America Invents Act: Yea or Nay?

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The America Invents Act (AIA) is the most significant change to the United States patent system in recent times. After numerous failed attempts at reform in the last decade, Congress finally passed the AIA into law in 2011. Now, eighteen months after its passage, the centerpiece provision of the AIA is set to go into effect. On March 16, the US will move to a first-inventor-to-file system, bringing it in line with the patent filing process followed by the rest of the world.

The first-inventor-to-file is a modification of the universally adopted first-to-file model. Under first-to-file, the first person to file the application receives the patent, regardless of the date of the invention. A more forgiving model, the first-inventor-to-file rules allow the inventor to first publicly disclose the invention and still successfully file a patent application for up to a year after the disclosure. A caveat of utilizing this grace period is that many foreign countries do not grant patents following public disclosure.  In a scenario where two parties seek to patent the same invention, the party to first publicly disclose or file an application with the USPTO receives the patent. In contrast, under the first-to-invent rule currently in place in the US, such disputes are settled through reviews of evidence of conception and reduction to practice.

The AIA received widespread support from major players in the software industry. The Coalition for Patent Fairness, an industry group that lobbied for the AIA, has a membership list that reads like the who’s who of the technology sector. SAP, Oracle, Google, Symantec, Microsoft and Amazon.com are all partners in the Coalition. It is important to keep in mind that larger corporations with structured legal departments and outside counsel at their disposal are well equipped to use the provisions of the AIA to their best advantage.

Small businesses and startups have been less vocal in their response to the AIA.  Todd McCracken of the National Small Business Association claims that the first-inventor-to-file system favors “entities having financial and staffing resources that are generally not available to startups, individual inventors or small-business innovators.” McCracken further asserts that the AIA reduces the incentive to invest in startups and predicts that it will hurt American entrepreneurs. Others object to the post-grant review provision that allows parties to appeal a patent provided they file their objection within nine months of issuance.  Post-grant reviews can be sought on any grounds, not just based on prior art claims. The concern is that challengers would entangle valid patent holders in endless review, an expensive prospect for startups.  In addition to the costs of litigation, a murky patent portfolio bogged in review is likely to dissuade investors from financing a startup. With patent trolls increasingly targeting startups, their fears may be well founded.

Proponents claim that startups do have something to cheer about, with the implementation of the AIA.  The ‘fast track’ provision of the first-inventor-file system reduces the patent examination period to twelve months, compared with the typical three to four year waiting period. Fast track provides a competitive edge to startups and comes at a discounted rate of $2400, available only to small businesses. The regular fast track examination fee, available to all filers, is $4800.

In the midst of the current social media boom, startups have very little to complain about. With record high valuations and flush with funding, most present day startups appear to be indifferent to the AIA.  The true impact of the AIA on startups will only come to light when this period of exuberance ends.

This article is part of a series on software-related patents in the United States.  The next installment will focus on the role of software-related patents in the open source movement.   

 

Photo Credit: ThatMakesThree

About: Amisha Manek

Amisha Manek is a first year law student at UCLA School of Law, with an interest in patent law and telecommunications law. Prior to joining law school, she worked as a consultant with the Telecommunications, Media and Entertainment practice at Capgemini North America. Amisha has a graduate degree in Electrical and Computer Engineering from Georgia Tech.

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