Patent Reform Must Focus...

Jonathan Zuck Washington, DC – Significant reform of the U.S. Patent system is necessary to preserve the accessibility and value of patents for the small innovators who depend on them, according to a newly released report by the Association for Competitive Technology (ACT). The report finds that small firm innovations are critical to the American economy and the patent system is an important resource for small innovators.

Small firms drive innovation and economic growth in America. The patents of small innovators are usually more technologically important than those of large companies. They are cited by other researchers more often and more likely to be closely tied to leading-edge scientific research. Based on this success, small firms have created between 60% and 80% of net new jobs over the last decade and employ 39% of high-tech workers like scientists and engineers.

"Patents allow a creative small company to protect its innovations and compete with larger companies. ContentGuard is an example of a small company that has been able to invent exciting new technologies and contribute to international standards because of the protection of patent laws," said Bruce Gitlin, Vice President, Business Development. "Revenues from patent licenses enable us to continue our work and grow the business."

The patent system has always been important to small firms and entrepreneurs on the cutting edge of technological innovation. In today’s information economy, patents are more important than ever for small firms as a means for securing capital for research and development and protecting their inventions from larger, better-funded competitors.

While patents have proven their value to small firms, issues with current patent process are undermining the system. The most important problem is a decrease in the quality of patents being approved by the USPTO.

"The trickle of poor quality patents granted by the USPTO is undermining the system's credibility and creating broad misperceptions of the overall value of patents for small firms. To ensure the future of our innovation economy, Congress must act to preserve the accessibility, quality and value of patents for small businesses,” said Jonathan Zuck, president of the ACT.

The report suggests 4 key areas where Congress and the industry can work together to bolster the value of patents for small firms, spur innovation, and would benefit the business community as a whole:

  • Fostering an environment where more efficient and comprehensive "prior art" searches are the norm. Current policy forbids 3rd parties (anyone other than the USPTO and the applicant) who may have evidence of prior art from submitting that documentation to the USPTO during the first 6 months of an application. Allowing these third parties to submit prior art evidence within 6 months of an application would provide patent examiners critical information where their body of considered prior art might be scant. In addition, the USPTO should encourage efforts to build prior art databases for new and emerging technology areas where the libraries are currently disjointed and sparse. For example, the Software Patent Institute is compiling a reliable and comprehensive body of software-related prior art, and will make it available to patent examiners.

  • Ensuring granted patents are ‘quality’ patents. The USPTO works hard to get patents right the first time, but the current reexamination procedures are not working well enough for small business. The existing procedures are rarely used because companies are forced to choose between proceedings that block evidence from future court use, or simply skipping the USPTO altogether and holding their evidence for use in future litigation. Congress should modify the estoppel provision to enable 3rd parties the ability to submit evidence to reexamination procedures while preserving their ability to present evidence in future litigation. In addition to fixing re-examination, Congress should create a post-grant opposition period that will allow challenges for a limited time, while including safeguards to avoid harassment, delay and undue expense.

  • The USPTO educating small companies about the patent process through greater outreach and communication. Small firms are most likely to innovate in cutting-edge technologies and ideas, yet many don’t realize the necessity of patenting and protecting their intellectual property. For those small firms who do understand the value of protecting their IP, many are discouraged by fears of large patent application costs, long pendencies, and the risks of costly patent litigation. In general, more facts -- and less fear -- will go a long way to help small firms make an informed decision about pursuing IP protection.

  • The ending of fee diversion and the hiring of more patent examiners with better qualifications. The patent system is currently overwhelmed and the PTO doesn’t have financial or human resources to adequately do the job. Worse, Congress recognized the patent system as a reliable revenue source and began lifting a portion of USPTO fees to subsidize profligate spending. Unfortunately, since not enough of PTO revenue stays “in-house,” the USPTO failed to hire enough patent examiners nor did it make use of new technology to work the backlog and speed quality patents out the door.

ACT is a national education and advocacy group for the technology industry. Representing mostly small- and mid-sized companies, ACT is the industry's strongest voice when it comes to preserving competition and innovation in the high tech sector. ACT's members span the industry, including software developers, systems integrators, IT consulting and training firms, and e-businesses.

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