Fixing US intellectual property laws
04/01/2000
For most of the last 200 years, America's patent law was the best in the world. Yet that law was written when the world was a very different place. In the last two decades, collapsing barriers to trade and communication, and aggressive new legal tactics have often put American inventors at a disadvantage compared to their foreign competitors. Individual inventors found themselves increasingly unable to finance skyrocketing costs to enforce their patents when well-heeled competitors challenged validity. Sometimes American inventors, thinking they were first, would invest their life savings in a new "patent-pending" idea only to discover years later that someone else had secretly beaten them to the Patent and Trademark Office (PTO) (see "A baker's plight" on p. 121). Most galling, foreign entities were beginning to get US patents on US manufacturing processes and trade secrets that had been in use for years.
An unlikely coalition
For more than six years, an unlikely coalition of manufacturers, academics, patent professionals, and individual inventors, has been working to bring patent law up to date. The result of their work—the American Inventor Protection Act of 1999 (Senate Bill 1798)—finally passed Congress in December as part of the Intellectual Property and Communications Omnibus Reform Act of 1999.
The new law makes three important changes:
- It establishes a new re-examination procedure—an optional inter partes re-examination—that provides for settling validity disputes in the PTO instead of the courts. When an infringer challenges the validity of a patent, it typically costs $2,000,000 or more in legal fees just to re-establish the validity of the original patent. The new re-examination procedure should do away with most of this cost.
- For patent applications that are also filed abroad, the new law requires publication of patent applications 18 months after filing. In the past, an application could be held secret in the PTO for decades. An inventor had no way of knowing if someone else was already in theprocess of patenting the same invention. Now, new inventors will have a better chance of knowing if they are first and publication will help in the raising of capital for newly patented technology without the fear of being made worthless by a dominant application.
- It establishes a "first-to-invent" defense, a prior user right much like a "grandfather clause." Under the old law, such patents were arguably enforceable if the technology in question had not been published. Now, business methods cannot be patented by anyone after they have been in use for more than a year.
Unsolved problems
While the new law is a step in the right direction, it does leave a number of problems unsolved. In the last year of the reform effort, some mounted a campaign to prevent any reform and succeeded in keeping loopholes open. For example, the re-examination procedure is not as dispositive as it should be. There are still ways that a well-heeled infringer can tie up an inventor in court and bleed him into submission.
Similarly, reform opponents slipped in a provision that makes it possible to keep applications filed only in the US secret forever. This prevents early determination of who was the first inventor and enables the growing practice of ambushing—writing a patent application and keeping it secret until others have invented and commercialized a similar technology. (There are patents being litigated today whose claims were kept secret for more than 40 years.) Even the grandfather provision got watered down when antireformers added a limitation that only protects fuzzy-definition "business methods." Now, some believe they have retained the ability to get new patents on old, unpublished technology if the technology is not a "business method."
New protection
But the new law does some other useful things. Prior to 1995, American patents expired 17 years after issuance; after June 1995, patents expired 20 years after the application filing date. The new law improves fairness by establishing a patent-term guarantee. If the PTO delays an application longer than three years to issuance, the inventor will have an expiration term close to the historical 17 years and the right to collect royalties back to the date of publication. This is the first time American inventors have been able to collect royalties for infringement that occurred before a patent was actually issued.
The new law also establishes the PTO as a government agency within the Department of Commerce with independent control of its budget, thus enabling more freedom in pay and working conditions so it can attract and retain top talent. Finally, the new law is designed to protect new individual inventors against fraudulent invention promotion companies and allows for electronic filing of patent applications.
With the passage of S1798, America's innovative businesses and leaders in intellectual property rights believe they have put off massive patent wars by restoring some sanity to the patent system. Now, when the next Tom Edison sinks everything he has into a new invention, he will know if first rights to the invention will be protected.
A baker's plight
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At a small bakery, Louis always baked bread in the oven until done. One day a power outage affected the baking cycle, and Louis noticed the bread in that batch tasted better. Louis experimented with different temperatures in different parts of the cycle. Two years later, he had an oven that baked a better bread. Excited, Louis visited a patent attorney. But the attorney had bad news: "Because you have been selling bread made in your new oven for more than a year, you are barred from applying for a patent."
Disappointed but undeterred, Louis built a successful chain of bakeries using his "secret oven." Four years later, another lawyer called on him, "Your bakeries have to close." A patent on a variable temperature oven like Louis's had just been issued to Magna Flame, the world's largest oven company. Louis was furious. "I'm the first inventor. How did Magna get a patent when I couldn't years ago?" His lawyer explained, "You couldn't get a patent because you had been using the invention for more than a year before you saw a lawyer. And since you didn't publish the secrets of your oven, anyone can apply for a patent. Magna Flame can use its patent to put you out of business—unless, of course, you can prove absolutely that they copied you."
That was American patent law. Today, when new patents are issued on old technology, the Inventor's Protection Act protects earlier inventors, giving them a "grandfather right" to continue. Lawyers for future inventors will be able to advise, "While new patent holders can keep others from using your process, they can't use their patents against you."
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Bill Budinger is an inventor with more than 36 patents. He is founder and chairman of Rodel Inc., 451 Bellview Rd., Newark, DE 19713; ph 302/366-0500, fax 302/451-6763, [email protected]. (Rodel is part of Rohm and Haas Electronics Materials Group, which also includes Shipley Company.)