What The New Patent Reform Act Means For Innovation

President Obama is expected, without delay, to sign into law the first large-scale reform to U.S. patent laws in 60 years. It brings U.S. law into line with most international practices, and is designed to quash patent trolling, cut red tape, and spur innovation.

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Late last night the Senate voted 89-9 to pass the America Invents Act that would radically reshape patent laws, and President Obama is expected to sign it without delay. It's the first such significant bill in 60 years, and it has one key component: It moves the onus from merely "inventing" a patentable idea first to becoming the person who actually files for an innovation first.

If the subtlely of this eludes you, then here's what the big hopes are for the act: By making this structural change about who gets assigned a patent, U.S. law will line up better with international law (which may simplify global-scale IP problems). It may simplify red tape, let the USPTO tackle a massive backlog of patent applications that're snarled in existing red tape, and it could disable a class of patent troll who documents an idea but never applies for a patent until someone else does, replicating their invention.

Whew. Okay, before we explore that in greater depth, some quick backstory.

A patent represents a legal line in the sand that says "I own this" after an inventor innovates a new object, process, or design. Patents are there, in many ways, to protect the rights of the inventor to make a profit from their inventions, and to stop a competitor with better funding (but less original thinking) from quickly taking the idea to market. Current U.S. law works very much like this, with the emphasis on "first to invent" or otherwise demonstrate an innovation, thus "bookmarking" the idea, and giving a window for the inventor to get a creative business plan in action to bring the innovation into reality.

But "first to invent" has some big pitfalls, including the ability of an inventor to totally gut the hopes of someone else with a similar or identical idea, and who then files for a patent—because the original inventor, without necessarily having to make any move toward realizing the innovation, can claim they invented it. A complex legal battle may then ensue, and perhaps the second filer may choose to settle privately, license the idea, or fight the situation in an expensive court case.

This trolling completely destroys the idea that a successful new thing is built on 1% inspiration and 99% perspiration—a troll, perhaps even a rich troll who's made money from previous innovations they've dreamed up (or, more materialistically, bought from someone), can simply keep the legal upper hand by saying they're the real innovator without actually building anything.

In the newly reformed laws under the AI Act, the legal ownership of a patent is conferred on the entity that's the first to file for the innovation. Since this costs money, an inventor has more of an incentive, after having a radical idea, to file a patent and then try to turn it into something that can earn revenue. Whereas the inventor who merely dreams up a neat idea but does nothing with it has less recourse to cry foul at a later date. The idea is to stimulate more geniune innovation, and prevent too much money and time being wasted in court cases that in no way advance the state of technology or the revenue-earning potential of the U.S. Supporters have claimed the reduced red tape and boosted innovation could create up to 200,000 jobs.

IBM, among others, has already responded to the news positively—as one of the biggest, most numerous patenters in action at the moment, it's a key stakeholder. The company notes that it's long been a proponent of reform, and applauds the "common sense" bill and thinks the law places the country in a position to "spur innovation and economic growth." It's worth noting that IBM seems to patent more ideas than anyone else, and thus the law to some extent protects its position against "first to invent" claims, rather than facilitating IBM's own patenting processes (apart from reducing complications).

The bill is also unlikely to impact ongoing disputes between giant firms like Samsung and Apple, or the recent acquisition of Motorola's patent portfolio by Google—in these cases it's not necessarily the vailidity of the patent that's being questioned (though in the Apple case Samsung is trying to devalue Apple's design patent on the iPad by claiming, bizarrely, prior art exists in the form of a movie prop from Kubrick's 2001 movie) but rather that a peer is violating a patent that's been granted to protect a genuine innovation. 

Meanwhile, individual inventors and smaller companies are wary of the reform, because their smaller assets may make filing a patent and paying for it a more difficult process, even if they're innovative enough to have come up with a thoroughly novel idea. One can argue that this enables a new angle for venture capitalists to get in to smaller companies, with micro investments on the hope that a novel patent could turn into a serious income-earner, but there are still many detractors to the bill.

Ultimately the AI Act does reform U.S. patent law, and at least will radically shake up the entire system of innovation, IP protection, and IP legal cases—and it may prevent certain classes of patent troll. It may unsettle smaller innovators, and at first it may even spur a flurry of new lawsuits as interested parties see an opportunity to make money from the new rulings. And it won't affect many of the larger-scale extant cases, which will just roll on for years earning lawyers some serious cash. 

Chat about this news with Kit Eaton on Twitter and Fast Company too.

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10 Comments

  • Guest

    disable a class of patent troll who documents an idea but never applies
    for a patent until someone else does, replicating their invention.

    What if I didn't *want* to patent my idea?  I wanted it to be public domain.  That shouldn't allow some megacorporation to patent my idea and prevent me from making it.

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  • Maurice Haff

    If you would like to get a good handle on the new legislation, its implications, and how it will be implemented, I suggest you checkout the article "America Invents: Lies, Damn Lies and Legislative History" by my friend Gene Quinn on IPWatchdog.com.  As for the discussion here regarding "patent trolls"  all should remember that patents are property.  In the USA, property rights are protected (usually).  Property owners have the right to sell, rent, and exclude others from use... just like your house.  If you purchase five beach houses and rent them to various users, but choose not use them yourself, are you a "real estate troll"?  Think about it.

  • Gloria Buono Daly

    This information is going to be very useful. Hopefully my idea will come to fruition. Thanks again.

  • james bradley

    IMHO, as per my understanding and reading of the proposed law, the night that congress passed it, is 180 degrees out from our esteemed colleague, the writer's understanding.
    In an attempt to bridge that misunderstanding, I offer, to patent is to 'expose', from latin. Is the US system not the first to demonstrate, i.e. the device, system etc must work? Is the rest of the world not first to patent, i.e. to write it up?
    Isn't it that presently a little inventor has to build or commonly prove in court that they were diligent in rendering commercial a device, system, service method, ..., generally an expensive undertaking?
    A first to submit system implies that, provided there are enough of our esteemed colleagues in DC that are examining for suitability for enablement, this is all that is required, and a 'troll' with development money can't overtake the little guy so easily, as the troll would by reading someone's application and building first.
    Isn't it that companies like Big Blue, siting in the cat bird's seat recognise that they will make more when the little guy succeeds, and are therefore on the good side of this bill?

  • Greg

    I'd agree with Vic that the title of "patent troll" is misused in this story.  The example of people filing patents, making to attempt to commercialize it only to sue someone who sells a similar item is more fitting of a patent troll.

    However, I do think that this bill addresses the issue of who is the true "inventor".  If I understand it correctly, the way it was previously, all you needed to confirm you were the "first" inventor of an item was a document laying out the idea with a few sketches and have it signed and dated by you and two witnesses.  You then had to show "reasonable" attempts to further the development of the invention.  These reasonable actions would probably be left up to the courts to decide.  However, which one of these persons do you think is more invested in the invention and most likely to contribute to society: someone who scribbles down some notes on a paper, buys a couple bucks worth of supplies to play around with -or- someone who invests enough time and effort into the design that it is refined enough to patent and willing to go the extra mile of actually filing for a patent?  

    The costs of filing a patent are real, but the initial filing costs are on the order of a couple thousand dollars.  If someone want's to call themselves an "entrepreneur" and invent something with the intent to market and sell it they have to be willing to stick their neck out a little and take some financial risk.

  • cellurl

    This benefits Google and Apple most.

    Consider learning about the teaparty. If not, then comany A or company B will run your country.

  • Vic Kley

    THE INVENTOR OPINES

    First things first the problems at the USPTO are due to gross underfunding due to the draining of user fees paid to the USPTO by inventors to fund congressional boondoggles- over a billion dollars worth.  We do not have enough examiners to process the patents.  Sadly despite the intent of the bill's creators what was passed and will likely be signed by the president still leaves the irresponsible congresspeople in charge of the piggybank.

    THE BACKBITER OPINES

    This article is clearly penned by someone entirely ignorant of inventing or even the common use of the insult troll.  Since "patent trolling " is entirely made up by the likes of ignorant scribes, and unscrupulous  infringers and their paid apologists it is not surprising that it is not only not addressed by the America Invents Act - it cannot be even discussed meaningfully until its well defined.
    Let us deal with this person posing as an author perhaps a useful term for him would be backbiter.  Our backbiter Kit makes the absurd remark that "a class of patent trolls" invent things and then wait for others to file patents in order to ..paragraphs of guesses and silly suppositions follow- what the backbiter calls his "backstory".  So someone actually invents but this person is we are told evil because he did not file a patent soon enough to satisfy the backbiter.  This could go on and on but let's cut to the chase.

    Actual interferences which is what two inventors claiming the same invention are involved in are extremely rare and the America Invents Act does nothing to affect any present or short term future interferences except to see that long term the First entity to File is the inventor- whether they invented or not.  This is in contradiction to the constitution and has a good chance of being thrown out by the courts.

    So to be clear interferences almost never happen and most of what others mean when they talk about "trolls" is an entity that merely owns patents with no sales or manufacturing of the invented item.  For lots of reasons the America Invents Act does not deal with the latter "trolls" AT ALL.

    The kind reader should also understand that the definition of "troll" also applies to NASA, and every University in the world, and research institutions like the Mayo Clinic, NIH, the Rockefeller Institute etc., etc.

    The one thing that everyone should also understand is that serial infringers like Microsoft, and Ford and many other usually large companies use "troll" to denigrate the entities that poor inventors sell their patents to because they do not have the many millions it takes to mount a serious challenge to such people. These "enforcers" are the only hope many small inventors or devastated start-ups have to stave off bankruptcy and try to obtain some value for their years of work.  If its not clear "serial infringers" means a company like Microsoft that has been repeatably found to have infringed patents by American juries.