Tuesday, September 13, 2011

Guest Post: Jobs vs. Innovation: What Patent Reform Really Means for America

***In light of the recent Patent Reform law that, at the time of this posting, is on Obama's desk awaiting his signature, we thought it would be a good idea to hear what the experts think about this new law.  Today's guest post comes to us from a Patent Attorney who goes by the blog name "The Examiner."  The Examiner is a technologist turned lawyer from the East Coast who has traveled extensively throughout South East Asia, Africa and Europe before deciding to settle down back in the U.S. He is registered to practice before the United States Patent and Trademark Office and lives in New Jersey where he currently practices Patent Law. Before going to law school, he spent most of his career building technologies for fortune 500 companies and now uses his law degree to protect that type of innovation from those who would steal it.  The Examiner has agreed to field our questions about this new law so please be sure to engage our guest in the comments below***

There is not much in the current political environment that Congress can agree upon.  From health care to the debt crisis, it appears that compromise has taken a backseat to political ideology and vacant rhetoric.  In spite of this, on September 8, 2011, the Senate, by an overwhelming 89-9 vote (and the House by a vote of 304-117), passed the most sweeping change to the U.S. Patent system in almost six decades. “The America Invents Act” (AIA), purports to put America to work by finally addressing the ostensibly broken U.S. patent system, which allegedly stifles innovation and progress.  This bill has been on the wish list of many deep pocket campaign donors for several years.  In fact, a consortium of some of the largest technology companies in America has vehemently supported the bill, which by all accounts will soon be signed into law by President Obama.  

The America Invents Act was passed in the moments before the President’s much-anticipated (or hyped depending on your persuasion) speech on his new jobs initiatives.  As the bill’s chief architect, Sen. Patrick Leahy (D-VT), asserts, this legislation “is a true jobs bill at a time when we need it the most.” Some even estimate that as many as 200,000 jobs will miraculously materialize in wake of this legislation.  Now you may ask yourself: is this too good to be true? Does this really affect me, the average citizen? Where are these jobs? How can I apply?

In order to address these questions, we need to examine what effect the AIA will actually have.  Although parts of the AIA will align applicable patent statutes with major court decisions, a more critical provision will move the U.S. patent system from the unique “First-to-Invent” (FTI) regime to the more European-style “First-to-File” (FTF).  Currently, our FTI system rewards the inventor who first conceives of an idea and diligently reduces it to practice by building a prototype or filing a patent application.  Typically, the patent is valid so long as the inventor does not abandon, suppress or conceal the invention.  One apparent problem with the FTI system is that when two inventors file a patent for the same invention, a costly interface hearing ensues to determine the “true” patent owner.  

By contrast, it is the simplicity and practical advantages of the FTF system that explains why many see it as an attractive alterative.  Under the FTF system, there are no expensive interference disputes (hearings where two different companies try to claim the same patent).  The applicant with the earliest postmark to the United States Patent and Trademark Office (“USPTO”) gets the patent.  

Consequently, with this simplified patent system more patents should be granted, which as we are led to believe will translate into more jobs [I’ll get back to that point later].  As expected, not everyone is in favor of this change.  Small inventors and mid-sized companies view the FTF system as unduly favoring large corporations, which have armies of patent attorneys on speed dial who are ready and able to rapidly churn out patent applications in exchange for billable hours.

To understand the underpinnings of the U.S. FTI system and why changing it is so controversial, a quick history lesson of Patent Law in America is required.  The U.S. Constitution, pursuant to Article I, Section 8, Clause 8, provides that Congress shall have the power “To promote the progress of science . . . by securing for limited times to . . . inventors the exclusive right to their respective . . . discoveries.” (emphasis added).  It is this constitutional provision that is the foundation of our current U.S. Patent system.  As such, the FTI system is deeply rooted in our laws because the Constitution provides Congress the power to grant patents to “inventors” who, by definition, are the first to invent not the first to file.  Hence, under an “originalist” view of the Constitution, to change to a European-style FTF system may not be what the Framers envisioned to promote the progress of science.  Yet, this inevitable constitutional challenge to the bill is not why it is most troublesome.  It is the misguided belief that U.S. patents = U.S. jobs. 

As many inventors can tell you, patenting an invention and making a profit from it are two totally different things.  The average entrepreneur has very little experience with patents, and many do not know how to exploit or even protect their newly acquired rights.  While there are a few who manage to spin their invention into the next multi-million dollar widget, and employ thousands of US workers, this is the exception not the rule.  Usually, only the large corporations are savvy enough to mass market their patent portfolio to the point of producing a profit.  But most of them do not manufacture the invention in the US.  Instead, they bypass the US workforce in favor of outsourcing overseas where they are able to exploit foreign economies of scale. Just look at the bottom of any hi-tech electronic and next to the demarcation indicating the item is U.S. Patented, you are most likely to also see the brand “Made in [pick your foreign country]”.

The reality is that besides the lawyers and big businesses, the only other group that the AIA will be popular with is the USPTO; a funding provision in the bill grants the USPTO the ability to increase revenue streams by self-regulating its own fees.  This will likely allow the hiring of at least some additional patent examiners to tackle the huge backlog of patent applications and reduce internal USPTO workloads.

So in sum, what does the AIA mean for you? Well, if you are a part of a unique and often small community of highly skilled workers (patent attorneys/USPTO) or a worker overseas, then this bill is for you; for everyone else in America, not so much.  Thus, until Congress is ready to agree to finally reform the outsourcing of American job creation, the AIA will be just another example of a failed attempt to get Americans back to work.
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