Obama's New Patent Law: What Does It Mean For Your Startup?

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By Heather N. Shafer (Intellectual Property Attorney, Independent) With a swift stroke of his pen, President Obama signed the America Invents Act last week that will overhaul the U.S. patent system. What should be of interest to startups and entrepreneurs everywhere is the transition of U.S. patent law to a “first-to-file” system.

Currently, the U.S. is the only developed country on this planet to grant patents to the “first-to-invent.” Under the first-to-invent system, there are several procedures within both the Patent Office and the Federal Courts that allow an inventor to assert prior rights due to prior invention over patents that have an earlier filing date than theirs.

For example, today, I may file a patent application on my invention for dog food that is completely 100% metabolized and therefore never comes out the other end of my dog (“Zero Emission Dog Food”). Five months before today, Purina may have filed a patent application disclosing and claiming my exact formula for Zero Emission Dog Food. Under a first-to-invent patent system, upon my proving my dates of invention predate those of Purina, the Patent Office would be persuaded to grant the patent for Zero Emission Dog Food to me rather than the earlier to file Purina.

After the new legislation takes effect (in about 1 year) I will no longer have recourse if I lose the “race to the patent office.” It won’t matter how many days or years ahead of Purina I am in development, if I don’t get my application on file first -– I lose.

Obama’s stated motivation for transitioning the U.S. patent system to first-to-file is to “encourage the entrepreneurial spirit” by “cut[ting] away the red tape that slows down or inventors and entrepreneurs.”

[What a load of dog crap. Jill's comment.]

Startup advocates everywhere have mixed opinions about whether the change will truly help entrepreneurs and small to midsize startups, citing the startup’s lack of financial resources.

Many feel the “first-to-file” system gives Big Companies an unfair advantage, allowing them to use their money and power to monopolize the creative intelligence of the universe by beating small to mid-size companies to the patent office.

David Kappos, director of the USPTO, had a different take on the situation. He pointed out before a House committee that first-to-file may actually level the playing field. The first-to-file system is far less subjective than the first-to-invent system, (can’t argue with that), and some very interesting statistics suggest the transition may not be as dire as Chicken Little makes it out to be. Kappos rebutted the “first-to-file gives Big Companies an economic advantage” argument (e.g., they can afford to file patent applications at whim), by citing the cost to inventors of proving their first inventor status —- $400,000-$500,000 at the low end. Kappos continued with a second interesting statistic, “In the past seven years, of over three million applications filed, only 25 patents were granted to small entities that were the second inventor to file but were able to prove they were the first to invent.”

What does this mean for startups?

Don’t wait around to file your patent application!

If your invention is a good one, one on which you have already staked your house, marriage, retirement fund, or shoe budget, FIND the money to have a good application drafted and filed. Make sure you work with a patent attorney who can draft a robust detailed application; taking into consideration the directions your company may go in the future. A robust application will make it less likely that a competitor will be the “first to file” a patent application covering an improvement you neglected to cover in your first application.

[A big risk to startups is a crappy, hastily filed application. Jill's comment. See the post on hasty applications.]

The moral of the story: the early bird gets the worm, and the first-to-file gets the patent.

This post was originally posted at IP Law for Startups.

Editor's note: Got a question for our guest blogger? Leave a message in the comments below. About the guest blogger: Heather N. Schafer is an independent intellectual property attorney with more than five years of experience in protecting, enforcing and licensing intellectual property rights. Heather started her practice in Chicago Illinois at Brinks Hofer Gilson & Lione, one of the largest intellectual property firms in the country, Brinks Hofer Gilson & Lione. Heather is a registered patent lawyer and counsels companies regarding strategic protection of their intellectual property including trade secrets, patents, copyrights, and trademarks.She blogs at IP Law for Startups.