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GOP-Backed Patent Reform Ignores the Constitution, Costs $1 Billion +, and Taxes Innovation

GOP-Backed Patent Reform Ignores the Constitution, Costs $1 Billion +, and Taxes Innovation

You probably haven’t heard about yesterday’s passage of the “America Invents Act” in the House, but as the bill goes into reconciliation after gaining the support of all but 67 Republican Representatives and three Republican Senators (along with two Democratic Senators and 50 Democratic Representatives), it’s important that you know what it means for the future of American innovation.

The Copyright Clause ( Article I, Section 8, Clause 8 ) of the Constitution states that Congress has the power, “[to] promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

But the patent reform legislation that passed the House yesterday throws this out the window, turning the procedure one follows to get a patent on their idea into a European-style “first-to-file” system.  The bill also gives the patent office the ability to raise fees and hands over the legislative authority to appropriate that revenue to Executive Branch bureaucrats.

Essentially, small business owners and individual inventors without the resources or ability to navigate a more difficult patent procedure are going to lose their ideas to larger, more connected corporations or, even worse, not pursue their idea at all.

Congressman Dana Rohrabacher (R-CA) spoke Wednesday on the House floor a few times on this issue and laid out a good last minute argument against the changes, while also pointing out the $1 billion in new spending the bill contains that is not being made up for with other cuts, as his colleagues had promised they would do under their “paygo” rules.

In one of the clips at the link above, Rohrabacher cites the Hoover Institute, which, in addition to the Constitutional conflicts, lays out the practical argument against the changes:

A final big problem with the proposed bill’s shift to first to file is that, not surprisingly, a first to file approach creates a serious incentive to rush to file. That’s a problem because rushing a filing causes the technological disclosure in that filing to be anemic for all but those huge companies with teams of lawyers on call just waiting to make rich filings. Not only is this just another provision of the bill that favors large players at the expense of smaller ones, it also is likely to have the practical effect of stripping the U.S. patent system of those patents that might otherwise have been of a broad scope . . . The rush to file quickly under a first to file regime significantly decreases the chance that a broad patent will issue. That’s one big reason why the U.S. has long been unique in the world for having a decent number of significantly broad patents. These pioneering patents were key to the successful commercialization of many of the world’s most important technological advances from television, to the gasoline distillation process, to the catalysis of modern plastics.

Why a bill that so clearly stifles innovation, creates additional taxes on the drivers of the American economy, and increases spending by creating a billion dollars worth of more bureaucracy isn’t attracting more grassroots opposition from groups like the Tea Party is beyond me.  But the good news is that, as the bill still has to go through the reconciliation process, there is still time to stop it.

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This is much worse than the Prescription Drug User Fee Act of 92 and the more recent Family Smoking Prevention and Tobacco Control Act and both of those were horrible enough. In 18 Jan 1982 edition of Spotlight, the FDA Bureau of Drugs Director Richard Crout was quoted as saying, “I never have and never will approve a new drug to an individual, but only to a large pharmaceutical firm with unlimited finances.” The FDA is currently trying to restrict and prohibit electronic cigarettes from the market because they weren’t patented by big pharma and cut into the market share of big pharmaceutical makers of nicotine replacement therapies, all of which have dubious effectiveness and some, like Pfizer’s Chantix, are directly implicated in causing suicides. Not only should this bill be stopped, but the two others I mentioned should be repealed before they do any more damage.

Who were the RINO’s that voted for this and what was their rationale? This seems like the big corporate lobbyists got their way at the expense of the regular folks. I can’t see what benefit will we all derive from this? What’s the story behind the scenes?

i work for the patent office (patent examiner). beleive me, we aren’t exactly thrilled either.

Could we have more information on this from someone, please? Ala <b<Ipso Facto does anyone out there have names of the supporters and their rationale for destroying the free market system? There’s got to be some flea-brain idea behind this and we need to throw some well-need light on those foolish, foolish idiot legislators [but I repeat myself] who drank someone Kool Aid and thought this was better than sliced bread. Are we going to have to take these bozos out to the political woodshed and get their attention?

Now wait a minute Professor Jacobson.

Having taken enough IP courses and done enough manufacturing design and drafting to fill a standard shelf in my office with legal and engineering textbooks on Patents, I’ve got some knowledge and experience with this field. That being the case, if this bill is IMPLEMENTED properly, it could be great. Let me explain:

First things first. As a matter of public policy, the public put on notice as to what is contained in the patent and what is covered. A “broad scope” patent should NEVER be granted in the first place, because it won’t be reasonably defined to put the world on notice as to what is subject to the patent.

What this legislation will do (if I understand it correctly) will largely prevent Patent Trolling, where the first to “discover” an idea sits on it and manufactures it until a “second” person comes along and starts to infringe (or files for a patent of their own) and THEN the first to discover files the patent application to force the second out of business or to pay royalties to the first as a tax. The first company does this by challenging the Patent application in the first place, by saying it was not a “novel” invention, but that their OWN use WAS novel. The older system makes for very difficult proofs and arguments about when something was created or when something was reduced to a fully enabled invention design, where this system won’t care. It will become a simple “first to file wins” and if the proofs aren’t met and the application isn’t properly amended, then the patent simply dies.

With this new legislation, it fulfills the purpose of the patent system, which is to put the whole world on notice of your invention IN ADVANCE of any UNKNOWN infringement or spending to develop product lines prior to the patent being filed.

Further, Section 112 (Specification) will become truly important again: Section 112 is the Quid Pro Quo between the patentee and the public. The patentee gives the written description of the invention and explains it in such a way that a person of ordinary skill in the art can make the invention. In return, the public gives a set of exclusive rights. §112 polices the quantity and quality of information. You have to give a written description, and you have to show how this thing works. Also, you still have to describe the best mode for practicing your invention.

Rep. Dana Rohrabacher’s speech, while moving, is inaccurate in that it will limit technological disclosure. Whether it does or not is entirely subject to the patent examiners demanding that the invention be sufficiently detailed for examination. Drozz above would be able to comment on that more.

Also remember: having a Patent is not the end-all-and-be-all of business. Maintenance fees are required at 4, 8 and 12 years. The economic life of a patent is very different from the statutory life of a patent. Economic life means the ability to raise price. When the demand curve becomes elastic (45 degrees), the patent renewal mostly becomes irrelevant. Demand inelasticity doesn’t last long, because other people will try to enter the market with a competing substitutional product (meaning one that passes both the “tripartite identity test” and the “Insubstantial differences test”).

With this change, people will still invent and patents will still be granted to small companies as well as large ones. What we will hopefully get out of it is better disclosure, less trolling and overall less patent litigation about who-made-what-when arguments just so that one party can demand a piece of another party’s profits AFTER setting up a factory.

WNC_Conservative | June 25, 2011 at 8:25 am

I would have to study HR 1249, “America Invents Act,” before I jump to conclusions about whether it is good or bad for inventors, and our system of awarding patents.

Text of the bill in PDF format is at:

http://www.gpo.gov/fdsys/pkg/BILLS-112hr1249eh/pdf/BILLS-112hr1249eh.pdf

And the CBO Cost Estimate, which contains their brief interpretation of the bill is here:

http://www.cbo.gov/ftpdocs/122xx/doc12217/hr1249.pdf

The Heritage Foundation does not agree with the changes in the bill giving the Patent Office authority to set fees and keep the money. (See the link in the original post.)

I think that most of the crtique in this article is unwarranted. There certainly are arguments for and against a first to invent versus a first to file system, but I believe that this bill will be very beneficial to the PTO and the IP community as well.

I fail to see how this bill harms small business and independent inventors. All inventors must timely file their inventions and may file provisional applications which gives them filing priority up to a year while allowing them to get their applications together and suitable for examination.

Congressman Rohrabacher assertion that this bill creates 1 billion in new spending is patently (much pun) false. The PTO is a completely fee funded agency (not getting a dime of taxpayer money), and for quite a number of years, Congress has been siphoning funds from the office to fund other areas of the government. In the least, that money should have been returned to inventors. However, the PTO is severely backlogged, understaffed and simply unable to serve the IP community with its current funding. Fees are structured based on what the PTO needs to operate and not what the PTO needs plus what congress wants. In short, congress has done a very poor job allocating funds for the PTO and has in essence been short changing the inventors who pay filing, issue and maintenance fees. This bill fixes that.

[…] GOP-Backed Patent Reform Ignores the Constitution, Costs $1 Billion +, and Taxes Innovation […]

I am apparently late to this party, but Chuck is right – the bill is not necessarily bad.

First, the Patent Office raises money through filing fees (and other fees). So the users of the service pay for the service – a novel idea in government. For many, many years, there has a backlog of patent applications such that it take years for an application to become an issued patent. The PTO could do a better job of processing the applications by hiring more examiners, but Congress takes 20%+ of the PTO’s revenues from filing fees. If the PTO can keep fees and adjust fees based on costs, that is really what we all should want from a government organization. If anything, it keeps the bozos in Congress from using patent filing fees to fund their spend-a-thon.

Second, First-to-File has pros and cons. One pro is that it will help mitigate patent trolls, who are assuredly anticompetitive. It will also make the system similar to other patent systems, which will make it easier for companies and inventors to secure multinational protection of their discoveries.

I recommend that you look into things a bit more before you start spouting crap. Also, while I appreciate that you are trying to look all tea party-y by citing to the Constitution, your cite has no relation to the remainder of your post, and makes you look ignorant of the law.

Oh, you are the new guy. I didn’t realize that. Let me help:

http://www.patentlyo.com/patent/2011/06/the-big-government-patent-bill-guest-essay-by-john-duffy.html

The Bill apparently provides for a Detroit satellite office. Good stuff. It is worse than I thought.

This is a horrible development for me: I want as little to do with the patent system as possible! If a “first-to-file” rule is adopted, it would make it impossible for me to defend an idea I develop as “prior art”.

I have absolutely no desire to get patents, or to get into lawsuits about who came up with what idea first. As our system currently stands, I can at the very least write up my ideas, notarize them, and publish them, so that someone else who patents the idea later wouldn’t successfully claim that I “stole” their idea.

Even then, I’m not sure what I’d be able to do: I wouldn’t be able to afford a patent lawsuit!

The entire concept of patents is flawed, and needs to be done away with. It inevitably favors the large corporations over the small startups, because small startups cannot develop large patent portfolios.

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