Crunch Time: Call Your Senators on Patent Reform

By Bryan Lord
February 25, 2011

It’s crunch time.  The Patent Reform Act of 2011 is scheduled for an up-or-down vote on the Senate floor this Monday, Feb. 28.  It’s time for all intellectual property professionals to look carefully at the Patent Reform Act, and decide: is this bill good for American innovation or bad?

I am convinced that it is bad.

This bill (and its predecessors) has been extensively lobbied.  A handful of large, multinational companies have lobbied vigorously for it.  A handful of other large entities have lobbied vigorously against it.  Yet consistently, small businesses, start-ups, entrepreneurs, and independent inventors – the present and future job creators in the U.S. – have said that this bill will hurt them today and it will hurt U.S. competitiveness tomorrow.

Their concerns are valid.

I encourage you to go to www.senate.gov, call your two Senate offices today and ask for the staffer handling patent reform, and ask for three things:

(a)   support an amendment to strike the “first to file” provision.

(b)  adopt Sen. Coburn’s amendment to end fee diversion.

(c)   unless both amendments are adopted, to oppose the bill.

Without the two proposed amendments, the “improvements” the bill purports to make are trivial, but the harms are substantial.

The “first inventor to file” section of the bill is particularly troubling.  It effectively repeals the “grace period” afforded inventors under current law with a hodge-podge of deadlines and conditions that are both operationally and commercially impractical — and are malpractice traps for practicing attorneys.  Because the proposed change gives no reliable procedure for overcoming risks of disclosure before filing for patent protection, inventors must behave as if there were no grace period at all.  Small companies will be “forced to file,” expending precious resources on pre-emptive patent filings rather than innovation and creation, prioritizing bureaucracy over creativity.

As if that isn’t bad enough, this change also disrupts the unique American innovation ecosystem, an ecosystem that has allowed American start-ups to flourish far beyond any other nation.  As a practical matter, the bill further tilts the scales against American innovators, and presents the same risk of loss of patent rights as exist now in Europe and Japan.  But worse, with the proposed changes enacted, a start-up will be forced to either curtail its participation in this ecosystem – to restrict conversations with investors, limit interactions with strategic manufacturing or marketing partners, and bar prototype field testing – or else risk preemptive filings or disclosure that would prohibit its ability to later obtain the protection of a patent.

This proposed change doesn’t harm certain large, multinational advocates of the bill in the same way.  With their size, scale, and market presence, they can conduct their financing, manufacturing, marketing, and testing in-house.  As a result, they can file most of their patent applications on “no grace period” schedules.  But the change would take away a company’s option to wait, investigate, and choose critical paths – determinations that are particularly critical to companies that rely upon external collaborations or have comparatively limited resources. The bill is a “one-size-fits-all” fix for an increasingly shrinking way of doing business.

Thus, this bill may prove a death knell to open innovation.

Finally, why are advocates of the bill touting “international harmonization” as justification for the change?  While our world is increasingly fraught with dissonance rather than harmony, it is also increasingly clear that innovation policy is among the few competitive advantages that nations  – and in particular our nation – has left.  Yet, in order to increase filing “harmonization” for some, the proposed bill takes away a preference that current U.S. law gives to U.S. inventors by redefining “public use” and “on sale” prior art to be international, instead of only “in this country.”  Why should a bill change U.S. law to take away a preference for U.S. inventors?  If the U.S. has had twice the rate of startup formation, job creation, and new product introduction as Europe and Japan for decades, why is “harmonization” a good idea?  If China is increasingly using its policy levers to strengthen its competitive position, why are we on the brink of weakening ours?

This is dense public policy, but the economic implications are very real.  Your opinions – and your client’s opinions – matter.  Your calls make an impact.  Call your clients and call you Senators.  Ask for your Senate staffer handling patent reform and ask them to:

  • remove the “first inventor to file” section in the Patent Reform Act.
  • adopt Sen. Coburn’s amendment to end fee diversion, preferably as a substitute for the entire bill.
  • Unless both amendments are adopted, oppose the bill.

It’s crunch time.  Your Senators need to hear from you – today.

* * * * * * * * * * *

NOTE: The concerns expressed by the author are shared by many within the small business community, as expressed in a recent letter to Harry Reid.

The Author

Bryan Lord

Bryan Lord

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 25 Comments comments.

  1. Invented Yoyo February 25, 2011 3:01 pm

    Sorry but I completely disagree with your analysis of the first-to-file issue. The days of keeping lab notebooks should expire like an old claim. That process alone is arcane and full of difficulty for inventors. All first-to-invent does is play into the hands of litigators. The whole prior art area is a mine field like none other. It would be different if the notion of first-to-invent actually worked like people imagine. In fact, it doesn’t work well at all. If anything it’s an added layer of complexity that hurts smaller inventors, not helps them.

  2. staff February 25, 2011 3:48 pm

    I agree that the recited provisions are bad for small entities, but fail to see any benefit in any other provision. Therefore, in my view the bill should flatly be voted down. In fact, until small entities, who create the lion’s share of new jobs are given a fair voice in this issue, no bill should be passed. Otherwise, all any bill will do is help large corporations maintain their monopolies and kill their small entity and startup competitors and with them the jobs they would have created. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” This bill is a wholesale slaughter of US jobs.

    “Patent reform”

    Just because they call it “reform” doesn’t mean it is. Patent reform is a fraud on America.

  3. Steve M February 25, 2011 6:09 pm

    Just finished calling and e-mailing both of my Senators.

    Hopefully everyone who cares about their inventions–and the inventions of their clients–will invest just the few minutes it takes to do this.

    Here’s a link to all state Senator contact info:

    http://www.senate.gov/general/contact_information/senators_cfm.cfm

  4. David Boundy February 25, 2011 8:41 pm

    Invented Yoyo —

    Are you reacitng to changing the § 102(g) “tie breaker” rule between two near-simultaneous inventors, from first-to-invent to first-to-file? For that, I tend to agree with you.

    But Bryan is talking about something else entiely, and it looks like you missed the point. Bryan is talking about effective repeal of the § 102(a) through § 102(f) grace period.

    You bet, relying on the grace period has its risks. But for most startups, every week’s payroll is a brush with bankruptcy–a MUCH bigger risk. They need the option to wait and see. One of the key things a business has to do is manage risks at an acceptable level, and preserve options. Patent Reform takes options away.

  5. David Boundy February 25, 2011 8:42 pm

    Steve M — good for you, it’s essential to phone. Many senate offices are a month behind in reading emails. You have to phone.

  6. Invented Yoyo February 26, 2011 9:06 am

    David –

    I don’t see a need for the grace period. Regarding vendors and investors, that’s what confidentiality agreements are for. Regarding publication or first sale – just don’t do it ! If you have trouble meeting payroll every week, find a new business. Patents are the least of your problems.

    I wish people correctly weighed the benefits of simplicity.

  7. Stan E. Delo February 26, 2011 11:55 am

    David is right on the money, as I have rarely gotten a reply from an e-mail to either of my Senators in less than about three weeks. It is also much more effective if you call your Senator’s Home office and ask for the staffer that handles IP issues, as the staffers there are pretty much permanent and personally selected by the Senator, instead of the hired hand type of staffers they will be using in their Washington DC office, who are mostly just assigned out of a staffing pool there.

    One year I got through to the staffer here, and she spent over twenty minutes with me while I tried to explain what a disaster the S. 1145 bill would have been for inventors and small businesses and why. She seemed to have several “Oh My! Really?” moments, which seemed to indicate she hadn’t even really ever thought about the issue much. Bit of a stretch to imagine that she mentioned the issues to the Senator, but all it might take is a bit of doubt by a few Senators to block the bill. You can also ask for the Senators to put a hold on the bill, which will require the bill to be debated before it is allowed to come to a vote, I believe. If the bill is debated much at all, it will make it Much more vulnerable to rejection.

    Thanks for the very clear article Bryan,
    Best regards,
    Stan~

  8. New Here February 26, 2011 12:49 pm

    “This bill (and its predecessors) has been extensively lobbied. A handful of large, multinational companies have lobbied vigorously for it. A handful of other large entities have lobbied vigorously against it. Yet consistently, small businesses, start-ups, entrepreneurs, and independent inventors – the present and future job creators in the U.S. – have said that this bill will hurt them today and it will hurt U.S. competitiveness tomorrow.

    Their concerns are valid.”

    With all respect:

    Small businesses, start-ups, entrepreneurs, and independent inventors, are often the same people being multifaceted. Just to be clear, many start-ups are small businesses by entrepreneurs, that many of those are, independent inventors and therefore all, not mutually exclusive for a single individual. Those of these, that are required to secure patent(s), by funding sources, is one reason for their seeking future patents that the PTO must support, that they may hold a view of any change in the patent system, as being “bad,” if seen not in support.

    Those multinational companies seeking change of the patent system are more often dealing with the system ( patent ), that now as Microsoft seeks to, by desired result of the case, will bring it’s own patents out into the open. What is going on that Microsoft would want to chance this result. One idea for the reason comes to mind, IBM in 2003, dealing with claims (copyright), though has nothing to do with patents ! however the cost, problems created by claims of a now defunct company cannot be refunded. No responsibility has been taken for claims that over seven years have never proven their worth in Courts of Law. Patents have a responsibility for their claims too. Those that give-up in a patent case against them, doesn’t prove the worth of any claim(s).

    What is driving those multinational companies that support change in the very system (patent), that they have for many years participated. Do they see their own innovation a threat to themselves, to rip-up the system that supports their innovations. What drives such action from some large patent holders themselves that is seen as a change for the better, even from their view point.

    Forget the anti-patent folks, my opinion is, this is a patent community problem driving the change.
    Thanks.

  9. Invented Yoyo February 26, 2011 6:15 pm

    You could argue that lower corporate tax rates unfairly benefits fortune 1000 companies.

    You could argue that Mickey Mouse copyright act unfairly benefits movie and record companies.

    You could argue that the proposed patent reform unfairly benefits multinational businesses.

    But in every case above, small businesses enjoy the exact same rights, without exception — whether or not they’ve ever made a profit, developed anything useful, or even hired a janitor.

    (FBI WARNING – COPYRIGHTED MATERIAL – $10,000 FINE FOR REPRODUCTION AND DISTRIBUTION.)

  10. Stan E. Delo February 26, 2011 9:37 pm

    New Here-

    I don’t think there are very many anti-patent folks here. Your messages tend to ramble a bit, so you might want to *Create Mail* so that you can look it over a bit and edit it before you copy and paste it into the little comment box. I was not able to reliably discover what you were trying to say, but perhaps that is not my problem after all?

    Stan~

  11. New Here February 26, 2011 10:57 pm

    Thanks for the reply Stan,

    My first is about, start-ups are small businesses by entrepreneurs, that many of those are, independent inventors. That cannot get funding ( VC ) without patents — as I understand it. So, if PTO change or changes mess with that, the only “problem” will be their funding! How this ties in with innovation I have no idea. Is it an accepted idea that all entrepreneurs ventures are innovation ? because they seek or are required to obtain patents ?

    My second is about, those patent holders — multinational companies that want the change on the table now — and I gave some idea of why. Odd such large patent holders feel the need to protect themselves by change that their own patents could be open to being invalidated as well. What value do patents hold for these holders that seem to be seeking some **undermining** of their own innovations ? What could drive them to do such a thing ?

  12. Blind Dogma February 27, 2011 11:13 am

    Stan,

    I have noted that New Here’s first language is probably not English, and that he prefers a writing style that is much too “stream of conscience.”

    It is indeed difficult to reply as deciphering the contribution is often akin to trying to understand what a neighbor’s three year is talking about.

    Having said that, I find New Here to be quite a bit more open minded.

    New Here,

    You ask “What value do patents hold for these holders that seem to be seeking some **undermining** of their own innovations ? What could drive them to do such a thing ?” – the answer is simple. They are the established power and have the benefit of size and market position. Patents often cover innovation made outside of their company, and protects their competitors. Remove that protection and yes, the little guy can utilize the Big Company’s patents just as the Big Company could use the Little Guy’s – but the power of the Big Guy would crush the Little Guy and the Big Guy’s patents are actually (usually already in the market) and the better innovation of the little guy comes from working around what is already there.

    In other words, it is not a direct comparison of the level of protection, in fact it is the opposite – the level of protection – in comparative power terms – that drives the animus towards weakening the patent system.

    You also state “the only “problem” will be their funding! How this ties in with innovation I have no idea.” – I would imagine that you have never started, run or even managed a company where you had fiscal responsibility, have you? At that stage, the funding “only problem” is a life and death problem. Without funding, you have no little company. Do you think that an inventor would openly share his invention without protection, when that very sharing if taken by the giant corp would crush his little company? Even in the cases where an inventor fails in the business sense after creating an invention, often the only value he can obtain is from the sale of his property – including the patent property. And you see how the Big Companies spoon feed the masses with the pejorative “troll” to any NPE that decides to buy and enforce such property, do you not? The two items are very strongly tied together for the exact same reason – the effect on Big Company’s bottom line.

  13. Stan E. Delo February 27, 2011 12:13 pm

    New Here-

    I pretty much agree with what BD is saying, and I would also add that BigCorp will generally always have legal staff already on the payroll that they can use to go after the little guy if their patents happen to be inconvenient for them. Post Grant review is another instance where it would seem to lower the value of All patents, until you factor in the in-house counsel that BigCorp has on tap to challenge newly granted patents, where the little guy would have to take a fairly large part of the finances out of their business or pocket to challenge BigCorp’s patents, which in most cases will not be practical, or perhaps fatal to the business if they try to and lose their case.

    Stan~

  14. New Here February 27, 2011 1:44 pm

    @BD & Stan-

    Thanks for the responses, I have read them.

    My first post #8, was not directed to anyone, just taking from quotes, of something Mr. Lord said.
    Mr. Lord said:

    “Yet consistently, small businesses, start-ups, entrepreneurs, and independent inventors – the present and future job creators in the U.S. – have said that this bill will hurt them today and it will hurt U.S. competitiveness tomorrow.”

    –I do not see that all of those mentioned ( in quote above ) are individuals — so I said:

    “Small businesses, start-ups, entrepreneurs, and independent inventors, are often the same people being multifaceted. Just to be clear, many start-ups are small businesses by entrepreneurs, that many of those are, independent inventors and therefore all, not mutually exclusive for a single individual. ”

    –Following the above, Mr Lord said:

    “A handful of large, multinational companies have lobbied vigorously for it.”

    –Lobbied for what ?
    “”
    It’s crunch time. The Patent Reform Act of 2011 is scheduled for an up-or-down vote on the Senate floor this Monday, Feb. 28. It’s time for all intellectual property professionals to look carefully at the Patent Reform Act, and decide: is this bill good for American innovation or bad?

    I am convinced that it is bad.
    “”

    –So, my three years, have me believe that those “multinational companies have lobbied vigorously for it.” — are patent holders. So I said:

    “Those multinational companies seeking change of the patent system are more often dealing with the system ( patent )”

    –Following that by giving a current example of what seems to be a patent community problem. I said and asked:

    “, that now as Microsoft seeks to, by desired result of the case, will bring it’s own patents out into the open. What is going on that Microsoft would want to chance this result. ”

    In my opinion, Mr. Lord has made a problem that I once thinking, was nothing more the the two sides of the patent – anti-patent coin. It is clear thanks to Mr. Lord’s insights, that the change on the table for vote, this Monday, is the result of the patent system, and the patent community.

    Seems odd to me any number of patent holders lobby for such objectionable change; so I did think (wrong again) that I would ask those I believe know the Law, about it. US based or not, multinational companies having US patents seek objectionable change to the system that is home to, and trusted to protect their innovation(s) ?

    Change, that if I read right, is not desired by most of the patent community, but by “handful of large” patent holders that must have knowledge of something wrong, wrong enough to lobby for change — even if objectionable !

    I know the Microsoft case and what is to be voted on, are not all the same thing. Just they have the patent system in common — as a problem in my opinion.

  15. Blind Dogma February 27, 2011 2:37 pm

    New Here,

    Thanks for the response, I have read it.

    I have no idea what you are trying to say. None. I cannot tell if you understood my response, or whether you agree or disagree (or even if you are neutral to the points made).

    All I can get out of your response is that somewhere you think there is a problem. Beyond that, I would be purely guessing what you are trying to say.

  16. Stan E. Delo February 27, 2011 2:54 pm

    New Here writes in part:

    –Following the above, Mr. Lord said:

    “A handful of large, multinational companies have lobbied vigorously for it.”

    –Lobbied for what ?
    “”
    “It’s crunch time. The Patent Reform Act of 2011 is scheduled for an up-or-down vote on the Senate floor this Monday, Feb. 28. It’s time for all intellectual property professionals to look carefully at the Patent Reform Act, and decide: is this bill good for American innovation or bad?”

    I am convinced that it is bad.

    New-

    The large companies have been lobbying to get Patent Reform passed that favors their business model, which is much different than what small businesses and independents need US patent law to provide. To give you an example, I happen to be pretty certain that during the 2007 Patent Reform effort, large, mostly IT corporations collectively spent well over $100 million to influence the passage of the bill. Of course nobody can really know for sure, and I heard of estimates as high as $200 million. I think what they are trying to accomplish is making it harder for the smaller entities to challenge their market share, and decrease their profit margin by a few percent. For the larger companies it makes sense to spend $40 million to get Patent Reform passed, because if they can increase their profit margin by even 2%, it might increase their profits by perhaps hundreds of millions over a few years. The sad part is that it would seem to me that nearly everyone but they will lose further down the road. The numbers I am using here are just Ball-Park guesses on my part, but I think they convey what I am trying to get at.

    Stan~

  17. New Here February 27, 2011 7:13 pm

    @Stan-

    Thank you for the information, I have read (continue to) the Bill:
    http://judiciary.senate.gov/legislation/upload/BillText-PatentReformAct.pdf

    It was those names I found in support of this Bill that makes me think the patent problem is larger then I was thinking. When the larger – largest businesses and Industries support a single Bill of the changes outlined, something is wrong with the patent system when so many wish to take a single action through the Law.

    I, believe it or not, want fair change, patents are powerful tools and if Governments are going to grant them, then some real idea of fair must come from those most effected first. As some US multinational companies are spending millions of dollars every year, over patent issues that tie up Courts and hit me, in the pocket to pay for it. Yes, do you have any idea how hard it is to do business when so many patents are driving up cost, keep people like me out of the larger picture — that, the patents have a strong hold on. Things I remember clearly no more the 25 years ago that were not patented, now I couldn’t touch them without legal advice.

    Something is wrong when small people must be driven out / away from growth of their business future because patent pools have what was once normal business knowledge– a toll booth at every step. It is not just the little guys, but the big boys have the push and backing to make the change(s) of what is wrong– that the Bill for sure, has some very unwanted change, that I can understand why it isn’t wanted.

    The US has fallen to a level below that of the rest of the world, that sees it, and I can only think, they know why. Competitiveness means change in so many ways. I want to change this, it is my US too ! and I love it !

  18. Blind Dogma February 28, 2011 8:10 am

    something is wrong with the patent system when so many wish to take a single action through the Law.

    Ne Here – you are making the mistake that if the people wanting change are large and powerful, then there must be something “wrong” that needs changing.

    Wake Up. People, in general, do not act altruistically. The “problem” they are seeking to correct is merely growth of their own bottom line – They care not for this country, nor for its laws except how to best game those laws to their advantage. Naivety (like its cousin willful ignorance) has no place in this arena.

  19. New Here February 28, 2011 10:33 am

    @BD

    I have read the Bill, and also have had those items of the Bill explained to me by someone knowing that law as well. I never just agree or follow along with something just because it makes me happy to do so.

    I do not believe those in support of the Bill are doing so because they care about others. One other fact is that those listed are not looking to help one-another with support of this Bill as well. Because when talking about bottom lines — how many do you know of that help the competition down the street or next door. One Bill with one set of changes is not something I can get myself to believe, is going to work for all, in some way shape or form, as individuals and bottom lines respectfully. So, it seems to me, my opinion, if one is to game something, it is far better to do so with a “marked deck” at the table, with the back of the cards facing being the dealer.

    I agree with the changes outlined in the Bill as they are now. If I didn’t for any reason, I would say so clearly. I don’t know about anyone’s cousin “willful ignorance”, as with any cousins of mine, I have made an honest effort to the best of my abilities — regardless of view.

  20. Blind Dogma February 28, 2011 12:57 pm

    New Here,

    I believe and trust in the views that you express are your honest feelings, and for that I thank you. I have never indicated otherwise.

    That is not to say, however, that I can often decipher what you say, either in the first instance or in any reply. I still do not know if you understood my points and agree or disagree with them. Your last post seems to indicate that you recognize that those pushing for the Bill’s passage are doing so for their own selfish reasons.

    I do not understand your reference to playing with a “marked deck.” I fully disagree with you that playing with a “marked deck” – a deck that only those who have so marked can read – is better at all (not even far better) than playing with the back of the cards being the dealer (which I interpret as playing with the faces of the cards up and showing). The latter case everyone can read the cards and play at the same level of knowledge – a “marked deck” only allows advantage to those that can read the marks and for the unwary (those who do not know the deck is marked) will most definitely be taken advantage of most ruthlessly.

    I also do not understand the reasons why you support the Bill as is – you do not give any (at least any that I can understand as being reason for supporting the Bill as is).

  21. New Here February 28, 2011 2:04 pm

    “I also do not understand the reasons why you support the Bill as is – you do not give any (at least any that I can understand as being reason for supporting the Bill as is).”

    @BD- I will give it a try, I hope this doesn’t go on for the bad, I being one person have opinions — and thats it ! To the best of my abilities I do make an effort to learn and understand, but fail because unable to put things into law terms — that are important. These matters are very important to me, I don’t waste my time, or the time of others, otherwise. Believe me !

    First-to-file system.
    I agree with this, for much the same reason I agree with post #1, “All first-to-invent does is play into the hands of litigators.” first-to-invent in my opinion side steps the fact that other non-patenting invenors exist, and may well have invented “first”. But left with no choices because they do not patent, that the first-to-invent is I have to believe, only looking at patents & patent applications. Not other non-patenting inventors for prior art.

    Patent quality.
    A patent post-grant proceeding, open for a number of months will allow non-patent inventors the chance, after having the knowledge of a given patent, if non-patent prior art applies — and more important, before any litigation from a given patent.

    Challenging validity.
    Without litigation and shorter time for reviews is the right direction to go. Protection for patent holders from lame or otherwise waste of time challenges is fair and the way it should be !

    These three are top on my list, I don’t have the Bill with me at this time for review, so I have given what I can recall, that is most important and the information around those changes in the Bill.

    BD, thanks for asking, I do hope I have offered you something here.

  22. patent litigation February 28, 2011 4:23 pm

    It is indeed telling that most smaller companies and independent innovators appear to oppose the pending patent reform bill, while many large corporations seem to welcome it with open arms.
    http://www.aminn.org/patent-reform-threatens-weaken-patent-protection-and-undermine-u-s-technological-competitiveness

  23. Blind Dogma March 1, 2011 7:35 am

    New Here,

    Thanks for putting care into your post. I appreciate you describing your reasoning on the three factors you consider important.