Patent laws change Saturday, affecting small-business inventors

vbridges@newsobserver.comMarch 11, 2013 

  • Patent resources •  U.S. Patent and Trademark Office: •  U.S. Patent and Trademark Office’s North Carolina resources: •  U.S. Small Business Administration: •  N.C. State University Libraries Patent and Trademark Resources Center Program:

Representatives of CertiRx, a Triangle product security technology startup, are working feverishly to file a number of patent applications before the U.S. intellectual property landscape transforms.

On Saturday, the first-inventor-to-file provisions of the Leahy-Smith America Invents Act, a new patent reform law, go into effect, putting a priority on the person who first files a patent application. The law is a contrast to the expiring system, which awards patent claims to the person who can show he or she invented a concept first.

The changes, which are the most significant to the patent system since 1952, harmonize the U.S. patent system with the rest of the world, but opinions vary on how small businesses will fare under the new practice.

“Previously, it was OK if you had an idea to just sit on it and make sure that it was going to have a commercial utility before you file,” said Tom Mercolino, president and CEO of CertiRx, which has five employees and more than 100 U.S. patent claims. “But now if you think it has any potential commercial utility you better file soon or you run the risk of having loss of (intellectual property) protection.”

A small company’s intellectual property portfolio supports the value of the company, Mercolino said.

“Without the intellectual property, it would be very difficult for us to attract either investment dollars, grant dollars or customer dollars,” Mercolino said.

According to the U.S. Small Business Administration, small companies produce 16 times more patents per employee than larger companies and outperform their larger counterparts in various categories, including licensing revenue and increased profits.

The Raleigh-Cary and Durham-Chapel Hill metropolitan statistical areas are among the nation’s 15 most productive for patents per capita, according to the Brookings Institution, a nonprofit public policy organization.

Help for small businesses

The patent reform bill was signed into law by President Barack Obama on Sept. 16, 2011, and different parts are being phased in over the next two-and-a-half years. Local patent attorneys say it’s hard to gauge the larger impact of the various rule changes.

The America Invents Act requires the Department of Commerce’s U.S. Patent and Trademark Office to work with law associations to establish pro bono programs to assist small businesses and complete studies to evaluate how the changes affected small businesses.

The U.S. patent office has pro bono programs in four states, and 12 additional programs aimed to open in the next year, including one in North Carolina, said John Calvert, senior adviser for the Office of Innovation Development at the U.S. Patent and Trademark Office.

The program pairs financially under-resourced small businesses with volunteer patent attorneys.

The patent office is also working on expanding its existing ombudsman services to help small-business owners understand the patent procedure and move their applications through the process.

The office will continue to offer a 50 percent discount on patent fees for small businesses with 500 employees or less. Starting March 19, micro entities will receive a 75 percent discount on related fees.

To qualify as a micro entity, applicants can not have been named as an inventor on more than four previously filed patents not assigned to a company and must have a gross income that is less than three times the U.S. median household income, a figure that is based on the most recent U.S. Census Bureau report.

The micro entity also benefits university inventors since it also applies to patent applications that could be of interest to higher education institutions.

Patent applications average about 31 months from filing date to finalization; however, accelerated examinations average about 5.8 months, Calvert said.

Starting March 19, prices on the accelerated option will drop, costing large businesses $4,000, small businesses $2,000 and micro entities $1,000.

Large firms likely to benefit

The goal in seeking a patent claim is to get the broadest possible coverage on a concept and then specific coverage on the product opportunities, Mercolino said. It’s hard to estimate how much the changes will cost, but he said he may have to adjust and create a more affordable strategy.

“It’s going to be more expensive for us to get patent coverage as broadly as we have been able to get patent coverage previously,” Mercolino said.

The patent reform alters the patent landscape in favor of large and international businesses, said Todd McCracken, president and CEO of the National Small Business Association, an advocacy organization with more than 65,000 members.

“Enactment of the AIA has, at every turn, put small-business innovators at a disadvantage, and to describe it as anything other than a massive blow to entrepreneurial innovation is simply not true,” McCracken wrote in a January 2012 Thomson Reuters opinion piece.

Laura Kiefer, a patent attorney with the Olive Law Group in Cary, said the first-to-file system pressures some firms to file applications early and more often, resulting in higher attorney fees, which can start at $20,000 from filing to patent issuance.

“It’s a huge benefit for larger companies with the resources and very much a hardship for small companies,” she said.

Chapel Hill patent attorney Kevin Flynn described the changes as a wash for small businesses.

“Some of these changes will help one of my small clients at some point, and some will hurt my clients,” Flynn said. “While the amount of change is disruptive and leads to a number of years of uncertainty, we will get through it, and I don’t think it has really changed the balance of power between small companies and big companies.”

Larger companies often succeeded in challenges under the first-to-invent system, as their employees were better at dating and documenting the development process, Flynn said.

“They were better at appealing cases because they had the budget to do it,” Flynn said.

Palmetto Biomedical founder Lawrence Boyd, a medical device inventor with more than 60 patents and pending applications, said he doesn’t think the changes will have a huge impact on his Durham company. Boyd said he dislikes the ambiguity that came with the first-to-invent system. Inventors don’t know the actual date of the invention until it is litigated in court, he added.

“And then they produce documents that show ‘Oh, I invented this six months before you did,’ ” Boyd said.

Bridges: 919-829-8917

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