Effect of new patent law pending

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A shift in U.S. patent law, signed by President Barack Obama on Sept. 16, may change this country's small-inventor landscape forever—though it’s not yet clear exactly how.

The history of the United States is littered with stories about small inventors creating some of society’s most notable and innovative products. From the creative duo who invented Google and the team that created the first Apple computer, to the Los Angeles building inspector who created a plastic version of a tin pie plate that would later come to be known as the Frisbee—all were invented by people not affiliated with a company.

Now, a shift in U.S. patent law, signed by President Barack Obama on Sept. 16, may change this small-inventor landscape forever—though it’s not yet clear exactly how.

The America Invents Act marks a significant shift in how patents are filed in the United States. For generations, this country has had a “first-to-invent” system, where the person who invents first gets the patent. Under the new law, America will move to a “first-to-file” system, in which the first person to file a patent application, regardless of the date of invention, gets the patent.

“In general, the U.S. system was very focused on the date of invention as a critical date in evaluating patents,” says R. Polk Wagner, a professor at Penn Law School and co-author of a new paper about the change in the system. “The new act changes that critical act, basically, from the invention date to the filing date. That has a number of important effects, one of them being if you’re racing with somebody else and you’re both inventing in the same area, whoever gets to the patent office first gets the patent.”

Wagner and his co-author, David Abrams, assistant professor of law, business and public policy at Penn Law, say it’s clear that the rules will have some effect, but it’s not apparent how things will change.

“We do know that [there] has to be some sort of change because the mix between large and small inventors is likely to change and change fairly significantly,” says Wagner. “It’s going to be a pretty significant change for how patent law is done. How much of a real effect it has, I think we just don’t know yet. It’s definitely going to change the way people do patent law in the U.S.”

For their paper, Abrams and Wagner looked to Canada, which made the shift from “first-to-invent” to “first-to-file” on Oct. 1, 1989. Using the United States as their control group, the researchers examined data from the Canadian Intellectual Property Office and the U.S. Patent and Trademark Office to see whether the share of patents granted to individuals dropped in Canada after the law change, compared to what was happening in America at the same time.

“The first thing you might do is say, ‘Let’s look at the fraction of patents that get granted to small inventors; let’s see if there’s a change in that right around the time the law changes in Canada,’” says Abrams. “We found a big decline in the share granted to individuals because of this law change in Canada.”

It’s going to be a pretty significant change for how patent law is done. How much of a real effect it has, I think we just don’t know yet."

Abrams also notes that “anytime you see a major law change, some people expect it’s going to be bad for them so they’re going to try and rush to patent rights before the law changes so they can get in under the old law.”

In Canada, in the week leading up to the 1989 rule change—as well as in 1995, when the United States made its last significant patent rule change—Abrams and Wagner saw a spike in patent filings.
The researchers say chances are, this country can expect to see a spike in patent filings under the old “first-to-invent” rule before the new law takes effect in March of 2013.

Advocates of the “first-to-file” system, including the Obama administration, say it will be cheaper and simpler. The “first-to-file” system will also bring the United States in line with the International Treaty on Intellectual Property Protection; this country has been in violation since 1995.

As for the timing of this rule change, Wagner notes this has been on the Congressional agenda for as long as a decade. After this summer’s particularly contentious debt ceiling debate, this legislation was one of the only ones able to garner enough bipartisan votes for passage.

Abrams and Wagner plan to edit their working paper and assess whether Canada’s “first-to-file” system has resulted in more lower-quality and poorly written patent applications. They’ll also try to glean some insights from the Canadian patent data, including why the law changed the patent landscape as it did.

“As our economy has shifted [and] continues to shift to more of an intellectual property one from a real property one, this stuff just becomes more and more important,” says Abrams. “This is the way the world is going. This is where our economy is. This is going to be a bigger and bigger fraction of our economy.”

Originally published on October 13, 2011