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W&L Professor Predicts Advantages to New Patent Law

W&L Audio:

Alan C. Marco

The new America Invents Act, signed into law last week by President Obama, will have a substantial impact on the pace of innovation in the country, according to Alan C. Marco, a Washington and Lee University economics professor who specializes in intellectual property rights.

Much of the media coverage of the new law focused on the change in the way the U.S. will award patents to inventors from a first-to-invent basis to a first-to-file basis.

Marco, who spent a recent leave as an expert adviser with the U.S. Patent and Trademark Office (PTO), said that while the shift is important, he believes it is even more significant that the patent office will now be able to set its own fees and manage its own budget.

"Allowing the director of the patent office to set fees will permit them to take those fees and invest them in more patent examiners and better technology that will hopefully improve quality and speed of the process," said Marco. "The PTO will still be required to be revenue-neutral, in the sense that it must set aggregate fees to recover its long-run costs."

This part of the new act will, Marco said, help address the growing backlog, which has meant that it takes inventors seeking a patent up to three years to get the first decision and as long as five years to get the patent grant. Since the patent term runs from the date of application, examination delay effectively shortens the period where patent holders can recoup their research costs."

In addition, Marco said that by now allowing the patent office to set its own fees rather than having to seek permission from Congress, the fees will be set in what he calls a "rational way from an economist's perspective."

Said Marco: "It enables the patent office to establish fees that are more in line with consumers' interests and with innovation."

Meanwhile, the shift from the first-to-invent standard to a first-to-file brings the U.S. more closely in line with the rest of the world.

"We are not adopting the same system of first-to-file that is the case in the rest of the world," noted Marco. "Instead, we are adopting the first inventor to file. That's a significant difference."

"In the past in the U.S., it had been first-to-invent. So if there was a question about whether or not you were the first to invent, that could be a pretty painstaking and bureaucratic process. Now it is the first inventor who files. If there are multiple inventors, the first one to file is the one who gets the patent. We won't have people sitting on the sidelines, grabbing an idea and still getting a patent. Furthermore, the new system means that inventors have an incentive to bring their ideas forward in published applications. That information benefits everyone."

Marco said some people fear that this new system will prove a disadvantage for small inventors as opposed to large companies since the small, individual inventor with the same resources of a big company may have a harder time getting to the office as fast.

The new act provides tactics that small inventors can use, Marco said. There are, for instance, provisional applications that serve as placeholders for 12 months without having to be fully developed patent applications.

"I think the ability of small inventors to use those provisional applications really handles a lot of problems with the first-to-file system," Marco said.

In addition, there is now a fast track that will allow, at the outset, 10,000 applicants to pay a higher fee but get a guaranteed 12-month response for the first decision.

"For those who are worried about the backlog and delay, this provides an opportunity for them to get quick responses. This could be important for big firms, but this can be vitally important for small entrepreneurial firms that are seeking venture capital funding," Marco noted. "When venture capitalists are looking at small startups, one of the things that they are interested in as a signal of the quality of their inventions is patents. This can be really important in gaining funding. It is a higher fee but not something that would be prohibitive to a smaller firm."

Marco also noted that the new act establishes a "micro-entity" status that provides a 75 percent discount on the fees and is targeted at individual inventors. There is also a new system under which someone can challenge the validity of a patent by going to the patent office rather than having to make that challenge in the courts.

"If someone goes to the patent office in a certain period of time to make a challenge, the opposition will be handled in house," said Marco. "There will always be an appeal to the federal courts but this new process could allow inventors to challenge an issued patent without having to go to the courts."

The act is seen as the most significant change to the patent laws since the 1950s. Marco agrees with that assessment.
"It doesn't mean that you're going to see flying cars in a matter of years," he added. "But I do believe it will improve innovation."

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