Small Inventors Wary of House-Passed Patent Bill

The House of Representatives on Friday passed a bill to update the nation's patent system, legislation that has many small inventors worried that it will harm their ability to innovate.

About 40 percent of the nation's patents are held by small businesses, according to the Innovation Alliance, a group made up of small technology and patent-licensing firms. It opposes the bill overall, but said on Friday that it expects its major area of concern over monetary damages will be resolved when Senate and House lawmakers meet to hash out the differences between their respective bills.

"We hope to play a more active, deliberate role when the bill goes to conference," said Susan Mora, spokeswoman for the group.

The Congressional Budget Office released an analysis on Tuesday estimating that over the course of five years the bill's implementation would generate about a billion dollars in unfunded mandates, noted Mora. The private sector, especially small businesses, is going to get hurt paying for that, she said.

Meanwhile, the White House on Thursday said it opposes the bill's efforts to redesign the way awards are made in patent infringement cases. The measure would set a new standard for infringement cases, allowing royalties from a product to be apportioned by percentages attributed to the patented use of the invention. Courts currently consider the value of an entire product when a component part of the product is infringed.

Harry Shubin, who teaches chemical patent law at George Mason University and is a former Patent and Trademark Office examiner, says small inventors are right to worry about portions of the bill.

"It could raise the cost of getting a patent application to $30,000 to $40,000, and if giant pharmaceutical companies are balking at spending that, how is Mr. Smith in Hoboken ever going to afford to get a patent?" said Shubin, who added that some of the legislation's intentions are "good and right."

The measure would limit damages for patent infringement to the "patent's specific contribution over the prior art, which may include the value of additional function of the combination with the art." Shubin, a partner with Millen, White, Zelano and Branigan in Arlington, Va., is concerned that litigation costs would skyrocket because of haggling over determining that "value."

"Anytime you put in a test that has undefined relative terms like that, litigators lick their lips and smile," Shubin said.

H.R. 1908 would require all applicants other than micro-entities to provide to the PTO the results of a prior art search and details why the invention is patentable over the prior art uncovered. The PTO has posted search templates on its Web site advising applicants of necessary search areas and sources in the situations where a search is required.

The templates are so extensive, said Shubin, that he estimates the actual cost to complete them will be in the tens of thousands of dollars. Because only micro-entities such as a sole proprietor of a business are exempted from this requirement, even small firms are going to be adversely impacted, he said.

"While the PTO was presumably trying to be helpful by providing the templates, they are so broad and inclusive that the fear of skipping any part of them will add an enormous amount of expense," he said.

The templates require searching a lot of special databases and "some people's entire careers are built on their ability to write a search query for these databases," Shubin noted.

"If I'm an inventor and I have to send someone out to conduct a search to hit all areas of the template, I'm going to get a carton or two of raw material to go through, which is going to add thousands in dollars in research and analysis costs."

If the PTO asks a researcher or lawyer, "Why did you truncate your search after 50,000 results? 'It was overwhelming' isn't an acceptable answer," said Shubin.

Shubin also said the bill's language on "inequitable conduct" would raise patent research fees astronomically. Inequitable conduct is when an attorney or applicant intentionally withholds information from consideration by the patent office, which could render a patent unenforceable and result in the lawyer's disbarment.

"The current bill returns the standard of what constitutes inequitable conduct to a standard that the Patent Office itself rejected as unworkable over 15 years ago -- whether a 'reasonable examiner' finds the information to be 'important'," said Shubin.

Shubin, who represents individual inventors as well as large corporations, acknowledged that he could rake in fees by helping others navigate these murky waters. But he's not running out to the Ferrari dealer yet. "This bill has too many problems."

H.R. 1908 is backed by Rep. Howard Berman (D-Calif.), chairman of the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property, and Lamar Smith of Texas, the ranking Republican on the full committee. A companion measure in the Senate is backed by Sens. Patrick Leahy (D-Vt.), chairman of the Judiciary Committee, and Orrin Hatch (R-Utah), a senior member of that panel.

By Sharon McLoone |  September 7, 2007; 5:00 PM ET Intellectual Property , Regulation Legislation
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An overhaul of the patent system is long overdue. The present system is rediculous. Business plans can be patented, animals can be patented, human genes can be patented. If you are cured of disease by genetic engineering will you have to pay a royalty whenever you have kids? Will somebody patent the air and charge you a royalty every time you breathe?

Posted by: Bob Yaes | September 12, 2007 1:11 PM

This legislation will change none of the issues you describe. It will only price the small inventor out of the patent game - delivering yet another blow to the near-dead spirit of American entrepreneurship.

Posted by: Pen Collector | September 12, 2007 8:21 PM

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