U.S. Patent Reform Act

The « patent reform act 2009 » is considered as one of the most important reform since the creation of the U.S. patent and trademark office. This project aims to bring closer the U.S.  patent system to those of other countries especially the European ones. But, as it will be discussed in this post, this project does not only target the procedures of the American patent and trademark office but also proposes to change the balance between big and small, especially non-practising, firms in patent disputes. Of course, this major change is subject to many objections, especially as we will explain by small firms.

The patent reform act 2009 proposes many changes articulated around two main points: the review and grant procedure of the USPTO, the balance plaintiff/defendant in patent disputes. The second main point is much more subject to controversy.

The review and grant procedure of the USPTO

On the review and grant procedure of the USPTO, the patent reform act proposes to introduce an opposition procedure. This opposition procedure would last 12 months (started at the date of patent grant) and be open to any third party. This reform act also proposes to promote the “first to file” principle used in many countries around the world and not the “first to invent” principle anymore. Finally, the third main point on the review procedure would be to authorize a third party to present the “state of the art” during the review of the patent. These three propositions are already used by many patent offices around the world and not subject to many comments. They are in line with the wish to bring closer the American and the European procedure of patent grant. Contrariwise, the points presented hereafter are more controversial.

The balance plaintiff/defendant in patent disputes

The main controversial points are related to the relations between patent holders and possible infringers. Indeed, besides the reforms presented above on the examination procedure of the U.S.P.T.O., the patent reform act 2009 proposes some major changes in the field of patent disputes. First of all, this project suggests that the court will not anymore be chosen by the plaintiff. The court would be the one where the defendant has its headquarter (or the court where the patent was infringed if it is possible to identify an area of infringement). This proposition aims to reduce the forum shopping (choice of the court by the plaintiff in order to maximise its likelihood to win) strategies especially by non practising entities. The patent reform act envisages simplifying the possibility of filing an appeal. This proposition would reduce the impact of first instance decisions. This project also provides the possibility for a possible (accused) infringer to plead good faith and explain he was unaware infringing a patent. Of course, this proposition will probably reduce the litigation risk for possible infringers especially in I.C.T. sectors where it is extremely difficult (for instance for a manufacturer) to know exactly which patents are infringed. Moreover, if this project is adopted, the patent holder wishing to file an infringement case will have to prove that he warned the infringer of a possible litigation. Finally, probably one of the most controversial propositions is to limit the possible damages to a “reasonable” level especially by calculating the damages not by using the overall market size but using the market size for the part of the product infringing the patent.

As we already said, this project is very ambitious and contains many propositions. The propositions concerning the reform of the examination and grant procedure of the USPTO are not very controversial.  On the other side, the project is much more discussed on the relations between patent holders and possible infringers. The main parts of these propositions were proposed and are supported by big ICT firms especially manufacturing firms. On the other side, small firms (in particular in the ICT sector) are mainly opposed to these propositions. For instance, the “American innovators for patent reform”, a lobby of inventors, engineers and entrepreneurs, is opposed to this project because it could harm small firms and protect disproportionately big ICT firms.

And it is true that we could be skeptical on the effect of these propositions on the equilibrium patent holder / infringer and especially on the possibility for a small firm to enforce its IP rights. Indeed, by reducing considerably the likelihood (possibility for an infringer to plead good faith…) and the intensity (new rule for calculating damages) of patent litigations for the infringers, this project does not help small innovative firms to enforce their rights. It is easy to imagine that, if this reform is adopted, the incentives for a small innovative firm to file a case after a possible infringer will be reduced. In fact, the patent holder will have a smaller likelihood of winning the case but also a smaller amount of damages if he wins. Furthermore, this difference will increase if the infringer is a big firm and the patent holder a small firm (because these propositions could accentuate the disproportion of capability). Whereas the objective of these propositions is clear and not very controversial (avoid or reduce the system abuses by a minority i.e. patent trolls), the consequences could be important and reduce the possibility for a small innovative firms to enforce its rights.

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About henryd

Ph.D. student in economics Research topics: economics of innovation, economics of standardization, industrial organization
This entry was posted in Agora - Discussion. Bookmark the permalink.

2 Responses to U.S. Patent Reform Act

  1. timpohlmann says:

    Thx Henry for your comments on the patent reform act. I do agree with you that some points are controversial. I especially want to catch up with your last point of reducing system abuses e.g. Patent Trolls. My opinion is a little different as I thought of Patent Troll to be a mechanism to cure the patent system and give small innovative firms a voice. Realistically all small inventors who propose their innovations to big players will find themselves before locked doors. Big players innovate in-house and rarely adopt external innovation. I actually doubt that especially big players are unaware of their infringement. They screen constantly the market to see what competitors file and are in my opinion well informed. Still, forum shopping and excessive royalties should be prevented!
    Please see also my article about Patent Trolls

  2. Pingback: The EU patent…improvement or confusion? | Innovation Tomorrow

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