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Robert Armitage’s clear and impassioned explanation of the America Invents Act (AIA), including excellent background information on why things had to change, is now available on the USPTO website. First published in the Winter 2012 issue (Vol. 40, No. 1) of the American Intellectual Property Law Association’s AIPLA Quarterly Journal, this article goes in the “Keepers” file.
Here is how Armitage, who is senior vice president and general counsel for Eli Lilly and Co., summarizes the profound changes brought on by AIA:
The “loss of right to patent” provisions were all repealed. The “best mode” requirement was made a functional dead letter. All references to “deceptive intention” were stripped from the patent law. A new “supplemental examination” procedure was instituted to address any error or omission in the original examination of a patent and bar the defense of patent unenforceability once the procedure has run to completion. Finally and most dramatically, it concisely limited “prior art” on which the novelty and non-obviousness of a claimed invention was to be assessed. Nothing can qualify as prior art absent representing a prior public disclosure or an earlier patent filing naming another inventor that subsequently became publicly accessible—casting aside 175 years of a more complicated, subjective, and uncertain standard for patenting.
Analysts should pay particular attention to the statutory section on supplemental examination, §257, beginning on page 109 of the PDF, which serves to lessen the risks associated with inequitable conduct defenses to infringement, thereby increasing a patent’s value. “Supplemental examination” allows a patent owner to ask the USPTO to consider, reconsider, or correct information that is or may be relevant to the patent. After (no more than) 30 days, USPTO certifies whether new questions of patentability arose as a result of the new information (and scheduling subsequent reviews); if no such concerns developed, the matter is over.
From the be-careful-what-you-wish-for department: On page 20 of the now-being-considered bill, Startup Act 2.0, is a line that seems to run against the grain of the current, 30-plus-year-old system of university technology transfer in the U.S.:
The Secretary shall award grants to support institutions of higher education pursuing initiatives that allow faculty to directly commercialize research in an effort to accelerate research breakthroughs.
Scott Shane, in Entrepreneur, calls the clause out: This so-called “free agent” provision “is a bad idea that will hinder commercialization of inventions developed at U.S. universities.”
Shane’s argument mirrors that of AUTM (Association of University Technology Managers):
The free agent provision would undermine this system because it would change the incentives for trying to commercialize academic inventions. Free agents [university inventors who by-pass the university technology transfer offices and attempt to commercialize an invention themselves or with an outside partner] would be doing it to make money, while university licensing officers primarily want to get new technology into practice and only secondarily, to bring cash into the university. This difference could result in fewer new products. Because their goal is to make money, free agents would focus on commercializing the most lucrative inventions, such as a heart drug, and skip the ones on which little money could bemade, such as a malaria vaccine, even if their commercialization would benefit society.
The Ewing Marion Kauffman Foundation has released a new study on the role of faculty and student entrepreneurship in university technology transfer, specifically as it relates to spinoffs.
In this study, the authors relate universities’ technology transfer offices and successful commercialization of innovation to university culture as a whole, specifically how an institution sponsors entrepreneurship. The research highlights four “pathways” to spinoff development, details the responsibilities and expected contributions of all of the players, and points out the strengths and weaknesses of each approach.
Businessweek recently featured a technology startup company, Tactus, and its early strategy to protect its inventions with patents, with related costs ranging from $15,000 to $40,000 per patent. Generalizing from the specific, the article implied other startups should adopt the same strategy, protecting themselves “with bulletproof intellectual property portfolios that can take years to build,” as a result of recent patent wars and nonpracticing entities (NPE) activities.
Techcrunch decided to examine the issue of whether entrepreneurs are getting caught up in the patent-filing whirlwind. The data show entrepreneurs are less likely to file for patent protection than in the past, but patent rates vary greatly by industry:
Our findings show that 33% of all funded companies (4,050 of 12,404) have at least one published patent application, but patent rates vary greatly by industry. Companies in the semiconductor and biotech industries have the highest patent application rates (65% and 62%, respectively). Companies in these ‘hard tech’ industries require significant investments at very early stages and their patents are more commonly used to defend intellectual property. Conversely, “soft tech” industries like ecommerce, web, and video games have patent rates below 20%.
Jackie Hutter, MS, JD, describes herself as a “recovering patent attorney” and now advises early-stage companies on their IP strategies. In her IP Asset Maximizer blog, she argues that most startup companies have more compelling needs for the cash than filing patent applications.
Citing Vonage as an example, Hutter argues that “no reasonable startup should base business success on the ability to prevail against a competitor after spending millions on litigation—especially when adding the opportunity costs and market uncertainty that results from such a business strategy.”
Last week’s victory by Monsanto over DuPont (Monsanto Co. v. E.I. du Pont de Nemours & Co., 09cv686, U.S. District Court, Eastern District of Missouri) for infringing on its patented genetically altered seeds rendered harmless from the effects of the Roundup herbicide is fascinating for valuation analysts because of the damages theory used.
After rejecting a request for $1.5 billion for a license, DuPont proceeded to use the accused product for research purposes only, a practice allowable in the pharmaceutical business, but not yet established in agriculture. DuPont realized no income from the seeds nor from the research; therefore, there was no request for lost profits. The jury awarded $1 billion in damages as a reflection of what would have been a reasonable royalty from the time of the first infringement to the end of the patent’s legal life in 2014.
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