Summary of new patent bill (America Invents Act)

From my friend Charles Cella at the excellent patent firm GTC Law Group. (email from them published with permission)

As you may be aware, the Senate passed the America Invents Act (AIA) on September 8, 2011. This act will create sweeping changes in US patent law once signed by President Obama, who has stated his intention to sign this bill.

The AIA will create significant changes to the law, and we wanted to take a moment to inform you of some of its most important provisions.

First to File System:

The United States will move to a first-to-file system instead of a first-to-invent system. This will put the US in closer alignment with rest of the world in determining priority of invention based on the earliest date a patent application was filed with a patent office. There is a limited one-year grace period related to public disclosures made by the inventor.

Further, the long-standing procedure to prove a prior invention, i.e., interference proceedings, will be replaced with “derivation proceedings” to determine whether an inventor of a first-filed patent application derived the claimed subject matter without authorization from an inventor named in a laterfiled application.

Post Grant Review:

There will be a nine-month window for challenging a patent on any ground. Review may be granted upon a showing that it is more likely than not that at least one of the challenged claims is unpatentable. After the window of post-grant review has passed, patents may be challenged on the basis of patents or printed publications only. Under a new transitional post-grant review process that applies to certain business-method patents, only parties who have been sued for infringement or otherwise charged with infringement (the recipient of a cease-and-desist letter, for example), may petition for review.

Patent Related Provisions:

Patents will not be granted to any strategy for reducing, avoiding, or deferring tax liability, or to claims covering human organisms. There will also be a 15% surcharge added to all patent-related fees and patent-maintenance fees, beginning 10 days after the date of the new law’s enactment.

Prioritized Examination:

The USPTO will be authorized to proceed with a program for a fee-based prioritized examination, which may be a useful tool for clients who are interested in an expedited examination for particular patent applications. This will cover applications for original utility or plant patents, and will take effect ten days after the date of the enactment of this Act. Initially, only 10,000 applications will be accepted in any fiscal year. Accordingly, space in this program may be limited, and it may be best to apply for this program earlier in the fiscal year.

My (non-expert) analysis:  seems to me this doesn’t fix any of the very serious problems in our current patent system.  First-to-file seems to reward companies with the resources to file many patents.  The post grant review seems to imply you should to monitor every patent issued and challenge them within 9 months. I don’t see how any organization without massive resources could do this.

The tragedy of the anticommons

Seems very relevant to today’s music industry, and potentially relevant to the internet/software industry in the near future as patent lawsuits become increasingly common:

The commons leads to overuse and destruction; the anticommons leads to underuse and waste. In the cultural sphere, ever tighter restrictions on copyright and fair use limit artists’ abilities to sample and build on older works of art. In biotechnology, the explosion of patenting over the past twenty-five years—particularly efforts to patent things like gene fragments—may be retarding drug development, by making it hard to create a new drug without licensing myriad previous patents. Even divided land ownership can have unforeseen consequences. Wind power, for instance, could reliably supply up to twenty per cent of America’s energy needs—but only if new transmission lines were built, allowing the efficient movement of power from the places where it’s generated to the places where it’s consumed. Don’t count on that happening anytime soon. Most of the land that the grid would pass through is owned by individuals, and nobody wants power lines running through his back yard.

From The Permission Problem, James Surowiecki, The New Yorker Magazine.  A very worthwhile read.


Thomas Jefferson on Patents

If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.

That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.

Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society, without claim or complaint from anybody. Accordingly, it is a fact, as far as I am informed, that England was, until we copied her, the only country on earth which ever, by a general law, gave a legal right to the exclusive use of an idea. In some other countries it is sometimes done, in a great case, and by a special and personal act, but, generally speaking, other nations have thought that these monopolies produce more embarrassment than advantage to society; and it may be observed that the nations which refuse monopolies of invention, are as fruitful as England in new and useful devices.

– Letter from Thomas Jefferson to Isaac McPherson

The lodsys case

Lodsys filed a complaint last week against a number of online retailers.  Lodsys is a so-called “non-practicing entity” – a patent holding company that doesn’t build products.  They previously filed lawsuits against Apple developers among others.  I am not a lawyer but I wanted to try to understand the case so read some of the documents.  This is my best understanding of the situation.

Here is an example of Lodsys’ accusations, in this case against

The reference to ’908 is referring to patent 5,999,908, which was filed in 1997.  It is an invention that appears to allow users to give feedback to websites:

Here is one example diagram from the patent about how the invention could be embodied:

Here is the specific claim (claim 37) that and other retailers are allegedly infringing:

As far as I can tell, the first clause says that it the claim is referring to a computer product, which in the case of seems to be their website, where the user and server can send information back and forth.  The second clause seems to say that this system includes computer code. The third clause seems to say this system includes a database.  The fourth clause seems to say there is a information transmitted between the user, web server and database.

Software patents should be abolished

The alleged societal benefit of patent law is that it creates a financial incentive to innovate.  The societal drawback is that it reduces competition, reduces the spread of innovation, and creates deadweight legal costs.

Perhaps patents are necessary in the pharmaceutical industry.  I know very little about that industry but it would seem that some sort of temporary grants of monopoly are necessary to compel companies to spend billions of dollars of upfront R&D.

What I do know about is the software/internet/hardware industry. And I am absolutely sure that if we got rid of patents tomorrow innovation wouldn’t be reduced at all, and the only losers would be lawyers and patent trolls.

Ask any experienced software/internet/hardware entrepreneur if she wouldn’t have started her company if patent law didn’t exist.  Ask any experienced venture investor if the non-existence of patent law would have changed their views on investments they made.  The answer will invariably be no (unless their company was a patent troll or something related).

Yes, most venture-backed companies file patents (I have filed them myself), but this is because 1) patents can have some defensive value, 2) they can grease the wheels of an acquisition (mostly because big companies want a large patent portfolio for defensive purposes), and 3) occasionally failed startups will get funded by investors whose intention is to go around suing people (hence providing “downside value” for the initial investors).

Articles like this recent one in New York Times promote the urban myth that the main beneficiary of patents are lone inventors whose idea is stolen by the big guys.  I have no special knowledge of the situation referred to, but I find it hard to believe in 1995 the idea of tying GPS to mobile devices wasn’t obvious to anyone in the field.   Almost all software and technology patents that I’ve ever come across are similarly obvious to practitioners at that time.  In theory obviousness is grounds for disallowing patents, but in practice patent examiners grants tons of silly patents.

Take the case of Blackberry and NTP.   NTP is a “patent holding company” – a patent troll – whose sole purpose is to sue people.  Now, I’ve been around long enough to know that the idea of mobile email is as old as email itself.  What RIM did was they actually went and made it a reality.  They figured out how to make a simple device that people loved, how to market it, and how to convince investors to give them money for what probably at the time seemed like an overwhelmingly difficult project.  The founders of RIM are the heroes of the story.   They didn’t need to sue anyone because they built a product and made money by actually selling a product people wanted.

How did having patents help society here?  NTP never tried to build any products.  No one is claiming RIM took the idea from them.  The only beneficiaries here are a company that never built anything and a lot of lawyers.

Software/internet/hardware patents have no benefit to society and should be abolished.