Why did the law change?

Congress decided to adopt the first-to-file system as part of a larger 2011 patent reform law known as the America Invents Act. The first-to-file system, which is used by every other country in the world, took effect on March 18.

What does it mean for inventors?

In the past, the Patent Office granted a patent to whoever invented it first. Now, the patent will go to whoever filed the application first.

Isn’t that unfair?

In the past, if someone stole your idea and obtained a patent for it, you could start an “interference proceeding” with the Patent Office. If you could show proof that you were the real inventor, the office would hand the patent to you. That won’t happen in the new system.

So, yes, in theory the old system was more fair. But in reality, interference proceedings were very rare — one report says that in 2007, they arose in fewer than one percent of all patent applications. And, of these, the patent was given to the second-to-file a grand total of 7 times. In addition to being rare, the proceedings were also expensive: a 2005 survey said the average cost was over $650,000.

Finally, America has a special rule that will help inventors in many cases. The rule says that if you disclose the invention at a conference or elsewhere, you have a one year grace period to file a patent for it. This means that your disclosure will prevent someone else from getting a patent on your invention (but it could also harm your chances to get patents in other countries).

What does first-to-file mean for small inventors?

One criticism of the U.S. patent system is that it favors big companies like Apple and Google who have the budget and the lawyers to file patent applications all day long. The new system won’t change this and could benefit the big companies even more. But, ultimately, it’s unlikely to make things much different than they are right now.

The bigger problem with patents is that too many are being issued in the first place. This leads to companies abusing 20-year monopolies over basic technology — often with no net benefit to society.

Where can I learn more about the first-to-file rules?

PatentlyO has the relevant text of the statute and a detailed description of what it does here.

Thumbnail photo courtesy Flickr user opensourceway

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Of note, just before the end of the year the U.S. Patent and Trademark Office temporarily invalidated Apple’s vaunted “pinch-to-zoom” patent, one of several found to be infringed by Samsung in August – generating a $1.05 billion damages award for Apple. On the same day, Kodak sold its imaging patent portfolio for $525 million to a consortium of 12 buyers (including none other than Apple and Samsung, along with HTC, Faceboook, Amazon, Fujifilm, RIM, Huawei, Adobe and Shutterfly).

In the coming year it’s a safe bet that global patent litigation and multi-billion dollar transactions will continue unabated, but here are a few other key trends we can expect to influence and shape the global IP marketplace.

The rush to the patent office begins

March 16, 2013, will mark the first day that the U.S. switches from a “First to Invent” to a “First (inventor) to File” system, under the America Invents Act (better known as U.S. patent reform). Whereas U.S. patent laws previously attributed priority rights to the first documented inventor, it is now largely the case that the first party to file a patent application will get the patent. Thus we can expect a rush to the patent office by companies large and small – adding to the already huge backlog at the USPTO of some 600,000 patent applications. Small businesses with limited legal budgets likely will be negatively impacted by the change, as it puts them at a pronounced disadvantage to their larger, better funded competitors.

Trolls will invade the cloud

With the number of patent lawsuits increasing every year – more than 3,000 were filed in the U.S. last year – there’s no reason to expect the pace to slow. Much of this litigation is fueled by so-called non-practicing entities, more popularly known as “patent trolls,” that base their entire business model on the use of patent enforcement, typically against multiple defendants.

Patent litigation in general, and troll litigation in particular, thrives in markets where the patent landscape is ambiguous, where there are complex products with multiple features, and where markets experience periods of explosive economic growth. The mobile market has seen its share of litigation frenzy over the last several years, and while the cloud computing market is clearly fertile ground, it will be at least five years before we see the type of  full-blown war mobile is now enduring. That said, the first signs of troll litigation are already emerging, such as CloudingIP, an NPE that filed patent lawsuits against RackSpace and several other defendants last year.

Copyright will take center stage

While patents have been all the rage in the IP marketplace over the last decade, content-related IP such as trademarks and copyrights are moving front and center with the proliferation of digital media and online content. Organizations such as Creative Commons have taken the lead in creating an infrastructure for the sharing of creative content online, giving the creator broad control over terms for sharing it.

The still-brewing debate over the ownership of Instagram photos, though, highlights another alternative to the creator-ownership approach – one that gives control over content to the platform that hosts it. The question moving forward is whether the copyright ownership of digital content will remain with creators or will be transferred to the platforms that host them

IP strategy is moving to the early phase

The Yahoo patent lawsuit against Facebook, filed on the eve of the Facebook IPO, highlights the need for startups to have a strategy around building a strong IP portfolio. While Facebook is no typical startup, it solved the problem in a non-typical way, by spending hundreds of millions of dollars buying patents from Microsoft to quickly increase its arsenal and defend against future litigation.

Obviously, few startups can afford a quick and expensive rebound like that, and therefore one lesson learned in today’s highly litigious marketplace is that any IP strategy needs to start from day one, even for cash-starved startups. Patent litigation against successful startups is picking up, and it is against this backdrop that IP strategy in the early phase is expected to become an absolute necessity for startups that wish to “cross the chasm” successfully.

Competition will go global

A recently published report by the World IP Organization (WIPO) revealed that in 2011, the number of patent applications filed in China exceeded those filed in the U.S. for the first time. That should come as no surprise to anyone following the pace of patent filing in China, an activity that has been prioritized by the Chinese government with the ambitious goal of reaching 2 million patent applications a year by 2015. Another noteworthy trend:  Of the list of the top-50 companies that received U.S. patents in 2011, the vast majority are foreign.

Both trends suggest the continued and increased involvement of foreign companies in U.S. patent litigation (as the mobile patent wars demonstrated), as well as the increased enforcement of IP rights overseas, and, in particular, in Asia.

Efrat Kasznik is president of Foresight Valuation Group, a Silicon-Valley based IP consulting firm, and is also a lecturer on IP strategy at the Stanford Graduate School of Business. You can find her on LinkedIn.

Photo courtesy of Shutterstock.com

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Samsung brought the USPTO’s ruling to the attention of Judge Lucy Koh, who is still sorting out final rulings in the Apple-Samsung case. Samsung, naturally, wants the judge to know that a key patent in the trial is having its status questioned by the patent office, as noted by the Verge.

But, like last week’s reexamination and invalidation of the “Steve Jobs patent,” also used in the same trial, this is by no means a big setback for Apple — yet. This is an initial answer from the USPTO. Apple will be able to respond to the ruling. Even if the USPTO finds against Apple again in a final office action Apple still has many more avenues of appeal. And crucially, Apple can still continue to assert the patent as its own.

So, in the short term, the USPTO’s ruling should have no immediate effect on the outcome of the Apple-Samsung trial.

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In a ruling dated last week, the USPTO held that all 20 claims for US Patent 7,479,949, — which covers the simple swipe and tap gestures used to operate a smartphone — are invalid. Apple successfully wielded the patent, nicknamed “the Steve Jobs patent,” in a major case against rival Samsung this summer.

So, what exactly does this mean? Well, for starters, note that the patent is far from finished. Last week’s ruling is part of a re-examination request — a proceeding where the patent office must second-guess itself. Under USPTO rules, the office provides an initial answer and then gives the patent owner a chance to respond — if the response fails, the re-exam is final and the patent is no good. Oh, and after that, there are appeals: PBIA; Federal Circuit; Supreme Court.

While all this plays out, Apple’s patent lives on and the company can continue to wield it in court. The ruling is, however, a significant symbolic blow to Apple. The patent has been regarded as one of its most powerful pieces of intellectual property and was even featured in a Smithsonian exhibit of Steve Jobs patents.

The same patent also caused controversy earlier this year when famed Judge Richard Posner threw out a lawsuit between Apple and Google, and called the patent system dysfunctional.

(Image by Photography Perspectives – Jeff Smith / Shutterstock.com)

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The appointment is significant because Lee used to hold the title “Head of Patents and Patent Strategy” at Google, where she issued a number of blog posts like this one calling for reform of the patent system.

Although the USPTO has yet to issue a formal announcement, Lee’s appointment was reported on Twitter by law professor Eric Goldman, who is well-respected on intellectual property issues:

Fantastic news: Michelle K. Lee, formerly Google’s chief patent lawyer, named director of the new @uspto Silicon Valley office! #htli

— Eric Goldman (@ericgoldman) November 16, 2012

[Update: Mike Masnick of Tech Dirt confirmed that a USPTO official announced the appointment at a patent event at the University of Santa Clara.]

The Silicon Valley patent office is one of several branch offices the USPTO established as part of a bid to pair specialized examiners with regional economies — high tech in San Jose, automotive in Detroit, energy in Dallas and aerospace in Denver. Lee may be hard pressed to recruit, however, given that pay for patent examiners is well below that offered at tech companies.

In recent years, patents have become a bugbear in Silicon Valley as a flood of low-quality patents has triggered a litigation arms race and given rise to a scourge of “trolls” — shell companies that don’t make anything but use the threat of lawsuits to extort licenses from companies that do.

Google and Twitter have been leading critics of the patent system while many experts have called for the reform or abolition of software patents.

The appointment has presumably been made at the behest of USPTO director David Kappos who has proved popular with both companies and the patent bar since he was appointed by President Obama in 2009.

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Starting today, the website Stack Exchange will run a channel devoted to patents on which the public can help scrutinize pending application. The move serves to crowdsource the arduous task of examining patents, permitting the general public to submit information that will help the patent office decide whether or not something is a new and useful invention.

It works like this. Once a patent examination is made public, anyone can submit it to Stack Exchange and launch a discussion. Others can then offer “prior art” that they believe is relevant to determining whether the patent should be granted. The collection of prior art is then sent on to an examiner at the USPTO who makes the final decision. To prevent gaming of the system, people are allowed to make only one submission with up to three pieces of prior art (additional submissions are possible but require a $120 fee).

The move is a boon for the Patent Office which has been lambasted for issuing a flood of seemingly obvious patents, including ones for emoticons, the use of auto-complete and a method of exercising a cat with a laser pointer. While such patents may seem simply frivolous, they are also ammunition for so-called “patent trolls” — shell companies that don’t make anything but make a living suing companies that do.

Crowdsourcing the prior art process will reduce the number of bad patents by helping examiners, who typically have around 18 hours to make a decision, locate material that shows an invention to be obvious or not new. Until now, the ability for third parties to submit prior art has been very limited.

Stack Exchange appears well-suited to vet patents. The site, which launched in 2008, is known for attracting communities of experts who answer questions on topics like software, photography and cooking. Stack Exchange also uses a sophisticated system of moderators and algorithms to keep discussions relevant and on point. In a phone interview, company executive Alex Miller explained why it’s taking part in the patent project:

“Like almost any tech company, we think there’s a problem with patents and think something must be done. We think this is great way to make progress on patent problems as work toward fund amentsl reform,” said Miller. “The second thing is empowers people who have this knowledge [to contribute to the patent system].”

The Stack Exchange project comes as other tech companies work to rein in a growing spate of patent lawsuits. Twitter, for example, is developing a contract that promises its engineers that their work won’t be used to fuel patent aggression. Meanwhile, Google will be contributing to the new crowdsourcing initiative by adding a “discuss” button to its patent pages that will bring users to Stack Exchange.

The crowdsourcing initiative is another coup for David Kappos, the popular USPTO director who started his tenure in 2009. The current project grew out of an earlier experiment called “Peer to Patent” in which outside experts were invited to join the patent examination process. Kappos has also taken other steps to modernize and invigorate the patent office such as opening a series of satellite offices where examiners specialize in areas of regional innovation. The patent office provided the following statement:

“By introducing third party input into the examination process for the first time since the inception of our nation’s intellectual property system, we’re able to expand the scope of access to prior art in key areas like software patents. This will improve the examination process and advance the Administration’s ongoing commitment to transparency and open government,” said Under Secretary of Commerce for Intellectual Property and Director of the USPTO David Kappos. “We encourage our nation’s innovators to follow Stack Exchange’s example and assist us as we improve the examination process and resulting patent quality that will drive our economy and create jobs and exports.”

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So what’s so great about these new patent offices?

The new locations mean companies will no longer have to travel to Washington for proceedings like re-examinations. It also means the patent office may be able to hire more examiners to plow through the hundreds of thousands of applications that have created a multiyear backlog.

The new centers are also intended to let patent examiners gain expertise in the regions and industry they serve. In Silicon Valley, this means examiners will be computer experts and in Denver it means they will be aerospace experts, according to Bloomberg. In Detroit, site of the first satellite office to be announced, examiners will be experts in auto technology.

Will this improve the quality of patents that are issued?

A rash of low quality patents issued by the US Patent Office is partly to blame for patent trolls and the ruinous lawsuits engulfing the technology sector. Better trained examiners could help staunch the problem.

“It will improve the quality level of patents in certain areas, especially software, semi-conductors and telephony,” according to Fabio Marino, a partner at the Silicon Valley office of McDermott Will & Emery. Marino adds that he expects high tech companies will work with the satellite office to familiarize examiners with the latest technologies to ensure patents they grant really are novel and non-obvious.

Sounds like a great idea. But who are these patent examiners?

Here’s the catch. The Patent Office has said there is a “critical need for electrical engineers” and, in general, has struggled to hire and retain people with expertise in the technology for which they are awarding patents. The problem can largely be summed up by the following chart which lists starting salaries just above $40,000 a year:

If the Patent Office already has a problem keeping electrical engineers in its Washington office, one can only imagine how its HR department will fare competing with the likes of Google, Apple and Facebook right next door.

On the other hand, the Patent Office has been adapting by creating a popular telework program and talking up the chance to “do something great for your country and for yourself.” Silicon Valley is full of millionaire engineers disgusted with the current patent system — perhaps some of them will jump at the chance for better work hours and a chance to reform the patent system.

Will an office in Silicon Valley actually fix the patent mess?

Not anytime soon. The 2011 law that created the new satellite offices introduced a series of reforms, including some that make it easier to challenge bad patents. These reforms, however, apply only to patents issued this year or later. That means that many of the inane patents (like this one for emoticons) fueling the current lawsuits will be washing through the court system for years to come.

There is also the question of funding for the Patent Office. While last year’s America Invents Act will allow the Patent Office to keep more of the fees it collects, it’s unclear if this will be enough for it to provide the technology and examiner training needed to do its job. More generally, courts and lawmakers are still struggling with whether certain subject matter — like software or medical techniques — should even be patentable in the first place.

So what’s the bottom line?

The new satellite Silicon Valley patent office, which will likely be housed in San Jose City Hall, may improve the patent system through better trained examiners — but the examiners (provided they can be found in the first place) are only one piece of a larger problem.

Marino, the patent attorney, also suggests the new patent office could produce a more indirect benefit — it could produce a cultural shift in the Patent Office as examiners and technology companies spend more time shoulder to shoulder and come to better understand each other.

(Image by R. Gino Santa Maria via Shutterstock)

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Recall that publisher John Wiley sued patent firms in March, claiming the law firms should pay extra copyright royalties when they submit a journal article to the US Patent Office.

It was unclear at the time if the firms would settle (as some have reportedly done) or instead tell Wiley to jump in the lake. It appears they’ve chosen the latter.

In new filings, Chicago’s McDonnell Boehnen Hulbert & Berghoff has denied copyright infringement while Minnesota’s Schwegman Lundberg & Woessner is asking the court to throw out Wiley’s complaint.

The law firms say they are required by law to submit the journal articles as part of patent applications, and point out that the Patent Office itself has said the practice is fair use. The Chicago firm is also arguing that its use of the articles is a non-public display, and that John Wiley is committing copyright misuse and has unclean hands.

The controversy stems from John Wiley’s efforts to squeeze extra revenue out of the journals by asking law firms to acquire a second license in addition to paying to read the articles in the first place. This second license would cover the right to make internal copies of the articles for their clients or for the patent office.

Patent law firms pay for access to journal articles because the articles are often part of the “prior art” that inventors must submit to the patent office to prove an invention is new.

Critics say John Wiley’s lawsuits will raise overall patent costs. The controversy hash also gained the attention of leading blog Patently-O.

So far, the publisher is showing no signs of backing off and is instead doubling down. On Friday, it filed a new suit against Kansas law firm Hovey Williams.

Here is what the Chicago firm thinks of Wiley’s complaint:

McDonnell Boehnen Hulbert & Berghoff Answer to Wiley Complaint Copy

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Well, last week I had dinner with founder Mary Hodder, of Dabble, who reminded me that there is another option: peer patenting.

That’s right, you no longer need to pay some lawyer $30,000 to file your initial specs with the U.S. Patent and Trade Office, where your brilliant invention(s) will be reviewed by a government hack — oops! I mean professional! — who, regrettably, likely has less engineering acumen or applied technical experience than you do. (Just take a look at the USPTO’s own performance and accountability report for 2007.)

NOW, you can submit your magnum opus to a circle of your professional peers, who, in good faith will asses the “prior art” in your field and, collaboratively, determine whether your invention is new enough to sanction with a seal.

Here’s a schematic of how it works:

The idea, promoted by the non-profit Peer-to-Patent Project, and working in tandem with the plagued USPTO (good for them!) borrows from the long-standing tradition among scientists and medical researchers of peer-reviewing each others’ work in public forums and published trade journals.

Such peer reviewing, the reasoning always was, creates opportunities where flaws in one party’s work can be identified and improved upon, ultimately contributing to the collective advancement of scientific research. It’s not a perfect process, but for generations it has worked well.

By mimicking and building on this tradition with technology patents, Peer-to-Patent believes potential conflicts, where a “new’ invention is thougth to infringe on an existing patent, can he identified and resolved early — before they ever spark a glint in some lawyer’s eye resulting in a costly legal contest.

Peer to Patent has gotten lots of nice press, and many large technology companies are supporting it innovation in the innovation food chain. (Microsoft, Sun Microsystems, IBM, GE, HP and more.)

According to its website, since the Peer-to-Patent launched in June, 1843 people have signed up to be reviewers and have cited 146 instances of prior art on 29 applications. That’s many millions of dollars in legal fees saved!

There are 15 patent applications currently up for review on the site. (Just a month ago, in December, there were 17 patent applications pending, so the vetting is real.) You can register to become a reviewer, here, or apply to have one of your inventions reviewed, here.

We share links to the first 6 applications out of the current stock — do any of then apply to your startup? Definitely check out #5!

1) Systems and methods for clinical decisions crawler agent

2) System and method for managing storage system performance as a resource

3) Method and apparatus for selectively executing different executable code versions which are optimimzed in different ways

4) Crossbar arithmetic processor

5) Smart drag-and-drop

6) Methods and apparatus to implement annotations based thunking

For the complete list, click here.
Have you used the community patent process? If so, tell us about it.

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