With the debacle that’s being touted by its proponents as “patent reform” being set for a vote this week in the House, I thought I’d share with readers a letter that I sent today to various parties in the USA, urging them to contact their congressional representatives to vote no on this monstrosity. The version shown below was sent to people in Michigan, my last port of call before moving to Israel. The 19-word statement at the end is courtesy David Boundy from his post this morning on PatentDocs. I will be calling the office of my U.S. representative (Congressman Dingell) later today to tell him to vote against the bill; if you can vote in the U.S.A., you should do likewise with your representative.
On Wednesday of this week (June 22), the House is set to vote on HR 1249, the deceptively titled “America Invents Act”. If enacted, the bill will effect numerous amendments in the patent statute; at this stage, none of them are good, and most are bad. I write now to briefly share two reasons why it is imperative that people who care about the economies of Michigan and Israel call, fax or email their representatives and urge them to vote against the bill, should it reach floor. The bill is bad for inventors and start-ups, which is bad news for the economies of both Michigan and Israel. (For readers who want to know more about specifics of the bill, I strongly recommend the posts on this topic at www.patentdocs.org, a blog that has been tracking this legislation.)
Chief among the reasons to vote against HR 1249 is that it will destroy what patentees refer to as “the grace period”. Outside the USA, if an inventor publishes a description of his invention before filing a patent application, he can no longer get a patent on the invention. If you’re a start-up company, that’s bad news: without publicizing the invention and disclosing it to others, it’s difficult to get funding; but without that funding, it’s impossible to further develop the invention. Catch-22. In contrast, under current U.S. law, an inventor can publish his idea, and still have a year to file a patent application without his own disclosure counting against him. The one-year grace period is unique to U.S. law, but it’s not merely reflective of the traditional American emphasis on entrepreneurship. It’s an approach to the patent process that closely aligns with the realities of the development process, unlike the “you disclosed, you lose” approach taken in other countries, which favors established interests over start-ups.
But it’s not just U.S. companies that take advantage of the inventor-friendly grace period. Israeli companies routinely take advantage of it too. That’s because, unsurprisingly, Israeli companies tend to be more focused on the U.S. market than the Israeli market, and if they can’t get a foothold in the USA, they’re not going anywhere.
HR 1249 will do away with the grace period, which is reason enough to vote against the bill.
Another main reason to vote against HR 1249 is that it no longer contains what was its best part, namely that it would have ended a practice known as “fee diversion”. Instead, HR 1249 will allow fee diversion to continue apace. Fee diversion is the practice of Congress taking monies collected by the U.S. Patent & Trademark Office (USPTO) from the parties that use its services – the applicants for and owners of patents and trademarks – and diverting those funds to other government projects. With the exception of a few years under the second President Bush, during which the USPTO was allowed to keep all its fees, this practice has persisted for many years. The problem is that the USPTO’s operating budget is funded entirely by those users fees. By taking funds from the USPTO, fee diversion effectively acts as both a direct tax on innovation (by charging patent applicants to fund non-patent related government activities) as well as an indirect tax, since it means the USPTO cannot work as efficiently as possible, as it doesn’t get to keep all the funds it should.
Chronic fee diversion has had deleterious results for the USPTO’s operations. Among other things, fee diversion resulted in the USPTO’s computer infrastructure becoming antiquated, making it difficult for the USPTO to efficiently examine patent applications. Moreover, this has occurred as the overall number of patent applications filed at the USPTO has risen dramatically; the USPTO is still hopelessly backlogged in its examination of patent applications. One consequence of what was effectively fee diversion this year alone (due to the budgetary stalemate in Congress) was that the USPTO will face a $100 million shortfall in its budget; on April 22 USPTO Director David Kappos announced ways in which it would respond to the shortfall, including a hiring freeze, a freeze on the plans to open a satellite patent office in Michigan, and a slowdown in the provision of certain other services.
Until last week, HR 1249 included provisions to allow the USPTO to not only keep all of its fees, but to set them too, a set of conditions that presumably would have enabled the USPTO to optimize its fees so as to optimize the services it provides. Unfortunately, some members of the House Appropriations Committee felt that they should continue to have the prerogative to raid the USPTO for their own pet projects. As a result, HR 1249 contains language that will only allow the USPTO to use up to a certain portion of the monies it collects every year; the rest will be set aside in a fund that will be controlled by the House. That’s fee diversion, just dressed differently.
The continuation of fee diversion means that the USPTO will continue to be backlogged, and take longer than it should to issue patents. That’s bad news for everyone, but especially for small companies looking for funding, since in many cases later-stage investment won’t be forthcoming until after a patent has been granted. Lengthy delays in patent examination at the USPTO thus means that many young companies won’t be able to survive long enough to develop a commercial product; that translates into loss of potential jobs and tax revenue.
If you care about your local economy and about Israel’s, please contact your representative today or tomorrow and urge him or her to vote no on HR 1249. You can find your representative’s phone number at http://www.house.gov/representatives/; please call today or tomorrow and say, “Please vote no on the rule for the patent bill, H.R. 1249, and vote no on final passage.” (Voting “no on the rule” means not allowing the bill to come to the floor for a vote.)
Daniel Feigelson
Daniel Feigelson is a U.S. and Israel patent attorney who grew up in Ann Arbor and has lived for nearly 20 years in Rehovot, Israel.
[NOTE: after posting, Canadian patent practitioner Ian Goodman reminded me that the USA is not unique in having a grace period: Canada is one of a handful of other countries that also have some form of a grace period. Nevertheless, it is a rarity, and it one of the great strengths of the US patent system.]
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