A first look at the Patent Reform Act or the America Invents Act

On Friday, September 16, 2011, President Obama signed the Patent Reform Act. The changes to the patent laws will have a major impact on inventors. Few in the academic world understand how the changes will impact independent inventors and small businesses. Unfortunately, I fail to see how the America Invents Act will create any jobs in America. The Act creates a disincentive for small businesses to innovate. So, who will create the jobs? The big corporations that lobbied for the Act?

The Patent Reform Act has 37 sections. I am still working my way through the 58 page Act. Some of the language in the Act is ambiguous and will either require legislative correction or court interpretation. This post only includes my initial impressions of the America Invents Act. I describe my understanding of a few of the sections below.

First to invent gone. First to file is the law.

Section 3 deals with the change to a first inventor to file standard. In order to obtain a patent, the invention must be novel (new) and non-obvious. Currently, inventors have a one year grace period to file a patent application. A patent cannot be obtained if "the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States." 35 U.S.C. 102(b).

The one year grace period allows inventors and small businesses the opportunity to shop the invention around, test market it, begin manufacturing and marketing, or otherwise exploit the invention before deciding if the invention should be patented. It is not unusual for a utility patent to cost $8,000 to $20,000 to obtain. Filing a provisional application can cost $3,000 or more. The one year grace period allows for the collection of information useful for deciding if such an investment in a patent makes economic sense.

The Patent Reform Act changes the law with respect to novelty. A patent cannot be obtained if "the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention." AIA, sec. 3(b)(1) (revising 35 U.S.C. 102(a)(1)). There is a narrow exception to this rule. Disclosures within one year of the filing date made by the inventor are not prior art.

The one year grace period is gone. Independent inventors and small businesses must make the patent decision before they begin publicly using or offering products embodying the invention for sale. Those inventors who like to test market their inventions will be faced with gambling on their inventions if they decide to seek patent protection because the patent application must be filed first.

Another section of the law that is gone is that a person cannot obtain a patent if "he did not himself invent the subject matter sought to be patented." AIA, sec. 3(b)(1) (deleting 35 U.S.C. 102(f)). Sure, the person filing the statement is required to make an oath or declaration that he "believes himself or herself to be the original inventor." But a patent is not invalidated if the identified inventor did not invent the claimed invention.

The first to file provisions of the Patent Reform Act do not take effect until 18 months after the date the Act was enacted. On March 16, 2013, the first to file law kicks in. It remains to be seen how pending patent applications will be handled when the law kicks in.

Fee changes

Sections 10, 11, and 22 of the the Patent Reform Act deal with patent fees.

First, the Patent Reform Act defines a Micro Entity as being eligible for paying reduced patent fees. A small entity is an inventor who has not filed more than 4 patent applications and has a gross income for the previous year of less than a specified amount (about $150,000 for 2010). If the invention has been assigned, the owner must have a gross income for the previous year of less than the specified amount. There are exceptions and special rules, for example, employees of an institution of higher education are considered micro entities.

Current law allows a Small Entity to pay one-half of various patent fees. For example, the PTO filing fee for a provisional application is $220. A small entity pays only $110. A micro entity would pay only $55. It is not unusual for an attorney to charge more than $3,000 for preparing and filing a provisional application. Additionally, inventors commonly spend thousands developing their invention. The $55 savings is insignificant and may actually be less than the cost to determine if the inventor is eligible for micro entity status considering the complexity of the new law.

The reduced costs for micro entities sounds good. But in reality it is a chewed up bone tossed to independent inventors and small businesses.

Fee Increase: One surprise is that after three years of no fee increases, the Patent and Trademark Office is increasing their fees by about 15%, effective September 26, 2011. So, the $110 provisional patent application fee for a small entity will be $125. That is not a significant amount. What is significant is that the Patent and Trademark Office fees are diverted to the general fund because Congress sets the PTO budget. The PTO budget is not under control of the PTO and it is not based on the fees collected by the PTO. So, a portion of the PTO fees are being diverted from the PTO and the PTO is increasing the fees they charge. Hmmm. Smells like a tax on inventors to me.

Oh, and the repeal of the fee diversion, well, the House eviscerated the provision in the Senate Bill that ended fee diversion. See Section 22 of the Act. The Patent and Trademark Office can only use that portion of the fees collected as provided in appropriations Acts. Translated, that means fee diversion is alive and well.
 

Related Links:

• Summary of the 2011 Patent Reform Act
• Text of the 2011 Patent Reform Act
• pdf file of the Patent Reform Act
   
• Current patent laws