|By Bethany Halford
Ideas are the capital of
the engineering world. And like
any other asset, ideas can be stolen.
To protect their intellectual property,
engineers and other inventors rely
on patents. But precisely who is
granted a patent and the protection
that patent provides could change
substantially in the United States
if the sweeping reforms in the Patent
Reform Act of 2005 are passed into
The proposed legislation was unveiled
in June by Rep. Lamar Smith, R-Texas.
"The Patent Reform Act of 2005 will
improve the quality of patents issued
by the [U. S.] Patent & Trademark
Office (USPTO) and will reform certain
patent practices that disrupt the
operations of high-tech companies
and other businesses," Smith said.
"The legislation represents the
most comprehensive change to U.S.
patent law since 1952."
The bill is still in the midst
of what political wags call the
legislative sausage-making process.
But even without a final draft of
the legislation, those in the know
about patents agree that if the
bill becomes law, it will substantially
change the way patents are gained
and maintained in this country.
The Software Business Alliance,
the National Research Council and
USPTO Director Jon W. Dudas are
among those who have endorsed H.R.
2795's reforms. The reception from
small companies, independent inventors
and universities, however, has been
decidedly cooler. These groups worry
that the new legislation could put
them at a disadvantage when trying
to secure a patent.
So, what should engineers working
in academia expect if the Patent
Reform Act passes? The bill ought
not to affect engineers' actual
research, says Eugene R. Quinn Jr.,
president of IPWatchdog.com and
a patent attorney with a B.S. in
electrical engineering. "The changes
have very little to do with the
actual invention," he says. But,
Quinn adds, university technology
transfer offices should expect big
changes when it's time to file those
inventions with the USPTO.
One reform that's generating controversy
among universities and independent
inventors would award patents to
the first people to file their patents
with the USPTO. That's a substantial
change from the current "first-to-invent"
system, which grants the patent
to the first person to devise the
The so-called "first-to-file" system
is the standard among the nation's
major industrialized trading partners.
Proponents of H.R. 2795 say that
this reform will harmonize U.S.
patent laws with patent procedures
in places like Europe and Japan-a
change that will save money when
filing a patent internationally.
A first-to- file system also removes
the ambiguity that's inherent in
a first-to- invent system. In contentious
cases, it's not necessarily easy
to tell who came up with the idea
first. In first-to-file systems,
all that matters is who got their
paperwork to patent office first.
H.R. 2795's opponents say that
the change could create a costly
race to the patent office that will
ultimately hurt universities and
independent inventors who don't
have deep corporate pockets or armies
of patent lawyers at their disposal.
The Professional Inventor's Alliance
(PIA) has come out strongly against
the bill, dubbing it the "Patent
Deform Act of 2005" on its Web site.
"This provision would undermine-not
further-innovation, as it rewards
not the inventor, but the first
to file," writes PIA President Ron
Riley. "This provision rewards the
individual or entity that is fastest
in filing a patent application,
irrespective of the significant
contributions of the inventor."
The draft of proposed legislation
circulating at press time actually
called for a "first-inventor-to-file"
system. This language is meant to
imply that the new system would
be somewhere between first-to-invent
and first-to-file, explains Carl
E. Gulbrandsen, managing director
of the Wisconsin Alumni Research
Foundation (WARF), the patent management
organization for the University
of Wisconsin, Madison. "It is a
hybrid version, but it still creates
a race to the patent office that
wasn't there before," he says.
"U.S. patent laws are unique in
a number of ways, and I'm not sure
that those differences are bad,"
IPWatchdog.com's Quinn says. "In
the U.S., the lion's share of our
economy is based on small businesses."
Many paradigm-shifting inventions
come out of smaller companies, which
are then bought up by larger firms
hungry to expand their patent portfolios.
According to Quinn, when you factor
in fees from patent searches, attorneys
and the USPTO, it costs upwards
of $6,000 to get a patent for a
relatively simple invention. A patent
for a complex invention could easily
cost more that $25,000. "Writing
patent claims is arduous," he says.
"Writing more claims requires more
attorney time and more patent fees."
Universities and independent inventors
work with limited budgets and therefore
have to be picky about what they
decide to patent. Moving to a first-to-file
system means that university technology
transfer offices and small companies
will have to make decisions faster
than they did under the first-to-invent
system. "They won't be able to take
a leisurely pace to the patent office,"
None of the universities that Prism
contacted was willing to go on record
about H.R. 2795, saying that the
topic was too controversial. There
have been murmurings from organizations
that represent academia's interests,
however. In a joint statement, the
American Association of Universities,
the American Council on Education,
the Association of American Medical
Colleges and the Council on Governmental
Relations stated that although they
do not oppose the switch to a first-to-file
system, there is concern that first-to-file
will not be as amenable to universities
as the first-to-invent system.
"University inventors typically
are faculty members who first publish
in academic journals and later consider
whether to file to obtain a patent,"
wrote the associations in their
joint statement. "Before filing
a patent application, universities
often need time to consider the
potential commercial application
of a basic research discovery, which
may not be obvious at the point
of discovery, and to assess the
receptivity with the commercial
sector to licensing any resultant
patent for development. All such
practices are accommodated in a
first-to-invent system but could
be could be compromised in a first-inventor-to-file
The first-inventor-to-file switch
isn't the only provision in the
Patent Reform Act of 2005 that promises
to substantially change the patent
process for universities. Although
it seems to be less controversial,
one of H.R. 2795's most sweeping
changes establishes a new process
for challenging patents, known as
a post-grant opposition procedure
in legislative jargon.
"If the legislation were to go
through in its present form then
these changes would have far-reaching
consequences," says Stuart Graham,
an attorney and professor of strategic
management at Georgia Institute
of Technology. Post-grant opposition
is part of the European patent system,
and Graham, in collaboration with
University of Munich professor Dietmaer
Harhoff, has been studying how adopting
this procedure would affect the
U.S. patent system.
While there is a re-examination
procedure within the current U.S.
patent system, Graham notes that
most people agree that it hasn't
been very effective. At present,
he says, "by and large, anyone who
wants to challenge a patent can
do that effectively only with litigation."
Of course, litigation can get expensive.
The American Intellectual Property
Law Association estimates that the
median patent litigation costs $500,000.
If more than $25 million is at risk
in the patent suit, the cost of
litigation is likely to be closer
to $4 million, and Graham says litigation
costs have been known to go above
$30 million in high-stakes cases.
Graham says the high cost of litigation
usually prevents those who can challenge
a patent from doing so. It's simply
easier for them to pay a licensing
fee to the patent holder and then
pass that cost on to consumers.
Although post-grant opposition
would never eliminate litigation,
proponents of H.R. 2795 think that
the provision would give patent
challengers a less expensive alternative
to litigation. When Graham and Harhoff
compared U.S. patents that have
been litigated with their equivalent
European patents, they found that
a patent litigated in the United
States is three times more likely
to face post-grant opposition in
Europe. "That's good news for us,"
Graham says, "because it is evidence
that opposition is a substitute
Graham and Harhoff also found that
there were a number of patents challenged
and subsequently invalidated under
the European system that are still
valid in the United States because
they were never litigated. Graham
says these bad patents are a cost
to U.S. innovation. "Think about
the impact that this has on engineers
working in labs," he says. Researchers
may be steered away from working
in certain areas where patents could
potentially be invalid, Graham explains.
"It's really those costs that the
opposition will be most effective
But challenging a patent under
the proposed litigation isn't free.
Paul Bianco, an intellectual property
attorney who holds a Ph.D. in bioengineering,
estimates that a post-grant opposition
could double the costs of getting
a patent. "This post-grant opposition
proceeding would potentially add
time and expense to the patent process,"
Bianco says. "If you're a small
college or university or individual
inventor, it could make you consider
whether or not to proceed with the
Graham concedes that additional
costs could be a burden if the patent
holder's resources are tight. But
he argues that the other side of
the coin needs to be taken into
consideration, too. "It is increasingly
in the university's interest to
challenge a patent," Graham says,
and opposition is a tool likely
to be more palatable to academia's
higher-ups, who understandably rankle
at the thought of spending $4 million
Costs aren't the only thing likely
to change if post-grant opposition
is adopted in the United States.
Although he doesn't oppose the new
grant-challenging system, WARF's
Gulbrandsen worries that oppositions
will heap extra work on an already
overloaded and under-funded USPTO.
Earlier this year, USPTO Director
Dudas told the Senate Subcommittee
on Intellectual Property that, on
average, it takes more than two
years for a patent to be granted
after it is filed. "Without fundamental
changes in the way USPTO operates,
Average pendency in these areas
could double by 2008," Dudas says.
"Moreover, without intervention,
the backlog of applications awaiting
a fi rst review by an examiner could
grow from its current level of approximately
500,000 to over 1 million by 2010."
Gulbrandsen says that delays in
getting a patent put universities
in a dire situation. "If I can't
get a patent issued, why is someone
going to get a license from me?"
Whether or not the Patent Reform
Act of 2005 will ever become law
remains to be seen. At press time,
various interests were still carving
up the bill, and its ultimate fate
was uncertain. Gulbrandsen offers
some advice to those still tinkering
with the reforms: "We need to be
very careful about tampering with
the patent system because it's kept
us very innovative," he says. "We
are the most innovative country
in the world, and our patent system
has been crucial in that."
Bethany Halford is a freelance
writer based in Baltimore.