New patent-law reforms mean more than getting Denver office

Jan 11, 2013

New patent-law reforms mean more than getting Denver office

Heather Draper – Reporter – Denver Business Journal

One of the highest-profile aspects locally of federal legislation reforming the U.S. patent system was Denver’s selection in July 2012 as a location for a new satellite branch of the U.S. Patent and Trademark Office.

The new satellite offices in Denver, Detroit, Dallas and San Jose, Calif., are being created under an amendment to the America Invents Act — signed into law in 2011 — as a way to speed up and streamline the overburdened U.S. patent system.

But other changes in patent regulation under that act also should help expedite the patent process for entrepreneurs and discourage so-called “patent trolls” from filing as many patent-infringement lawsuits, Denver patent attorneys say.

One of the biggest changes: The United States on March 16 of this year will switch from a “first-to-invent” to a “first-to-file” patent system. To understand the significance of that, consider Alexander Graham Bell, who was the second person to file a patent for the telephone behind Elisha Gray.

“That famous story illustrates the benefit of having a first-to-invent system,” said Thomas Franklin, partner at the Denver office of Kilpatrick Townsend. “But it also illustrates the downside, because they had to have a six-week trial to determine [that Bell] got the patent. It’s been a huge issue under our current system, battling over who is actually the inventor.”

The rest of the world uses a “first to file” patent system, he said, but Americans “had this romantic notion that you could be the second to file and end up being a captain of industry with your great idea. But statistically it was very improbable.”

Franklin has been advising his clients for years to get to the patent office as soon as possible, and now that advice is more relevant than ever, he said.

“Let there be no confusion — now it’s a race to the patent office,” Franklin said.

Bruce Kugler, partner at Denver-based Sheridan Ross PC, also described the new system as a “race.”

“File early and file often. It’s a race to the patent office,” Kugler said.

A ‘napkin disclosure’

The first-to-file system will mean that Kugler may forgo doing a comprehensive search for similar patents before filing a provisional patent application for his client, he said.

“We’ll immediately file; we’ll put together a napkin disclosure,” he said. “We’ll file it and then do the search and supplement [the application] later.”

Before, his clients could have relied on the date of conception and “swear behind that,” Kugler said. Now, it’s best for entrepreneurs to get to the patent office and file — after meeting with a patent attorney to ensure their provisional patent application provides sufficient disclosure about the invention.

Under the U.S. patent system, inventors are able to file a provisional patent application that serves as a rudimentary description of the invention. They can file several provisional applications for their invention, and they have a year from the first provisional filing to file a formal patent application that patent examiners will review.

“The provisional patent application has one purpose in life: You file it to mark your date and then it lives for one year and expires,” said Shane Niebergall, of counsel at Denver-based Holland & Hart LLP. “It’s less robust, and less time will typically be put into it. It doesn’t have a patent claim, but instead a basic description that will support future claims.”

Niebergall warned that inventors can’t just file provisional applications “willy-nilly” — there has to be enough information that someone with basic skills in the area of the invention could make it and use it. But filing provisionally is key under the new system, he said.

“You can not only preserve the filing date, but it also enables the inventor to say ‘patent pending’ on their product,” he said. “It creates more of an ‘uh-oh’ moment for competitors.”

In reality, Niebergall said he isn’t going to practice patent law “much differently than I have for the first 15 years of my career. I mean, why would you ever sit on an idea? Come talk to me. Show me what you have. Let’s get it on file.”

Looming litigation

Unlike the lawyers who help inventors file or “prosecute” patents, Chad Nitta, a partner in the Denver office of Kutak Rock LLP, views the changes from a litigation perspective, which relates to legal action over patent infringements.

He worries the pressure to file patents quickly under the new system will put his small- to medium-sized business clients at a disadvantage.

“Small companies being ‘nimble’ is relative,” Nitta said. “Yes, you have fewer people that need to sign off on things, but big corporations have the resources and experience to file quickly.

“Entrepreneurs will have pressure to quickly establish the curbs and gutters of their own inventions,” he said. “If you inelegantly describe your patent, that’s a problem. It could be a significant hurdle for Joe in his garage.”

But, Nitta said, it’s really too soon to know what the new rules might mean for patent litigation attorneys.

“Over the next five years with applications filed under new rules, we’ll see what it really means to litigation and licensing,” he said. “To me, with my litigation bias, we have to wait and see what the changes mean and ultimately, the value of patents and the ability to sue on them.”

The American Invents Act also has reforms meant to curb nonpracticing entities — or so-called patent trolls — from “extracting a toll” from alleged patent infringers, without having any plans to market or manufacture the patented product themselves, Kilpatrick Townsend’s Franklin said.

“It’s naked litigation without any commerce concerns,” he said. “People see that as not nurturing the goals of the patent system to foster innovation.”

Another change Franklin likes is fast-track patenting, which he urges more patent attorneys to embrace.

“I’m now getting patents for clients in about six months, from filing to issuance,” he said. “Before, the average was three years, sometimes closer to five years. So the big complaint was that, by the time the patent was issued, the technology was obsolete.”

All the recent patent reform should help U.S. companies get a jump on the competition, he said.

“The U.S. patent system has gone through more changes in the last few years than it has in decades, maybe even a century,” Franklin said. “We’re starting to see how it follows through, so now entrepreneurial companies can get to the patent office first and get patents issued on a fast track. It changes the dynamics of things.”

Heather Draper covers banking, finance, law and the economy for the Denver Business Journal and writes for the “Finance Etc.” blog. Phone: 303-803-9230.