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March 18, 2008
(Mis)Managing the Patent System
The current patent system in the U.S. drains entrepreneurship and small-business growth, a new study shows. Problems include high litigation costs, a decline in patent quality and differences among nations in terms of patent law.
Amid the increasing complexity of patent legislation, most patents today fail to meet set standards, according to a new report from the Small Business and Entrepreneurship Council (SBEC).
"Considering that 99.9 percent of the 26.8 million American businesses are 'small businesses' and that they contribute a more significant source of innovative products and services than larger enterprises do, it is undeniable that small businesses demand and deserve a fair, pro-innovation patent system," Raymond Keating, the group's chief economist, said in a statement.
Current shortcomings in the U.S. patent system have induced legal and cost barriers for the nation's firms, particularly for small firms. "Studies show small patenting firms produce 13 to 14 times more patents per employee than large firms," Inc.com recently pointed out.
The problems, according to the report, include high litigation costs, a decline in patent quality and differences among nations in terms of patent law.
As such, Keating believes the patent system needs restructuring to bolster patent quality while reducing costs. Other reforms, he added, should include patent litigation, international harmonization and a shift to a first-inventor-to-file approach as opposed to first-to-invent.
But it's not just the SBEC noticing what's at stake when it comes to patent reform.
"The patent office traces the root of its problems to the enormous backlog of patent applications of ever-increasing complexity — 700,000 last year," Medical Design reports. Uneven examination quality also irritates patent applicants.
However, the U.S. Patent Office (USPO) reports relatively high examination quality in the medical-device field (86.6 percent compliance rate compared with an office-wide average of 82 percent). The USPO also claims a slightly higher rate of erroneous allowances (6.43 percent as compared with an office-wide average of 5.32 percent).
If and when patent reform occurs, it may also lead to a shifting of burdens from the Patent Office to patent applicants. They might have to "explain the relevance of submitted documents and to prove the invention's uniqueness," Medical Design notes:
Accelerated examination rules, which are the only proposed rules to have taken effect, force applicants seeking accelerated examination to conduct a pre-filing search and submit an analysis to the 'most closely' related references.
Though some medical-device designers and manufacturers have organized to voice their concerns about patent reform, many other manufacturers would do well to start thinking about stanching the flow of unprotected intellectual property (IP) from their offices and manufacturing plants.
"Among 150 companies benchmarked, 48 percent reported lost market share, 44 percent lost sales, 30 percent experienced product commoditization and 27 percent had lower margins because of compromised product intellectual property," according to Aberdeen Group (via Innovate Forum) last year.
Specifically, this cautionary data refers to team members who share computer-aided design (CAD) files, send e-mail, CDs, flash drives and more to suppliers, partners and perhaps customers to design and develop a new product as quickly as possible. "Technology solutions like encryption and public key infrastructure provide effective security for data 'at rest' and 'in transit,' but do not address the protection of data 'in-use' by CAD users, which is critical to manufacturers," adds Innovate Forum.
So, as collaboration increases in importance, Aberdeen Group explains, "documenting IP and enabling legal protection, and safeguarding product data, including enhancing IT security and digital rights management" can make sharing files safer.
It's essential for businesses with IP to view it as akin to some number of dollars (NTP Inc., for example, won a $612.5 million infringement suit against Research In Motion.), not to mention the value of reputation as it relates to patenting. Nonetheless, "most businesses are flying blind with unfocused R&D programs that can erode returns on investments, and overlooked patents that can lead to lost revenues," Forbes recently explained. "Worst of all, companies that lack a precise understanding of their IP portfolio can end up fighting off claims that a technology for a key product actually belongs to someone else."
As for small-business needs, the recent SBEC report noted that the patent system is plagued by excessive and costly litigation. "Of course, large firms have the resources to better weather litigation, while just one lawsuit can terminate a small, entrepreneurial firm," the report continued.
Many reforms are included in the bipartisan Patent Reform Act of 2007, which was approved by the House last year. A number of organizations have lobbied for or against aspects of the bill.
Resources
Patent Reform: Protecting IP, Enabling Innovation & Bolstering Entrepreneurship
by Raymond J. Keating
Small Business & Entrepreneurship Council, Feb. 13, 2008
Study Highlights Positive Impact of Patent Reform on Small Businesses, Offers Policy Options
Small Business & Entrepreneurship Council, Feb. 13, 2008
Study: Patents Failing Small Business
by Alexandra Zendrian
Inc.com, Feb. 21, 2008
Is Patent Reform the Answer?
by Courtenay Brinckerhoff
Medical Design, Sept. 1, 2007
The Protecting Product IP Benchmark Report: Safeguarding Design Intellectual Property in a Global Market
by Jim Brown
The Aberdeen Group, November 2006
Highlights from Project Vote Smart
GovTrack.US
Patenting for Profits
by Vinit Bhatia and Gib Carey
Forbes.com, Dec. 20, 2007
Protecting Your IP in China
by Jill Jusko
IndustryWeek, April 1, 2008
US Senate Moves Toward Vote On Reform To Patent Regime
by Dugie Standeford
Intellectual Property Watch, March 18, 2008
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6 Comments"Many reforms are included in the bipartisan Patent Reform Act of 2007, which was approved by the House last year."
Are you kidding?
The co-called parent "reform" is nothing else but a license for large corporations to steal IP from small companies and individual inventors. Period.
Everybody should write to their senators asking them to oppose this patent "reform"
March 18, 2008 12:03 PMThe original sin was when we changed from "first to invent" to "first to file" in order to "harmonize" with other countries. All done without any public discussions - just an announcement that it was a done deal! But at least we all have "American Idol" models to get us through!
March 18, 2008 2:55 PMThe patent system currently skunks the little guy every time. Look at all the patent attorneys the big companies have.
I have a 24-claim patent on a product that once the patent was issued, 3 companies visited me to 'discuss' licensing and I promptly found my product for sale throughout the entire building industry by no less than 30 manufacturers. When my attorney reminded them of my patent, they said 'so what- go sue us- it'll only take you seven years to even get into the federal court system.'
I can give you no less than 3 other similar cases where all you do is pay big bucks to get screwed.
March 18, 2008 4:01 PMI also read the reform on patents. I also ran into huge out-of-pocket expense for attorney services. I also read between the lines, giving corporate advantage. I also agree that you need deep pockets if you intend on keeping your idea your's. I also agree that the patent program is not for the lowly entrepreneur (cash challenged).
I have a number of unique ideas and I find that my only recourse is to seek investors and have them sign confidentiality and non-compete forms, giving me and my heirs a percentage of any production package they wish to negotiate.
March 19, 2008 7:18 AMAll this talk of a need for patent "deform" is but a red herring fabricated by a handful of large tech firms as a diversion away from the real issue...that they have no valid defense against charges they are using other parties' technologies without permission. It's not about reforming the system. It's about legalizing theft!
The objective of these large firms is not to fix the patent system, but to destroy it or pervert it so only they may obtain and defend patents; to make it a sport of kings. Patents are a threat against their market dominance. They would rather use their size alone to secure their market position. Patents of others, especially small entities, jeopardize that. For example, the proposed change to eliminate the use of injunctions would only further encourage blatant infringement. Any large company would merely force you to make them take a license. They would have little to lose. Everything would be litigated to death -if a small entity can come up with the cash to pursue. That's what these large multinationals are betting against. This legislation in regressive, not progressive.
Sadly, some legislators and other parties have been duped by these slick firms and their well greased lawyers, lobbyists (some disguised as trade or public interest groups...ala SBEC and/or Mr. Keating), and stealth PR firms. Don't be surprised to find the Washington lobbyist scandal spreading into the patent deform proceedings. These companies are simply buying legislation.
When corporate America agrees to not use our inventions without consent, American inventors and small entities will agree to stop suing them.
Steve
March 19, 2008 8:17 AMOur small company has numerous inventions and ideas we won't patent. The application costs and litigation risks are too high. We either don't make the product or make it and hope no one finds the invention.
Great patent system we have. Patent litigation is one of the most lucrative legal fields and there are companies and their lawyers who make a living monitoring new patent applications seeking out inventors to sue.
Another problem is our Patent Office allowing patents on obvious things that have been around for years (although they allow them to use Google now). For example, simple circuits made with common electrical components, or programming code that does common tasks.
March 19, 2008 10:29 AM
