequence, as noted earlier this month by Ars Technica's Timothy B. Lee, is that it may be tempting for the patent office to be more lenient in its granting of patents so as to increase the number of future applications and--along the way--its own revenues.

7. Challenging Bad Patents

Finally, through a new "post-grant review" process, the new legislation offers a new opportunity to challenge bad patents. That certainly sounds like a good thing; the only trouble is the way it was implemented, as the EFF notes.

Pro: There's no doubt we need better ways to get bad patents invalidated--there are far too many in existence today--and this could help to a limited extent.

Con: “These procedures offer few practical chances for ordinary people who don’t constantly monitor the Patent Office,” writes the EFF's Samuels. Strict time limits on these challenges, in particular, mean that constant vigilance is required in order to challenge a patent in time to be considered. Once again, only the big guys with their well-paid legal staffs will likely be able to do this quickly enough, putting small businesses at a disadvantage once again.

It's certainly a good thing that the need for patent reform has been recognized; there's little debate about that. But what got signed into law this time just doesn't come close to doing enough. Let's hope the push continues for a more sane and balanced system that doesn't reward the monoliths and trolls or impede the little guys quite so much.

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