Patent Reform Coming in 2011

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If your small business is built around an invention or new product, you are likely familiar with the United States patent system and its inefficiency when processing new requests. David Kappos, the patent agency’s director says this:

“We are currently operating the most senseless system of delayed and delinquent examination imaginable.”

If your business is nearing the stage of patenting an idea, here is what you need to know: If you send your application in today, it will land at the bottom of a stack of 700,000 other applications. The patent and trademarks office will take up to three years to process your request and if the application is completed incorrectly, the application is delayed considerably longer.

For a business relying on venture capital or angel investors to fund their startup costs, this three year process can be a major problem because investors who perform their due diligence don’t want to commit large amounts of funds to a company who does not exhibit clear ownership of their intellectual property.

Patent applications also come at a high financial cost. While the actual application is about $1,000, the attorney fees to complete the process can be more than $10,000. Even if only part of the cost is paid initially, this is a considerable amount of money to have tied up in something that may not provide a return on the investment for three years or more.

Patent laws and procedures haven’t been updated since 1952 and as a result, congress has introduced bills for reform in 2005, 2007, and 2009 but most have stalled because of controversial guidelines. In the bill proposed in 2007, there was a provision where patent applicants must find out for themselves if a patent already exists prior to filing.

This provision was met with controversy. Among the arguments, patent applicants don’t have the expertise to perform the proper research to accurately find other potential products and if they did, they would still have to receive a ruling from the patent and trademarks office regarding the degree of similarity to their own product.

David Kappos, believes that two key changes will be in place by next year.

Fast Track

The fast track provision would allow the applicant to pay an extra fee to “jump to the front of the line”. Kappos believes that this would speed up the process to no more than one year from the date of application. The fast track fee has not been publically announced but Kappos would only say that the fee would be “considerable”.

Even if the fast track fee were twice that of the current fee, for a small business who could gain the patent up to two years earlier, the extra fee would be much less than the amount of money that could be earned if the product went to market two years earlier.

Delayed Processing

Other applicants are not only happy with the current pace of processing but they would like it to run even more slowly. For those who have filed early stage patents, this would allow businesses to not pay the full fee until the later stages of development. This is particularly helpful for those businesses who file for patents on products that may never reach the market.