Making the Case Against First to File

By Ron Katznelson, Ph.D.
November 8, 2009

NOTE: This was originally written as a comment to my article Much Ado About Nothing Over First to File.  It is posted here as an article with the permission of Ron Katznelson.

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I generally respect those who have the capacity to change their opinions based on substantial relevant evidence and a compelling underlying factual record that supports such a change. And I know you to be one who had made shifts in the past based on such sound bases, and you earned all of our respect for that. However, this one is a surprise to me, as I now see you change your mind over mostly irrelevant facts and over what appears as a profound misunderstanding of the adverse effects of transitioning to a First-To-File (FTF) system. There has been much folklore and obfuscation about FTF and you may have fallen for it based on, what I believe to be genuine, but tangential experience. You and others are missing the point by looking only at a formulated invention and whether it takes three months or one year to file it. You are missing the point if you believe that the stakes are solely related to the quality, content or the submission speed of an application that is ultimately filed with the USPTO. Rather, the harmful effects of FTF for small startups and early-stage patenting firms is in losing patent protection on inventions for which applications will not, or could not, be filed. Harm will not merely arise due to the “race to the patent office”. Harm will be inflicted due to the race to the patent office with the wrong application, for the wrong invention, and for the wrong reasons, while exhausting precious resources in the process. As David Boundy correctly points out, “First to File” vs. “First to Invent” is a misnomer and the use of these terms is mere obfuscation. Interference priority contests at the USPTO and their numbers under current law are entirely irrelevant for assessing the effects of FTF on important inventions that I’m afraid will never reach the USPTO. Several facts, some of which have been touched on in prior comments, can help in appreciating these pernicious aspects of FTF.

The proposed transition to FTF had undergone no study or evaluation of the expected effects on U.S. patenting practices, the balance of costs and risks for small and large U.S. businesses, or of the adverse effects on patent quality and the increased USPTO workload. Do you not think that we ought to see such studies and projections undertaken prior to any enactment of FTF that overturns more than 200 years of American patent law? Noteworthy is the recent McGill University study of the Canadian transition to FTF in 1989, finding resultant adverse effects on small businesses in Canada and negative effects on patent quality. Should we ignore such evidence?

While I acknowledge that FTF would provide the administrative convenience of improved certainty as to patents’ priority date, a U.S. transition to FTF will shift costs and uncertainty risks from large firms to small patenting firms, for the reasons I explain below, (and I apologize if some of these have been articulated by prior posters above). This is because establishing patent priority under FTF will require a “race to the patent office” with every new important idea, which would be resource-prohibitive for small startups. Currently, important new ideas that gestate during months or even years are often fleshed-out, vetted, eliminated or reduced to practice prior to filing. Steve Perlman’s example above shows that his company’s yield of important inventions that were ultimately worth filing amounted to less than 10%. This is not atypical. R&D inventive work at the previous company I founded, Broadband Innovations, had generated approximately three times more important inventions than those for which we ultimately filed an application. Millions of our investors’ dollars had been spent on such explorations, and they were all documented contemporaneously in internal memos and engineering notebooks with the full understanding that corroboration was required. Your anecdotal experiences that inventors “simply are incapable of keeping appropriate records because they do not understand the evidentiary standards by small R&D” are not from the startup world that I know. Perhaps yours are experiences from some dysfunctional entities that would not attract investment capital. I caution you to refrain from jumping to conclusions based on such anecdotes.

Our invention-prospecting experiences described above are not unique to startup companies in our times and there is a paucity of general knowledge about these pre-filing activities even for the most famous inventions in history. For example, apart from the vacuum and glass improvement experiments, Edison’s success in incandescent lamps came about only after he and his assistants spent several man-years at the Menlo Park laboratory in a search for the right filament material, developing molds for its carbonization and perfecting the manufacture of their bonding connections to the lead-in wires. Thousands of experiments with filament substances and configurations were carried out, among which were carbonized fibers from turnips, pumpkins, squash, eggplants, apples, and from bamboo. Robert Conot’s book on Thomas Edison provides the details of how Edison sent out half a dozen men to search the world for the best bamboo, after narrowing down the filament “spectrum” to bamboo fibers. The results of these elaborate explorations spanning hundreds of filament configurations, were captured in hundreds of experiment entries in many lab notebooks, but only in a handful of filament patent applications.

Unlike large patenting firms that have lower-cost in-house patent prosecution resources and can afford to file more often, small business and early-stage startups will incur substantial increases in risks of losing patent protection. This is because many small firms will have no funds to flood the USPTO with patent applications, or will need to disclose their inventions to many potential investors (including large would-be competitors) before having the funding to engage in patent prosecution. Under FTF, and with a limited patenting budget, R&D teams will have to frequently face a painful dilemma as to which of these inventions should be written up and filed in a patent application. Unfortunately, many such guesses will prove wrong. Are you unwilling to acknowledge that such risks under FTF would be significantly higher than today? The great risks, costs, dilemmas and increased patent protection uncertainties that the FTF environment will create will undermine early-stage startups’ ability to attract investment capital or to even get established. Importantly, unlike other effects that would only come after the patents filed under FTF issue years after enactment, the risks associated with increased patenting uncertainties at small firms will begin having negative effects on new job creations in a matter of only months from enactment of FTF.

Indeed, the USPTO has no experience, knowledge or expertise in the potential effects of FTF because the pre-filing processes and risks discussed above have been invisible to the agency. Mr. Kappos’ citation of Interference statistics under current law in approximately 70 interferences out of some 450,000 applications per year provides virtually no relevant information on what will occur under FTF. It provides no information on applicants’ adaptive behavior when compelled to “race to the patent office.” It provides absolutely no means to assess the harm to applicants who will assume the uncertainty risks of not knowing which initial invention is worthy of a filing. Your explanation that small firms would benefit from being forced to act in their best interest have been shown as unavailing by others who commented above. If you respond to my post, please be sure to clarify whether you acknowledge that these uncertainties in patent protection risks will increase for small firms. If so, please explain how you balance these elevated costs and risks with the benefits that come (only to large firms) from FTF. To do so, use facts, show your work. If, instead, you are inclined to dismiss these risks, then we need go no further – we will have realized that we do live in different worlds.

Facts are important. To do its job, the USPTO requires very little, and indeed possesses very little, understanding of the actual invention process, the startup pre-filing activities, the entrepreneurial search and ‘mating’ with equity investors that inventors undergo and the magnitude of the risks we ask our investors to share-in. As David said, the USPTO is only the “midwife” in the birth of patents. Unfortunately, a troubling aspect of the USPTO’s advocacy for a transition to FTF overturning 200 years of American patent law is its apparent lack of data and models well within its field of expertise. For example, it failed to study somewhat relevant prosecution events at the Office, which are approximately 100-200 times more frequent than Interferences. These are Rule 131 affidavit filings including corroborating evidence to establish priority prior to a cited reference date. Analyzing the temporal statistics of pre-filing events documented in these records can be very illuminating. Do you think that estimates based on these records of the number of patent claims that issue today, but will be denied under FTF would not be far more relevant than the Interference Cool-Aid that you have been drinking?

Facts are important. It is also evident that no one at the USPTO had attempted to obtain relevant data from foreign patent offices on first-filings under FTF in order to model the increased flow and the subsequent abandonment of applications under FTF. For example, refer to an Appendix of my comments, downloadable from http://works.bepress.com/rkatznelson/59/. Figure 1 (page 3) of the Appendix shows that nearly 60% of applications filed under FTF pressures in Europe become useless to their owners before they are taken up for examination. In contrast, only 12% of applications filed without such pressure are abandoned prior to first action. This suggests that European applicants file 2.5 applications subject to FTF in order to attempt patent protection equivalent to one application, as opposed to filing only 1.14 applications for the same goal when they are not being subjected to FTF constraints. The increased flow of applications under FTF will also have dire financial collateral consequences: As seen in Figure 1, about one in three applications filed under FTF at the EPO are dropped after receiving the search report. Because the USPTO provides the search report only as part of the first office action on the merits (FAOM), the Office would be spending search and examination resources on applications that would otherwise never reach examination, let alone a patent grant that later fetches large renewal fees. (Compare these figures to the relatively low USPTO abandonment rates after FAOM in Figure 5, page 13 of my Appendix). Thus, FTF will cause a substantial upfront increase in costs to the Office without concomitant financial back-end revenues from renewal fees.

How do you think the USPTO will address the revenue shortfall when it is forced to invest much more examination resources on the “least profitable” product in its production line? As currently drafted, if S. 515 passes, the USPTO will be able (and indeed compelled) to increase all upfront application fees to make up the shortfall in patent renewal without even being accountable for such a disaster. Small business patentees will be harmed the most from these unavoidable increases in up-front patent fees. But do not despair as this will bring us in closer ”harmony” with our European friends who now have lopsided skew in their patent fee structure that is so “helpful” for their small patenting businesses.

Patent practitioners, you all have a choice now: You can advise your clients now that FTF will be good for them and that it would not matter much if they only filed early. You can tell them that they need to do so anyway, if they intend to file globally (at 20 times the cost). And upon passage of FTF, you will have to explain to them the consequences of the new law and the reasons that they must use your services more often (and pay you more money for filing more applications). You will have to explain to them that employees’ development records and engineering notebooks could not be relied on. You will have to devise new set of prudent practices that they should use immediately upon every departure of a key employee (perhaps to join a competitor). It will necessitate an immediate diversion of his colleagues’ time to write and file patent applications on patentable subject matter developed by the departing employee. You will explain that you will be there to assist them. You will explain that such precautions are advisable because derivation would be expensive, hard or nearly impossible to prove and that trade-secret enforcement is a matter remitted to vastly different state laws, in which you have no expertise. You would then have to deal with the appearance of having led them on the garden path of extracting more of their funds and making their procedures vastly more complicated.

Or, you can follow the alternative path. It involves providing your clients now with full disclosure of “I told you so before the law passed” about the consequences of FTF as described above. You can also tell your clients now where they can learn about both sides of the issue to form their own opinion and what they can do to avert the FTF provision if they so choose. This will buy you a lot of good-will and trust. It will remove any future appearance of a conflict with your clients’ interest, if and when FTF becomes law and your clients have to spend more money to use your services more often. At the very least, you can avoid losing clients due to mistrust and at the very best you and other patent practitioners following this alternative can help avert a disaster for startup companies.

The Author

Ron Katznelson, Ph.D.

Ron Katznelson, Ph.D.  
Dr. Katznelson is the Founder and President of Bi-Level Technologies in Encinitas, CA. He is also the Chairman of the Intellectual Property Committee of the IEEE-USA. This article expresses his personal views only and does not represent any position taken under his official capacity at IEEE. From 1990 to 2005, Ron was Chief Technology Officer, Founder and Chairman of Broadband Innovations, (formerly known as MCSI), where he led the company’s entry into the digital RF CATV industry. Prior to that, he was with the VideoCipher Division of M/A-COM Linkabit Corp., later acquired by General Instrument Corp. (GIC), where he served as Director, New Technology Development. At GIC, he directed R&D in the areas of Advanced Television Systems that led to GIC's video compression technology, now forming the core of the MPEG-2 standard and a basis for the Grand- Alliance ATSC High Definition Television standard. His responsibilities also included the management and development of the VideoCipher Division's intellectual property portfolio as well as representation in industry groups and standard bodies.

Prior to his work in industry, Dr. Katznelson was a Professor of Electrical Engineering at the University of California, San Diego (UCSD). He taught courses in Linear System Analysis, Probability and Stochastic Processes.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 18 Comments comments.

  1. Gene Quinn November 8, 2009 1:36 pm

    Ron-

    I respect your opinions and I will go through them more carefully and consider them, but here are my preliminary thoughts.

    1. You say that facts are important but then only provide lip service to the fact that we overwhelmingly already have a first to file system. Interference proceedings are extraordinarily rare, and out of all interference proceedings those that result in the second to file but first to invent winning are extraordinarily rare. So we are talking about an exceptionally small number of situations that will be affected.

    2. You say that 131 Affidavits are not taken into account. Explain to me exactly why we should consider that when moving from a first to file to a first to invent? There is absolutely no reason to consider 131 Affidavits. They are completely irrelevant to the discussion. The question under first to file will still be who was the first inventor to file. There is absolutely no reason why we could not have a first to file system that allows applicants to swear behind that which relates to inventions that were not the subject to a patent application.

    3. You and everyone else who are focused on first to invent ignore the Constitutional rational for the patent system, which is to encourage early disclosure. The law has always done this, and given that we do not have prior user rights in the US (save business methods) those who choose not to file or delay filing do so at their own risk.

    4. What is wrong with filing more patent applications? Absolutely nothing. What that will do is lay the foundation for the creation of more assets, which is a good thing. You are looking at the glass being half empty here and refusing to acknowledge that means the glass is also half full. You cannot lament the fact that innovators will now have to file and protect more and see that as a bad thing without also asking what positive will come of it. We all know that all innovators make bad decisions at times with respect to what to file on and what to leave as a trade secret. We all know that there are situations where innovators wish they had filed but didn’t and it is too late. What first to file will do is require businesses to protect their assets, create assets and have more potential successes. Investors are going to love first to file if the company has a cost effective strategy in place.

    5. You say, as others have, that: “FTF environment will create will undermine early-stage startups’ ability to attract investment capital or to even get established.” What evidence do you have? You say I shouldn’t rely on anecdotes, but that is exactly what you are doing. This statement without proof is no evidence at all. I also know it to be false. What inventors wouldn’t want a system in place where ever conceivable piece of intellectual property protection is protected? None, and you and everyone else knows that. This is a savvy business strategy, and why so many big business rely on the PCT process. They want to file on as much as possible and delay deciding what to pursue. That is a smart strategy, and one that minimizes mistakes and missed opportunities by not filing or waiting and allowing other events to create bars to patentability.

    6. Appropriate use of the provisional patent system will allow independent inventors, small businesses and start-ups to protect everything that could remotely be patentable. At least 10 high quality provisional patent applications can be created for the price of 1 nonprovisional patent application. That means the creation of 10 potential assets. The fact that others haven’t figured out how to do this in a cost effective matter is not a patent system problem. I have figured out how to do it in a cost effective manner and those without patent training can easily provide all the information necessary so as to allow minimal attorney time and maximum quality. So there is absolutely no merit to the argument that first to file will enormously expensive.

    7. No one seems to want to address the rampant fraud in the independent inventor community. Fraud that costs the community some $300 million annually. First to file will eliminate that fraud. On top of that, independent inventors and entrepreneurs and truly small businesses simply do not keep the records necessary to prevail in an Interference. We all know that to be true, but everyone is acting like it is false, but not providing any evidence, just argumentation.

    8. Those with a coherent strategy will not only be OK, they will be enormous winners in a move to first to file.

    9. The fact is that we already have a first to file system in 99.99% of the cases it is the first to file who was the first to invent. So those claiming we have to stay with first to invent or the economy, business, investment and the country will suffer are just flat out ignoring the facts.

    -Gene

  2. Ron Katznelson November 8, 2009 4:18 pm

    Gene,

    To begin with, your links to related posts missed the original thread to which my comments were directed. It had very good comments from others, particularly by Robert K S, David Boundy and Steve Perlman. If read again, these will answer several of your rebuttal points above.
    See http://www.ipwatchdog.com/2009/11/06/kappos-talks-patent-reform-at-uspto-inventors-conference/id=7172/

    I will only say that apparently, judging from your repeated use and reference to Interference statistics, I had not made myself clear about the irrelevance of Interferences to the harm of FTF. Interferences are only among applications that were filed. To understand the harm of FTF and to simplify the string of logic here, please ignore priority contests. Focus only on important inventions for which applications would not be filed under FTF. Now, please articulate how do interferences have anything to do with such inventions for which no patent protection will be attained? If you do not understand why you should look at important inventions for which applications would not be filed by startups, than go back to Steve Perlman’s or my explanation above. Let me repeat: EPO applicants are playing a 2.5 to 1 crapshoot with their applications that are filed under FTF constraints but only a 1.14 to 1 crapshoot when no such constraints exist (as under the current American system). Small businesses cannot afford to play a 2.5 to 1 crapshoot with their applications. Contrary to your baseless assertion, the additional applications required are no “assets” – only liabilities, which are abandoned. (See Figure 1 mentioned above). If you expect us to more than double our filings of priority applications, you are dreaming a patent practitioner’s rich dream that will never come true. We cannot afford to do that, and therefore we will not. Rather, we will be forced to guess which important inventions should be disclosed and claimed in an application before we obtain the answers. Those of us who are not clairvoyants will loose protection on important inventions. It is as simple as that. And the big firms know that. Now, how do Interferences have anything to do with this?

    As to your point 2 above, again I may not have made myself clear. You are missing the point. What happens today with Rule 131 affidavits (whether or not you agree with the way the USPTO handles those), is that claims are allowed today that would not have been allowed under FTF. In other words, prior art that is not “prior” to the invention date will invalidate claims under FTF. I was explaining that this loss of property rights is far more relevant than interference contests, and should have been studied by the USPTO. Your comment 2 is clearly unresponsive.

    I will let others here comment on your other rebuttal points.

    In any event, can you state clearly the exact nature of the benefits you see to small startups with FTF? Please do not conflate that with your educational goals of imparting important knowledge to procrastinating inventors who do not understand the importance of early filings.

  3. Gene Quinn November 8, 2009 4:45 pm

    Ron-

    You say: “please ignore priority contests”

    I understand what you are saying, but you simply cannot ignore priority contests. That is like saying “ignore the facts that are bad for me and you will understand that I am right.”

    You are right, small businesses cannot afford a crap shoot, but your EPO statistics are not at all compelling. You are again ignoring the facts that are not helpful to your argument. High quality provisional patent applications can be filed on every innovation for very little money. The fact that you do not believe that to be the case is the problem. I can prove it to you if you like and show you exactly how independent inventors and small businesses can accomplish that with an appropriate strategy if you like.

    You say: “If you expect us to more than double our filings of priority applications, you are dreaming a patent practitioner’s rich dream that will never come true. We cannot afford to do that, and therefore we will not.”

    Then you are pretty well screwed. You can afford to do it with an appropriate strategy, and not only can you afford to do it but it will be MUCH CHEAPER than what you are doing presently. Again, the fact that you don’t believe that is the problem.

    You say: “In any event, can you state clearly the exact nature of the benefits you see to small startups with FTF?”

    That is what I have been doing in the articles and comments, and I will continue to do it. Let me summarize some of the points.

    You say: “What happens today with Rule 131 affidavits (whether or not you agree with the way the USPTO handles those), is that claims are allowed today that would not have been allowed under FTF.”

    That is simply not true. You still have to be the first inventor to file. You are also acting like there is no diligence requirement at all, and there most certainly is a diligence requirement.

    1. Everyone knows and accepts as true that large companies cannot innovate. They cannot and do not innovate under a first to invent system, and changing to a first to file will not change that in the least.

    2. First to file will require inventors, entrepreneurs and small businesses to treat inventing and innovation as a business, follow a plan and execute. Sloppy and silly reliance on first to invent when it matters in less than .01% of all patent applications will be supplanted with appropriate business strategies.

    3. Inventors commenting here are saying that they invent something years ago and no one has figured it out so they are just waiting for the right time to file and then claim first inventor status. This is an illustration of the lack of understanding of the law that is pervasive with respect to first to invent and causes many inventors to make bad decisions based on beliefs that are mistaken. They do not understand the law, and they think they are safe, and we all know they are not. No diligence means no first to invent winner. No evidence sufficient to demonstrate conception means no first to invent winner. There is no secret why the second to file almost never wins, and acting like the rare exception justifies the rule is crazy in my opinion.

    4. Fraud will cease because the fraudulent players in the invention market advise that a patent can wait, and in many cases wait for years while the inventor makes payments. The PTO and FTC do nothing to protect the inventor from the $300 million a year scams, but first to file will, so it is a good thing for that alone, particularly given that the first to file is the first inventor in 99.99% of all patent applications.

    5. Small businesses and start-ups are far more capable of making changes instantly, adjusting their efforts, requiring inventors and scientists to play by rules that make sense. Large corporations refuse to order inventors and scientists to do what is necessary to cut costs or move nibbly because they have never done that in the past and fear revolt. They would rather pay a patent attorney $300 an hour than require the inventor to spend 1 hour describing their invention so that it is enabled, despite the fact that the inventors pay and benefits add up to maybe $100 per hour at most.

    For years I have worked with inventors and showed them how to answer a series of simple questions that describe their invention so it is enabled. They do really very well, with some minor attorney time to tighten things up it works very well. I have inventors continually go through the process, file serial provisionals with every new advance and by the end of the waiting period we have a handful of provisionals that are strung together as a nonprovisional patent application. By going through this process the inventor learns what is required, is given additional ideas to expand the invention and the resulting product is far more detailed than it ever would have been or could have been if only an attorney wrote the application. It can be used to save money in the long haul, or with the same amount of funds you can get multiple applications that are far broader in scope and extraordinarily detailed in terms of embodiments.

    You see, by starting the patent process from day one and working collaboratively in a deliberate manner the resulting product is much much better. Time spent by the inventor who operates in a mentored environment saves dramatic sums of money compared with the attorney doing everything.

    I know for fact that large corporations will NEVER engage in such activities. I have been told so by several and it is because they think they have a grasp on how to write patent applications. They love to complain about the cost, and will not do anything that cuts costs, raises quality and acts as an invention mining system. Small business that embrace this rather than fight it will wind up with patent portfolios that are so solid, so deep and so broad that large corporations will simply not be able to do anything other than acquire them.

    This is GREAT news for those who embrace the opportunity. Of course, you are right though. Those who can only operate under the stale, old, inflexible work models that have caused a dramatic and unsustainable increase in the cost of obtaining a patent will fail miserably. But at every point throughout history those who held tight and fought the new model eventually lost to those who embraced the opportunities.

    -Gene

  4. David Boundy November 8, 2009 9:15 pm

    Gene –

    Ron made a mistake, referring to the phenomenon as “first to file.” Your comments 1 and 2 are correct and relevant – or rather would be – if the bill ONLY changed 102(g) from first-to-invent to first-to-file. But look at new 102. It totally replaces 102(a) (b) and (e). Ron’s and my big concern is not 102(g) interferences, it’s the emasculation of the grace period.

    Gene writes: “What is wrong with filing more patent applications? Absolutely nothing. What that will do is lay the foundation for the creation of more assets, which is a good thing.” That’s astoundingly naive. A patent application on a bad invention is worth a whole lot less than a patent on a good invention. Businesses cannot afford to throw good money at bad patents. Ask your clients, the business people – how many of them would agree with you that in the real world, where patents cost more than zero, whether they agree that spending more money on patents is good? If they thought patents were the value trump card, then why do they limit the number of inventions they patent? It’s because they’re trying desparately to put capital only into projects that generate the highest level of return.

    I’m just shocked that a lawyer that advises businesses could use the reasoning you’ve set out above.

    David

  5. Bart van Wezenbeek November 9, 2009 6:20 am

    Sorry to interrupt in the discussion, but I believe that the comparison with the EPO filings is incorrect.
    Ron argues that: “Let me repeat: EPO applicants are playing a 2.5 to 1 crapshoot with their applications that are filed under FTF constraints but only a 1.14 to 1 crapshoot when no such constraints exist (as under the current American system).”
    A large part of teh applications that are counted in this comparison are European first filings that are used as a priority application for subsequent further (EPO, PCT or rest-of-the-world filings). In my firm most commonly (in about 80% of the 500+ first filings we file yearly) we file an EPO application as priority application and at the 1 year priority term file either a PCT application or go national/regional directly. Further down the process, these PCT applications are in due time converted into Euro-PCT filings. In the meantime, the European priority filings are abandoned. Thus, in this case nearly all European first filings from my firm are abondoned, but this does not mean that the applicants have abandoned their inventions!

    You should compare European first filings with US provisonal filings and then look at how many are continued in later applications. That would be a fair comparison.

  6. David Boundy November 9, 2009 9:39 am

    Gene – your comment 5:

    >>You say: “please ignore priority contests”

    >>I understand what you are saying, but you simply cannot ignore priority
    >> contests. That is like saying “ignore the facts that are bad for me and you
    >> will understand that I am right.”

    No Gene, the reason to ignore priority contests is precisely because they’re so small in number that they are irrelevant. You keep focusing on the irrelevant part of the issue – priority contests between two applicants who file on the same invention at about the same time – and sweep aside the huge and terrifically costly issues –

    – the 100,000-500,000 or so applications that are not filed every year, because over the course of a year the business decides that the cost-benefit ratio is unfavorable. Under new s 102, businesses don’t have that option – they’re forced to make an expenditure that turns out to be cost-benefit-negative.

    – the cost to the business of preparing all those provisionals you advocate.

    I suspect that your posittion – much like the PTO’s – is the product of sample bias, based on your position in the process flow. By the time a patent applicaiton reaches outside counsel, someone inside has done the cost-benefit calculus, so every invention that reaches you is indeed likely to mature into an “asset,” and you might well concluse that all inventions deserve that treatment, simply because you’re not exposed to the junk. You might also think that the cost of a provisional is $1500, because that’s what you bill – but your bill doesn’t reflect the far larger costs borne internally to the business. From my position as in house counsel, wow, your analysis is – umm – loopy.

    Gene, theoretically, you’re right, you can’t ignore priority contests. I’m sure if you asked, Ron would develop an analysis that reflects the cost of priority contests. The difference will be in the third figure, totally swamped by other factors. Priority contests are indeed a tiny cost.

    In return, will you please include all the other costs of new s 102 in your analysis? And will you accept that the in-house business folks who make these decisions are making rational business and resource-allocation decisions? Will you accept that business folks generally know more about their businesses than outside counsel do, instead of substituting your judgment for how businesses should be run?

    David

  7. Gene Quinn November 9, 2009 10:59 am

    David-

    And you ignore the fact that there is a better, cheaper, faster way about protecting inventions and filing patent applications. Like the many large companies that want to keep the old model and refuse to consider models that are better, you want to keep hold on what you know even though we all know the system is broken.

    If you and your clients are not interested in a better strategy to take advantage of first to file then that is fine. You will, however, get no sympathy from me.

    -Gene

  8. EG November 9, 2009 12:00 pm

    I’ll enter this debate from the standpoint of a prosecuting patent attorney who has been in this business for over 32 years, has been both in large corporate and small private practice, and with the experience of a dad who probably me and my brothers through school based on his significant patent interference practice.

    1. I agree with David B. that first to invent (FTI) versus first to file (FTF) is no longer a patent interference issue, but really a “will there be a grace period” issue. When my dad was in active practice, there were far more interferences than there are now. In fact, my dad was well aware of the poor odds for the second-to-file being determined to be the FTI, as well as the fact that the individual or small business couldn’t afford the expense of a contested interference. A number of these interferences were also simply “ownership disputes” in the disguise of priority contests, or involved “derivation” (i.e., invention stealing) situations. The thought that FTI allows an individual/small business who is tardy to file a chance to win a contested interference (more like someone winning a state lottery) is simply a “red herring” on this issue.

    2. I’ll also admit a certain amount of ambivalence on how I view FTI versus FTF based on my career experience. How you view FTI versus FTF will also depend on whether your business relies primarily on the U.S. market, or on the global market. When I was in large corporate practice (approximately the first half of my career), we truly lived in an FTF world because we competed not just in the U.S., but globally. (Our competitors were also global which meant that most of those competitors were already living with a FTF environment.) That meant dealing effectively with “absolute novelty” countries/regions like Europe in terms of prompt filings before potentially “self-inflicted wounds” due to early market test exposures of technology. This situation was even more challenging (and expensive) before the days of U.S. provisionals. In the large global corporate world, treating the situation as a “virtual” FTF was simply the cost of doing business. Accordingly, going to an FTF world in the U.S. was just recognizing the reality of the large global corporate world.

    3. Now that I’ve been in private practice for over 10 years, my views on this FTI versus FTF debate have undergone adjustment. The individual, and more importantly, the small business (or a non-profit R&D organization like a university), is at a significant disadvantage in a FTF world. This goes beyond being “ignorant” of the “no grace period” issue outside the U.S. The true “killer” here is the stringent “written description”/”enablement” requirements of the U.S. (the rest of the world, including Europe, is getting tougher on their versions of these requirements). The fact is creating a patent application, even if it’s only a provisional, requires the small business to invest time (David B. is right on this) to meet these requirements, as well as to make sure that the claim set correctly covers. Time spent by the small business in terms of internal resources devoted to application drafting is money spent by the small business, beyond just the attorney/government fee costs. Also, the idea that the patent attorney can draft such a patent application in a “vacuum” without the expenditure internal time resources by the small business usually results, in my experience, in an inferior patent application (believe, I’ve been there).

    4. Coupling FTF with stringent “written description”/”enablement” requirements creates a fairly “lethal” combination for the small business. (In my opinion, Congress talks way too much about individuals being screwed by FTF and not enough about the imposition on R&D-intensive small business which is where most of the significant innovation comes from.) The simply don’t have the time (or money) resources needed to do extensive patent filings that meet stringent “written description”/”enablement” requirements in the relatively short periods of time that FTF realities impose. (We found this issue to be daunting even in the large global corporate world.) Put differently, FTF creates an environment of “hurried application drafting” before enough time (or experimentation) can normally be spent to understand the true scope of the technology. (As Ron K. notes that also creates more poorly developed applications for the respective patent offices to consider.) While large businesses can endure such inefficiencies and costs, small businesses normally cannot.

    5. Net: if you live in the large global business world, FTF is the reality you’re willing to accept. But if you’re a primarily a U.S.-based small business that relies upon patent IP to survive, you would much prefer to have an FTI (“grace period”) world, even if it’s only in the U.S. My initial 2 cents for what it’s worth.

  9. David Boundy November 9, 2009 12:11 pm

    Not correct, Gene. I accept that there are other ways to protect inventions.

    I even accept that first-to-file, in the narrow, literal sense – first-to-file vs. first to invent confined to only a 102(g) priority contest, in isolation from the rest of the changes in proposed s 102 – could well be “better, cheaper and faster.”

    But the objective evidence – based on the “revealed preferences” in rational economic decisions that businesses actually make – is that over-filing of provisionals, being forced to make filing decisions early rather than after more information comes in – is lots more expensive. The huge cost savings of NOT FILING until you know which inventions are bad and which are good, available under current law and revoked under new s 102 – is the issue I’m trying to focus you on, and that you are aggressively ducking.

    I am emphatically NOT speaking from the context of “large companies” – I am speaking from the point of view of the small companies that I have represented in the past, and get financing for today. New s 102 has benefits for large companies and for market incumbents, largely in terms of entrenchment and hobbling of disruptive new entrants. It’s the small companies that get hurt.

    David

  10. David Boundy November 9, 2009 12:32 pm

    EG’s got it exactly right, particularly his paragraphs 3 and 5.

  11. David Boundy November 9, 2009 12:56 pm

    Another important observation –

    New section 102 does not give new options that are “better, cheaper, or faster.” All the techniques available under S.515, and all that Gene advocates, are available today. For those situations in which those techniques are “better, faster and cheaper,” they are being used (I use Gene’s techniques exactly the way Gene suggests, when it is the “better and cheaper” way).

    The problem is that new section 102 takes away options. Options have value — keeping options open is almost always a good business strategy. The choice of whether to act or not, to avoid committing resources, is valuable separate from anything else–one of the key themes in a management MBA is learning to evaluate how and when to act vs. preserving the option to act or not act. The option to rely on the grace period is far more valuable to the more innovative company, and to the smaller or earlier stage company, than to the multinational market incumbent, for reasons EG outlines.

    Gene, the flaw in your argument is that you fail to recognize that there are some cases where your approach is not better, cheaper, faster–unless you’re taking the position that you know more about running folks’ businesses than they do? I emphatically do accept that cases exist in which the approach you advocate is better, and it’s better that you not attribute to me ideas that I do not hold. But it’s also indisputable that S.515 takes away “better, cheaper, faster” options for other cases, and forces a “one size fits all” approach. The companies for which the current options are most valuable are the most innovative companies, the companies that rely most heavily on the patent system.

    David

  12. Ron Katznelson November 10, 2009 1:09 am

    Bart van Wezenbeek says the following about my comparison of EPO first-filings with second filings: “A large part of the applications that are counted in this comparison are European first filings that are used as a priority application for subsequent further (EPO, PCT or rest-of-the-world filings) …. nearly all European first filings from my firm are abandoned, but this does not mean that the applicants have abandoned their inventions!”

    Bart, let me clarify first that the EPO second-filings I show in Figure 1 discussed above do not include Euro-PCT applications (which exhibit even a lower abandonment rate than that shown for EPO second filings). Second, I am not sure how your specific firm uses first-filings at the EPO, but I have looked at some of the abandoned EPO first-filed priority applications to which priority is claimed in subsequent filings. In virtually all the cases I have seen (and this was by no means a scientific survey), the subsequent application had a related but different (and often expanded and more detailed) specification. The question arises as to why one would abandon an EPO application only to file a second application with the same disclosure? I suggest to you that although, as you say, applicants have not abandoned their inventions, they later discovered aspects of their inventions that require new claims, which may not have been well-supported by their first-filed EPO specification. Would you be serving your client’s best interest by spending more money on a new EPO filing having an identical disclosure to that of the priority EPO first-filing? The fact that improved specifications are subsequently filed supports the conclusion that First-Filings are for the most part lower-odds crapshoot and not just expensive place-holders, as you seem to suggest.

    Your suggestion of comparing EPO first-filings to U.S. provisional applications has some merit. However, it misses the entire picture of the fundamental differences in the role played by provisional applications in our invention-date-based priority system. It may come as a shock to Gene, but we value the role of provisional applications. We also use them in ways that are mostly unknown to outside patent practitioners who are not involved with our R&D engineering management processes.

    First, we recognize that under current U.S. patent law, a provisional application is only a single evidentiary milestone in the chain of evidence that we rely on for protecting our inventive developments. Apart from lab notebooks, a whole body of engineering development records, component purchases, external correspondence, emails and internal memos, are also part of this evidentiary record. Clearly, we have no way of knowing in advance which specific bits of information would be important and these bits are impossible to capture in patent applications. In Europe, EPO first-filings constitute the only priority evidence, whereas provisional applications in the U.S. are but a component of the evidentiary record. Thus, some provisional applications are created and filed with the USPTO not only because of their elevated evidentiary weight in the chain, but also as “checklist” events for preserving all other bits of evidence in the chain. In establishing the evidentiary chain, we are also mindful of the diligence requirements and that a delay in filing a patent application will not be excused where activities were directed solely at commercialization and the improvements and refinements made are not disclosed in the final patent application. Lutzker v. Plet, 843 F.2d 1364, 1367 (Fed.Cir.1988). An equally problematic scenario involves patenting an invention too soon, only to discover that engineering changes were made after filing and the patent procured does not even cover the company’s actual product. Not only might precious resources be wasted but also all the advantages of an early filing will be lost.

    Second, for reasons listed above, we also ascertain that we have a working notion of the claims we want to obtain, without which a disclosure in the provisional application cannot be properly and effectively made to begin with. Contrary to practice of some practitioners (who may charge only $1,500 for a provisional application), we build a subject-matter claim-tree, draft claims and ensure that they are well supported under §112 in provisional applications. The specification often goes through substantial revisions. As Steve Perlman correctly observed in a parallel thread, the resources and expenses to prepare and file such provisional applications is about 95% of non-provisional applications. “Cheap” provisional shortcuts only create a false sense of security. ( See Provisional Patents Are Quick, Cheap, and Worthless By Kirk Teska, at http://www.spectrum.ieee.org/may09/9007). An additional value we obtain from focusing on claims in such “checklist” events, is the attention and feedback for occasionally redirecting engineering activities. These redirected engineering activities can ensure that we have adequately addressed commercially relevant and patentable aspects of the invention and had generated the work-product required for enabling provisional disclosures. Many are unaware of these internal R&D resource allocation decisions we make, specifically in support of patent protection.

    However, as startups with limited resources, our development schedules are often longer and we cannot afford to file provisional applications as frequently as large firms. Fortunately today, U.S. law requiring diligence in filing applications takes into account these specific resource-limitation circumstances. In patent invalidity due to abandonment disputes, the patent challenger bears the burden of proving that the patent applicant abandoned, suppressed and concealed its invention by clear and convincing evidence. Drawing all reasonable inferences from the chronology and the chain of evidentiary milestones established by the record, the court must conclude that it has been clearly and convincingly shown that the applicant abandoned its invention. This determination must include examining “the circumstances surrounding [the applicant’s] delay and the reasonableness of that delay”, Fujikawa v. Wattanasin, 93 F.3d 1559, 1568 (Fed.Cir.1996). The specific nature of the invention and the differing burdens applicants face in reducing their inventions to practice are relevant. A fact-finder could reasonably infer that a delay was reasonable given the complexity of the subject matter at issue and the fact that the applicant engaged in significant steps towards perfecting and commercializing the invention through much of the delay period. See Checkpoint Sys., Inc. v. U.S. Int’l Trade Com’n, 54 F.3d 756, 762 (Fed.Cir.1995), and the cases cited therein. These pre-filing steps are gauged against reasonable allocation of resources available in our business and a court’s conclusion of abandonment, suppression or concealment depends on the total facts of each case. DuPont v. Phillips Petroleum, 849 F.2d 1430, 1436 n.5 (Fed. Cir.1988). Our startup companies and our investors rely on this existing law as mitigating some of the risks of losing patent protection when we embark on costly developments.

    Unlike filing-date-based priority laws in foreign countries where a “one size fits all” approach is used for administrative convenience, U.S. patent law is based on the equitable search for all reasonably relevant evidence surrounding the specific circumstances of the invention, its creation and ownership as a patent property right. Is it more complex and messy in a relatively minute number of cases arising in disputes? – Of course it is. However, in its operation in the vast majority of inventions that are not in dispute, it is the least disruptive or intrusive, as it relies on our existing development records. [Proponents of FTF who argue that it will save resources because inventors would need keep no invention records and notebooks, are simply ignorant of well-structured R&D and engineering processes that build such records anyway]. Importantly, this equitable search for all reasonably relevant evidence surrounding the acquisition of property ownership rights under U.S. law is not unique to patent law. It is the hallmark of the American justice system on which we depend to protect all our other property ownership rights, and indeed all our rights. It is this protection under U.S. law that reduces the risks of investing in the creation and acquisition of property ownership rights in America. Investments in patent property ownership rights are no different. A transition in the U.S. away from those protections by adopting the filing-date-based amendments to §102 will be a transition merely for the sake of administrative convenience at the expense of judicial equity. It will single-out patent property ownership rights from all other property ownership rights in America as subject to fundamentally exogenous foreign legal principles that are incongruent, contrary and an anathema to American legal principles of equity.

    Is this just the first step in a series of steps intended to dismantle the American legal system?

  13. Ron Katznelson November 10, 2009 1:15 am

    Bart van Wezenbeek says the following about my comparison of EPO first-filings with second filings: “A large part of the applications that are counted in this comparison are European first filings that are used as a priority application for subsequent further (EPO, PCT or rest-of-the-world filings) …. nearly all European first filings from my firm are abandoned, but this does not mean that the applicants have abandoned their inventions!”

    Bart, let me clarify first that the EPO second-filings I show in Figure 1 discussed above do not include Euro-PCT applications (which exhibit even a lower abandonment rate than that shown for EPO second filings). Second, I am not sure how your specific firm uses first-filings at the EPO, but I have looked at some of the abandoned EPO first-filed priority applications to which priority is claimed in subsequent filings. In virtually all the cases I have seen (and this was by no means a scientific survey), the subsequent application had a related but different (and often expanded and more detailed) specification. The question arises as to why one would abandon an EPO application only to file a second application with the same disclosure? I suggest to you that although, as you say, applicants have not abandoned their inventions, they later discovered aspects of their inventions that require new claims, which may not have been well-supported by their first-filed EPO specification. Would you be serving your client’s best interest by spending more money on a new EPO filing having an identical disclosure to that of the priority EPO first-filing? The fact that improved specifications are subsequently filed supports the conclusion that First-Filings are for the most part lower-odds crapshoot and not just expensive place-holders, as you seem to suggest.

    Your suggestion of comparing EPO first-filings to U.S. provisional applications has some merit. However, it misses the entire picture of the fundamental differences in the role played by provisional applications in our invention-date-based priority system. It may come as a shock to Gene, but we value the role of provisional applications. We also use them in ways that are mostly unknown to outside patent practitioners who are not involved with our R&D engineering management processes.

    First, we recognize that under current U.S. patent law, a provisional application is only a single evidentiary milestone in the chain of evidence that we rely on for protecting our inventive developments. Apart from lab notebooks, a whole body of engineering development records, component purchases, external correspondence, emails and internal memos, are also part of this evidentiary record. Clearly, we have no way of knowing in advance which specific bits of information would be important and these bits are impossible to capture in patent applications. In Europe, EPO first-filings constitute the only priority evidence, whereas provisional applications in the U.S. are but a component of the evidentiary record. Thus, some provisional applications are created and filed with the USPTO not only because of their elevated evidentiary weight in the chain, but also as “checklist” events for preserving all other bits of evidence in the chain. In establishing the evidentiary chain, we are also mindful of the diligence requirements and that a delay in filing a patent application will not be excused where activities were directed solely at commercialization and the improvements and refinements made are not disclosed in the final patent application. Lutzker v. Plet, 843 F.2d 1364, 1367 (Fed.Cir.1988). An equally problematic scenario involves patenting an invention too soon, only to discover that engineering changes were made after filing and the patent procured does not even cover the company’s actual product. Not only might precious resources be wasted but also all the advantages of an early filing will be lost.

    Second, for reasons listed above, we also ascertain that we have a working notion of the claims we want to obtain, without which a disclosure in the provisional application cannot be properly and effectively made to begin with. Contrary to practice of some practitioners (who may charge only $1,500 for a provisional application), we build a subject-matter claim-tree, draft claims and ensure that they are well supported under §112 in provisional applications. The specification often goes through substantial revisions. As Steve Perlman correctly observed in a parallel thread, the resources and expenses to prepare and file such provisional applications is about 95% of non-provisional applications. “Cheap” provisional shortcuts only create a false sense of security. ( See Provisional Patents Are Quick, Cheap, and Worthless By Kirk Teska, at http://www.spectrum.ieee.org/may09/9007). An additional value we obtain from focusing on claims in such “checklist” events, is the attention and feedback for occasionally redirecting engineering activities. These redirected engineering activities can ensure that we have adequately addressed commercially relevant and patentable aspects of the invention and had generated the work-product required for enabling provisional disclosures. Many are unaware of these internal R&D resource allocation decisions we make, specifically in support of patent protection.

    However, as startups with limited resources, our development schedules are often longer and we cannot afford to file provisional applications as frequently as large firms. Fortunately today, U.S. law requiring diligence in filing applications takes into account these specific resource-limitation circumstances. In patent invalidity due to abandonment disputes, the patent challenger bears the burden of proving that the patent applicant abandoned, suppressed and concealed its invention by clear and convincing evidence. Drawing all reasonable inferences from the chronology and the chain of evidentiary milestones established by the record, the court must conclude that it has been clearly and convincingly shown that the applicant abandoned its invention. This determination must include examining “the circumstances surrounding [the applicant’s] delay and the reasonableness of that delay”, Fujikawa v. Wattanasin, 93 F.3d 1559, 1568 (Fed.Cir.1996). The specific nature of the invention and the differing burdens applicants face in reducing their inventions to practice are relevant. A fact-finder could reasonably infer that a delay was reasonable given the complexity of the subject matter at issue and the fact that the applicant engaged in significant steps towards perfecting and commercializing the invention through much of the delay period. See Checkpoint Sys., Inc. v. U.S. Int’l Trade Com’n, 54 F.3d 756, 762 (Fed.Cir.1995), and the cases cited therein. These pre-filing steps are gauged against reasonable allocation of resources available in our business and a court’s conclusion of abandonment, suppression or concealment depends on the total facts of each case. DuPont v. Phillips Petroleum, 849 F.2d 1430, 1436 n.5 (Fed. Cir.1988). Our startup companies and our investors rely on this existing law as mitigating some of the risks of losing patent protection when we embark on costly developments.

    Unlike filing-date-based priority laws in foreign countries where a “one size fits all” approach is used for administrative convenience, U.S. patent law is based on the equitable search for all reasonably relevant evidence surrounding the specific circumstances of the invention, its creation and ownership as a patent property right. Is it more complex and messy in a relatively minute number of cases arising in disputes? – Of course it is. However, in its operation in the vast majority of inventions that are not in dispute, it is the least disruptive or intrusive, as it relies on our existing development records. [Proponents of FTF who argue that it will save resources because inventors would need keep no invention records and notebooks, are simply ignorant of well-structured R&D and engineering processes that build such records anyway]. Importantly, this equitable search for all reasonably relevant evidence surrounding the acquisition of property ownership rights under U.S. law is not unique to patent law. It is the hallmark of the American justice system on which we depend to protect all our other property ownership rights, and indeed all our rights. It is this protection under U.S. law that reduces the risks of investing in the creation and acquisition of property ownership rights in America. Investments in patent property ownership rights are no different. A transition in the U.S. away from those protections by adopting the filing-date-based amendments to §102 will be a transition merely for the sake of administrative convenience at the expense of judicial equity. It will single-out patent property ownership rights from all other property ownership rights in America as subject to fundamentally exogenous foreign legal principles that are incongruent, contrary and an anathema to American legal principles of equity.

    Is this just the first step in a series of steps intended to dismantle the American legal system?

  14. Ron Katznelson November 10, 2009 1:18 am

    Bart van Wezenbeek says the following about my comparison of EPO first-filings with second filings: “A large part of the applications that are counted in this comparison are European first filings that are used as a priority application for subsequent further (EPO, PCT or rest-of-the-world filings) …. nearly all European first filings from my firm are abandoned, but this does not mean that the applicants have abandoned their inventions!”

    Bart, let me clarify first that the EPO second-filings I show in Figure 1 discussed above do not include Euro-PCT applications (which exhibit even a lower abandonment rate than that shown for EPO second filings). Second, I am not sure how your specific firm uses first-filings at the EPO, but I have looked at some of the abandoned EPO first-filed priority applications to which priority is claimed in subsequent filings. In virtually all the cases I have seen (and this was by no means a scientific survey), the subsequent application had a related but different (and often expanded and more detailed) specification. The question arises as to why one would abandon an EPO application only to file a second application with the same disclosure? I suggest to you that although, as you say, applicants have not abandoned their inventions, they later discovered aspects of their inventions that require new claims, which may not have been well-supported by their first-filed EPO specification. Would you be serving your client’s best interest by spending more money on a new EPO filing having an identical disclosure to that of the priority EPO first-filing? The fact that improved specifications are subsequently filed supports the conclusion that First-Filings are for the most part lower-odds crapshoot and not just expensive place-holders, as you seem to suggest.

    Your suggestion of comparing EPO first-filings to U.S. provisional applications has some merit. However, it misses the entire picture of the fundamental differences in the role played by provisional applications in our invention-date-based priority system. It may come as a shock to Gene, but we value the role of provisional applications. We also use them in ways that are mostly unknown to outside patent practitioners who are not involved with our R&D engineering management processes.

    First, we recognize that under current U.S. patent law, a provisional application is only a single evidentiary milestone in the chain of evidence that we rely on for protecting our inventive developments. Apart from lab notebooks, a whole body of engineering development records, component purchases, external correspondence, emails and internal memos, are also part of this evidentiary record. Clearly, we have no way of knowing in advance which specific bits of information would be important and these bits are impossible to capture in patent applications. In Europe, EPO first-filings constitute the only priority evidence, whereas provisional applications in the U.S. are but a component of the evidentiary record. Thus, some provisional applications are created and filed with the USPTO not only because of their elevated evidentiary weight in the chain, but also as “checklist” events for preserving all other bits of evidence in the chain. In establishing the evidentiary chain, we are also mindful of the diligence requirements and that a delay in filing a patent application will not be excused where activities were directed solely at commercialization and the improvements and refinements made are not disclosed in the final patent application. Lutzker v. Plet, 843 F.2d 1364, 1367 (Fed.Cir.1988). An equally problematic scenario involves patenting an invention too soon, only to discover that engineering changes were made after filing and the patent procured does not even cover the company’s actual product. Not only might precious resources be wasted but also all the advantages of an early filing will be lost.

    Second, for reasons listed above, we also ascertain that we have a working notion of the claims we want to obtain, without which a disclosure in the provisional application cannot be properly and effectively made to begin with. Contrary to practice of some practitioners (who may charge only $1,500 for a provisional application), we build a subject-matter claim-tree, draft claims and ensure that they are well supported under §112 in provisional applications. The specification often goes through substantial revisions. As Steve Perlman correctly observed in a parallel thread, the resources and expenses to prepare and file such provisional applications is about 95% of non-provisional applications. “Cheap” provisional shortcuts only create a false sense of security. ( See Provisional Patents Are Quick, Cheap, and Worthless By Kirk Teska, at http://www.spectrum.ieee.org/may09/9007). An additional value we obtain from focusing on claims in such “checklist” events, is the attention and feedback for occasionally redirecting engineering activities. These redirected engineering activities can ensure that we have adequately addressed commercially relevant and patentable aspects of the invention and had generated the work-product required for enabling provisional disclosures. Many are unaware of these internal R&D resource allocation decisions we make, specifically in support of patent protection.

    However, as startups with limited resources, our development schedules are often longer and we cannot afford to file provisional applications as frequently as large firms. Fortunately today, U.S. law requiring diligence in filing applications takes into account these specific resource-limitation circumstances. In patent invalidity due to abandonment disputes, the patent challenger bears the burden of proving that the patent applicant abandoned, suppressed and concealed its invention by clear and convincing evidence. Drawing all reasonable inferences from the chronology and the chain of evidentiary milestones established by the record, the court must conclude that it has been clearly and convincingly shown that the applicant abandoned its invention. This determination must include examining “the circumstances surrounding [the applicant’s] delay and the reasonableness of that delay”, Fujikawa v. Wattanasin, 93 F.3d 1559, 1568 (Fed.Cir.1996). The specific nature of the invention and the differing burdens applicants face in reducing their inventions to practice are relevant. A fact-finder could reasonably infer that a delay was reasonable given the complexity of the subject matter at issue and the fact that the applicant engaged in significant steps towards perfecting and commercializing the invention through much of the delay period. See Checkpoint Sys., Inc. v. U.S. Int’l Trade Com’n, 54 F.3d 756, 762 (Fed.Cir.1995), and the cases cited therein. These pre-filing steps are gauged against reasonable allocation of resources available in our business and a court’s conclusion of abandonment, suppression or concealment depends on the total facts of each case. DuPont v. Phillips Petroleum, 849 F.2d 1430, 1436 n.5 (Fed. Cir.1988). Our startup companies and our investors rely on this existing law as mitigating some of the risks of losing patent protection when we embark on costly developments.

    Unlike filing-date-based priority laws in foreign countries where a “one size fits all” approach is used for administrative convenience, U.S. patent law is based on the equitable search for all reasonably relevant evidence surrounding the specific circumstances of the invention, its creation and ownership as a patent property right. Is it more complex and messy in a relatively minute number of cases arising in disputes? – Of course it is. However, in its operation in the vast majority of inventions that are not in dispute, it is the least disruptive or intrusive, as it relies on our existing development records. [Proponents of FTF who argue that it will save resources because inventors would need keep no invention records and notebooks, are simply ignorant of well-structured R&D and engineering processes that build such records anyway]. Importantly, this equitable search for all reasonably relevant evidence surrounding the acquisition of property ownership rights under U.S. law is not unique to patent law. It is the hallmark of the American justice system on which we depend to protect all our other property ownership rights, and indeed all our rights. It is this protection under U.S. law that reduces the risks of investing in the creation and acquisition of property ownership rights in America. Investments in patent property ownership rights are no different. A transition in the U.S. away from those protections by adopting the filing-date-based amendments to §102 will be a transition merely for the sake of administrative convenience at the expense of judicial equity. It will single-out patent property ownership rights from all other property ownership rights in America as subject to fundamentally exogenous foreign legal principles that are incongruent, contrary and an anathema to American legal principles of equity.

    Is this just the first step in a series of steps intended to dismantle the American legal system?

  15. I want to "see" November 10, 2009 10:49 pm

    Maybe graphics will help. Is it possible to illustrate for a “typical” start-up entity: timeline(s) showing when creators-time-hits, patent-costs, etc. will occur for FTF versus FTI ?

  16. Ron Katznelson November 11, 2009 1:27 pm

    I Want To See wrote: “Is it possible to illustrate for a “typical” start-up entity: timeline(s) showing when creators-time-hits, patent-costs, etc. will occur for FTF versus FTI ?”

    That is an excellent question. Unfortunately we would not know what “typical” startup timelines look like without having a survey of U.S. startups, perhaps comparing those to FTF-country-based startups who do not depend on U.S. patents (are there any?). Such a study is one among other studies that should have been undertaken to inform Congress and the Commerce Department about real facts and about potential effects of the transition to FTF before pushing for this legislation. Does it not make sense to demand that such factual record be establish prior to changing 200 years of American law?

    What we do know from a 2008 survey of about 1,500 U.S. Startups is that they have spent an average of $38,000 to obtain their most recent patent, which is roughly twice the expenditures per patent of all other firms and perhaps three to four times the costs for large firms with in-house patent counsel. Startups often pay significantly more than incumbents to their prosecuting attorneys, because startups (i) tend to file for patents on inventions that are more important to the company’s core business model than large firms, (ii) usually use outside instead of in-house counsel for patent prosecution; and (iii) often have difficulty monitoring outside counsel to limit overall costs. See Graham et al, High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey, 67 (June 30, 2009). Available at SSRN: http://ssrn.com/abstract=1429049 .

    Combine this stark imbalance of costs between small startups and large firms with increased filing frequency requirements with lower patent yields under FTF, and you have a fine recipe of killing or harming startups. While we may not know exactly how patent filing patterns and costs will evolve under FTF, we do have some overall results of such a transition in Canada, when it moved from FTI to FTF in 1989. A recent McGill University study shows that small businesses were put at a disadvantage compared to large firms and that patent quality declined. See Lo & Sutthiphisal, Does it Matter Who Has the Right to Patent: First-to-Invent or First-to-File? Lessons from Canada, NBER Working Papers, No. W14926, 28, (April 2009). Available at SSRN: http://ssrn.com/abstract=1394833.

    This is not rocket science and should come as no surprise. It is the consequence intended by incumbent large firms pushing for FTF in the U.S. The only surprise is how many Americans can fall for the “harmonization” mantra used to cover up their real agenda.