A Bill Inventors Cannot Afford

Rachael Doukas

A bill before Congress threatens to stifle technical innovation coming from small business.  Under current American patent law a crucial grace period exists providing intellectual property protection between the time an invention occurs and the time a patent is filed.  It provides inventors and startups the time to meet with investors and test their inventions.  It allows for inventors to properly evaluate their discoveries and not waste capital on an unworkable process or product. For small firms competing against capital-rich large, established firms, this process is invaluable, and is designed to protect these individuals from being at a severe disadvantage.

HR 1249, the America Invents Act, abolishes this grace period, replacing it with one that creates unacceptable risk of loss of patent rights that no small business can afford.  "Inventors won't be able to talk to investors without a patent, and won't be able to file an application without an investor,"  David Boundy, Vice President and Assistant General Counsel for intellectual property at Cantor Fitzgerald, told us in an interview.  This is unrealistic and will stagnate the spirit of American inventors.  "Today's law is structured around business.  It lets the law move at the speed of business. Legal deadlines track business activities.  Inventors wait to file quality patent applications until they have quality inventions.  HR 1249 is structured for the convenience of bureaucrats and patent lawyers, not businesses." Boundy adds.

Organizations opposing HR 1249 include: the National Small Business Association, the U.S. Business and Industry Council, the National Venture Capital Association, the Institute of Electrical and Electronics Engineers, and the Professional Inventors Alliance.

Canada's experience has already demonstrated the dangers inherent in the new approach, having revised their own patent law from one very similar to America's current law, to one quite similar to HR 1249.   Examining twenty years of data, two economists at Canada's prestigious McGill University concluded that changing from the first-to-invent to first-to-file benefited large corporations, while hurting small businesses and independent inventors.   First-to-file favors the first-to-file, whether or not they have a viable invention. Thus, they can deprive other individuals or businesses from obtaining valid patents. Innovation, the mainstream of American economic progress for two centuries, will be stifled.

Currently, small businesses often attend inventors forums where inventors meet investors and, hope to secure venture capital.  This would end under HR 1249.   Boundy explains, "The reason there are no startups and no venture capital elsewhere is because everybody thinks you have to file a patent application (which can cost up to $10,000) before you can have that first conversation.  So there's a $10,000 entry fee at the door of these conversations.  And the reason is that there's no meaningful grace period."  As the U.S. economy has a higher dependence than the Canadian economy on small businesses and on businesses that focus on their domestic markets, a change from first-to-invent to first-to-file will weaken the already fragile U.S. economy.   

But wait, there's more. The bill also forces inventors to file a number of patent applications for every alteration that occurs with their invention; making inventing a very costly process.  Imagine if Thomas Edison had to re-file ten thousand times for the invention of the light bulb.  Perhaps, we might still be in the dark.  

A bill before Congress threatens to stifle technical innovation coming from small business.  Under current American patent law a crucial grace period exists providing intellectual property protection between the time an invention occurs and the time a patent is filed.  It provides inventors and startups the time to meet with investors and test their inventions.  It allows for inventors to properly evaluate their discoveries and not waste capital on an unworkable process or product. For small firms competing against capital-rich large, established firms, this process is invaluable, and is designed to protect these individuals from being at a severe disadvantage.

HR 1249, the America Invents Act, abolishes this grace period, replacing it with one that creates unacceptable risk of loss of patent rights that no small business can afford.  "Inventors won't be able to talk to investors without a patent, and won't be able to file an application without an investor,"  David Boundy, Vice President and Assistant General Counsel for intellectual property at Cantor Fitzgerald, told us in an interview.  This is unrealistic and will stagnate the spirit of American inventors.  "Today's law is structured around business.  It lets the law move at the speed of business. Legal deadlines track business activities.  Inventors wait to file quality patent applications until they have quality inventions.  HR 1249 is structured for the convenience of bureaucrats and patent lawyers, not businesses." Boundy adds.

Organizations opposing HR 1249 include: the National Small Business Association, the U.S. Business and Industry Council, the National Venture Capital Association, the Institute of Electrical and Electronics Engineers, and the Professional Inventors Alliance.

Canada's experience has already demonstrated the dangers inherent in the new approach, having revised their own patent law from one very similar to America's current law, to one quite similar to HR 1249.   Examining twenty years of data, two economists at Canada's prestigious McGill University concluded that changing from the first-to-invent to first-to-file benefited large corporations, while hurting small businesses and independent inventors.   First-to-file favors the first-to-file, whether or not they have a viable invention. Thus, they can deprive other individuals or businesses from obtaining valid patents. Innovation, the mainstream of American economic progress for two centuries, will be stifled.

Currently, small businesses often attend inventors forums where inventors meet investors and, hope to secure venture capital.  This would end under HR 1249.   Boundy explains, "The reason there are no startups and no venture capital elsewhere is because everybody thinks you have to file a patent application (which can cost up to $10,000) before you can have that first conversation.  So there's a $10,000 entry fee at the door of these conversations.  And the reason is that there's no meaningful grace period."  As the U.S. economy has a higher dependence than the Canadian economy on small businesses and on businesses that focus on their domestic markets, a change from first-to-invent to first-to-file will weaken the already fragile U.S. economy.   

But wait, there's more. The bill also forces inventors to file a number of patent applications for every alteration that occurs with their invention; making inventing a very costly process.  Imagine if Thomas Edison had to re-file ten thousand times for the invention of the light bulb.  Perhaps, we might still be in the dark.