Senator Feinstein Opposes First-to-File Provisions of Patent Reform Bill (S. 23)

By Kevin Noonan --

On Wednesday afternoon, Senator Dianne Feinstein (D-CA) (at right) addressed the Senate, calling for passage of an amendment to strip the "first-inventor-to-file" provisions from the Senate patent reform bill (S. 23).  That amendment lost, 87-13 on Thursday, but her 5-minute speech raised important issues for the House of Representatives to consider when it takes up patent reform legislation (as well as issues that may be raised in any Constitutional challenge).  Senator Feinstein said the following:

I rise today to offer an amendment [SA 133] to strike the first to file provisions of this bill.  I am joined in this effort by my co-sponsors, Senator [James] Risch [R-ID], Majority Leader [Harry] Reid [D-NV], and Senators [Mike] Crapo [R-ID] and [Barbara] Boxer [D-CA].  I also ask unanimous consent that Senator [John] Ensign [R-NV] be added as a co-sponsor of the amendment.  I know that the bill has contained these provisions for some time now, and I acknowledge that I have voted for different versions of it that contained these provisions.  But I've heard more and more in the past two years from small . . . inventors, startup companies, small businesses, venture capitalists, and yes even large companies, from all around our country, but especially in my state of California, that this proposed transition, from our first to invent system to a first to file system would be severely harmful to innovation, and especially burdensome on small inventors, startups, and small businesses.  And I have become convinced that it's the wrong thing to do.

For the benefit of my colleagues, who have not been so embroiled in this rather technical issue, let me provide a little background.  For over a century, our country has awarded patents to the first inventor to come up with an idea, even if somebody else beat them to the Patent Office.  A "first to invent" system, and we have done very well under the first to invent system.  This bill would change that, so that the first person to file an application to a patent for a particular invention would be entitled to that patent, even if another person actually created the invention first.  And this is what's known as the "first to file" system.

Now the argument . . . that's made for transitioning is that the rest of the world follows first to file, and this will harmonize our system with theirs.  This is really supported by big companies, who have already made it, who have an international presence.  Therefore, I understand their support for first to file.  But under first to invent, we have been the world's leader in innovation, and the first to file countries have been playing catch-up with our technological advances.  So without all due respect, I wouldn't trade America's record of innovation for that of virtually any other country, or certainly any first to file country.  The genius of America is inventions in small garages and labs, and great ideas that come from inspiration and perspiration in such settings and then take off.  So many of America's leading companies -- Hewlett Packard, Apple, Google, even AT&T arising from Alexander Graham Bell's lab, for example -- started in such settings and grew spectacularly, creating jobs for millions of Americans and lifting up our economy and standard of living.

A coalition of affected small business groups, including the National Small Business Association and others, recently said and I quote, that "first to file disrupts the unique American startup ecosystem that has led to America's standing as the global innovation leader."  It's critical, I believe, that we continue to protect and nurture this culture of innovation.  And preserving the first to invent system that has helped foster it, is essential to do this.

Moreover, this bill would not actually harmonize our patent priority system with that of the rest of the world.  Many first to file countries allow more extensive use of prior art to defeat a patent application, and provide for greater prior user rights than this bill would provide.  And Europe does not provide even the limited one-year publication grace period that this bill does.

An important part of this debate are the changes the bill makes to the so-called "grace period" that inventors have under United States current law.  Presently, a person's right to their invention is also protected for one year from any of the following:  1) describing their invention in a printed publication; 2) making a public use of the invention; or 3) offering the invention for sale.  This is called "the grace period," and it's critical to small inventors.  108 startups and small businesses wrote last year and I quote, "U.S. patent law has long allowed inventors a one year grace period so that they can develop, vet and perfect their invention, begin commercialization, advance sales, seek investors and business partners, and obtain sufficient funds to prosecute the patent application."  During that grace period, many inventors learn about starting a technology-based business for the first time.  They must obtain investment capital.  They often have to learn from outside patent counsel (at considerable expense) about patenting and related deadlines and how to set up confidentiality agreements.  Many startups or small businesses are in a race against insolvency during this early stage.  The grace period protects them during this period, and loss of patent rights due to any activities, any information leaks or inadvertent unprotected disclosures prior to filing their patent applications.

S. 23 eliminates this grace period for offering an invention for sale or making a public use of it, leaving only a grace period from, quote, "disclosure" of the invention.  There are two problems with this.  First, disclosure is not defined in the bill.  This will generate litigation, while the courts flesh out that term's meaning.  While this plays out in the courts, there will be uncertainty about whether many inventions are patentable or not.  This uncertainty will in turn chill investment, as venture capitalists will be reluctant to invest until they are confident that the inventor will be able to patent on their own invention.  Secondly, because of this lack of definition, some patent lawyers interpret "disclosure" to mean a disclosure that is sufficiently detailed to enable a person of ordinary skill in the particular art to make the invented item.  In practical terms, this means a patent application or a printed publication.

Now this does provide some protection to universities, it's true; they often publish about their inventions.  However, it is scant protection for the small inventor.  They don't publish about their inventions, until they file a patent application.  As the 108 small businesses put it, and I quote, "no business willingly publishes complete, technical disclosures that will tip off all competitors to a company's technical direction.  Confidentiality is crucial to small companies."  The grace period from offering for sale or public use really is critical for their protection.  Eliminating it, will in the words of these small businesses, quote, "practically gut the American one-year grace period."  The National Small Business Association wrote recently, and I quote, "The American first to invent, grace period patent system has been a major mechanism for the dynamism of small business innovation.  It is clear that the weak or entirely absent grace periods used in the rest of the world's first to file patent systems, throttle small business innovation and job creation."

Our amendment would provide [sic, protect] America's world-leading system.  I'm also very concerned that first to file would proportionately disadvantage small companies and startups with limited resources.  I've become convinced that this change would impede innovation and economic growth in our country, particularly harming the small, early-stage businesses that generate job growth.  Obviously the process of innovation starts with the generation of ideas.  Small California companies and inventors have described to me, however, how most of these ideas ultimately do not pan out.  Either testing or development proves that they are not feasible technologically, or they prove not to be viable economically.  Unfortunately, first to file incentivizes inventors to race to the Patent Office, to protect as many of their ideas as soon as possible, so they're not beaten to the punch by a rival.  Thus, first to file will likely result in significant over-filing of these dead end inventions, unnecessarily burdening both the Patent and Trademark Office and inventors.

As Paul Michel, former Chief Judge of the Court of Appeals for the Federal Circuit, and Gregory Junamen, President of the International Federation of Professional and Technical Engineers put it in a recent letter to the [Judiciary] Committee, and I quote, "as Canada recently experienced, a shift to a first to file system can stimulate mass filing of premature applications as inventors rush to beat the effective day of the shift or later filings by competitors."  This presents a particular hardship for independent inventors, for startups and for small businesses, which do not have the resources, and volume, to employ in-house counsel, but must instead rely on more costly outside counsel to file their patents.  This added cost will drain resources away from the viable ideas that can build a patent portfolio, and a business.  At a time when the Patent and Trademark Office has a dramatic backlog of one million patents waiting to be examined and a pendency time of some three years, Congress should be careful to ensure that any legislative changes will not increase patent filings that are untruthful.

The counter argument is made that a small inventor could file a cheap, provisional patent application and that's sufficient protection.  However, patent lawyers who work with small clients have said that they advise their clients not to treat a provisional application any less seriously than a full patent application.  If there is part of an invention that's left out of the provisional application, that application will not be protected, and the parts that are included in the provisional application will also be vulnerable, under an attack that the inventor failed to disclose the best mode of the invention, by leaving out necessary information.

The argument is made that first to file will establish a simple, clear priority of competing patent applications.  Proponents of first to file argue that it will eliminate costly, burdensome proceedings to determine who actually was the first to invent, which are known as interference proceedings.  However, the reality is that this is not a significant problem under our current system.  There are only about 50 interference proceedings per year to resolve who made the invention first.  This is out of 480,000 patent applications that are submitted each year.  In other words, one hundredth of one percent of patent applications.

Another problem with the bill's first to file system is the difficulty of proving that someone copied your invention.  The bill's proponents assert that it protects against one person copying another person's invention by allowing the first inventor to prove that, and I quote, "such other patent was derived from the inventor of the invention."  Currently, you as a first inventor can prove that you were first by presenting evidence that's in your control:  your own records, contemporaneously documenting the development of your invention.  But to prove that somebody else's patent application came from you (under the bill, was "derived" from you), you would have to submit documents showing this copying.  Only if there was a direct relationship between the two parties will the first inventor have such documents.  If there was only an indirect relationship, or an intermediary (for example, the first inventor described his invention at an angel investor presentation or he didn't know the identities of many in attendance), the documents that show derivation (which means "copying") are not going to be in the first inventor's possession.  They would be in the second party's possession.  You would have to find out who they talked to, who they e-mailed with, to trace it back to your original disclosure.  But the bill doesn't provide for any discovery in these derivation proceedings.  So the first inventor can't prove their claim.

For these reasons, and many others, the first to invent system, which I believe has made our nation the leader in the world, which our amendment would preserve, is supported by numerous people and businesses around the country, including the National Small Business Association, the Coalition for Patent Fairness (that's a coalition of large, high-tech companies), the Institute of Electrical and Electronics Engineers, which has 395,000 members, the International Federation of Professional and Technical Engineers, AFL CIO, the University of California system, the University of Kentucky, Paul Michel, the former Chief Judge of the U.S. Court of Appeals for the Federal Circuit, which plays a critical role in hearing appeals in patent cases, and the U.S. Business and Industry Council, American Innovators for Patent Reform, the National Association of Patent Practitioners, Professional Inventors Alliance USA, Connect, a trade association for small technology and life science businesses, and many small inventors, as represented for instance by a letter signed by 108 startups and small businesses from across the country.

. . .

Mr. President, I don't often agree with the organization Gun Owners of America, an organization that believes that the National Rifle Association is too liberal.  But I do agree with them on this issue.  They are part of the coalition of 23 conservative organizations that wrote to the leaders about this, arguing and I quote, "our competitors should have to harmonize up to our superior intellectual property regime, rather than our having to weaken our patent system and harmonize down to their levels.  There are many other signatories, but I think this is really a battle between the small inventor, the beginning in the garage, the Apple computer who was nowhere, who through the first to invent system was able to create one of the greatest companies in the world.  America's great strength is the cutting edge of innovation and the first to invent system has served us well.  You know, if it isn't broke, don't change it and I don't really believe its broke.

Of course, the amendment was defeated.  But Senator Feinstein's remarks may contain a glimmer of how the first to file regime may be opposed when matters go to the House of Representatives.  Perhaps those members will be more receptive to the sentiment from the Gun Owners, that harmonization makes more sense if it improves, rather than weakens, the patent system.  Or at least there may be a sentiment to require that the other major patent offices provide a U.S. grace period before the first to file provisions comes into effect (which was a requirement in the last patent reform bill to pass the House three years ago).  Senator Feinstein's remarks can be viewed here.

Comments

[6]

Ooooooooooooo snaaaaaaaaaaaaaaaaappppppppp!!!!!!!

IMO FItF. Give em a bit more grace period on some things though. TBH though, why can't the small businesses just publish their work in some obscure journal or whatever and let it be "publicly available" in like one library in nowheresville? I don't see the problem with this.

[Lee Caffin]

It's a false hope that Europe will amend its patent laws to include a grace period as a quid for the US moving to FTF. It's been debated in Europe before over the course of 20+ years and it will never happen. FULL STOP. Let's stop deluding ourselves. If such a caveat is in any Patent Reform Law, then it's essentially the same as maintaining the status quo re. first to invent. Either US steps up and includes FTF with its own appropriate grace period or it removes it completely. There's no middle ground here relying on other countries to amend their laws before US moves to FTF. House Reps. need to be clear on this issue.

[sol aisenberg]

If the first to file passes and hurts the ability of the small independent inventor to obtain a patent on his invention, then I predict that the skilled small inventor will publicly disclose his invention so that others, including large companies, will not be able to obtain a patent on the invention. This will use the current requirement of NOVELTY in obtaining a valid patent.

When this happens frequently enough then the large companies will as for a return to first to invent.

There are many other ways to make the patent office more effective, and faster.

[David Boundy]

Feinstein's right on the money. Small companies use the grace period, it's crucial to them.

6: The reason is that (a) developing a § 112 ¶ 1-quality publication costs a lot of attorney and/or inventor time (and I understand that the Senate Report will specify that publication grace period will requre a § 112 ¶ 1 quality disclosure), and (B) no mater how obscure, you've given the other guys in the market a clue to where their competition will be. That's a huge commercial reality, no business will ever use the publication route to a grace period. It's a cynical fig leaf.

Sol: same response. Your proposal is commercial suicide.

[Stan E. Delo]

Roger that, and I would third the motion. Why work so hard and spend so much just to give it away? I would probably never do so myself, and am wondering if You would? Riddle me that if you will.

Stan~

[6]

"6: The reason is that (a) developing a § 112 ¶ 1-quality publication costs a lot of attorney and/or inventor time (and I understand that the Senate Report will specify that publication grace period will requre a § 112 ¶ 1 quality disclosure), "

I agree, but you can already lose to a 102(e) ref (unless you want to go down the interference hell path, which we'll assume you do not). So what's the point? Even Eugene the eskimo can see through the present so called "grace period". You're already racing to the patent office, may as well make it official and save us the time and trouble of having a, b and e to apply differently.

Look I know you're paranoid that this will hurt small companies but I just don't see it man. If anything, it'll just spur people to keep a part time in-house patent agent around. They're fairly affordable.

Plus, if making a 112 1st quality disclosure is all that difficult for you then you're probably doing it wrong anyway. Which I have little doubt that you personally are anyway, but lets not go down that road.

I note that I can sum up like 90% of the inventions before me in like, meh, a paragraph? And the other 10% in like, a page? And I'm talking about disclosures that people send in that are 50 pages long. Of course you can sit and expound on this and that forever as some [redacted] are want to do all the time, but there is no requirement for that to happen. Just cut that part out.

Funny enough, I say the above because of how it so often happens where I can cite one paragraph or a couple of sentences to literally 102b 30 claims. Somebody sat down and painstakingly spread the subject matter of those two sentences out into 6 pages of claims. Stop that [redacted] and maybe it wouldn't take you so long to draft an app.

Bottom line, you're already racing to the office, and I see no reason to lean on the "hardships" of filing for a patent. Put as much effort as it is worth to you into the filing and call it a day. This isn't rocket science or patent lawl... oh wait, yes, actually it is patent lawl. Still.

"B) no mater how obscure, you've given the other guys in the market a clue to where their competition will be. That's a huge commercial reality, no business will ever use the publication route to a grace period. It's a cynical fig leaf."

Wut? If nobody reads it then you didn't give anyone any clue to where their competition will be. The trick is to make it so obscure that nobody finds it, though it is available to them. That isn't hard. At all.

[s]

Under the current practice, if an invention is described in any language or in any country before a patent application, the application claims will not be granted. Even if the item is offered for sale before the application, and after the patent is granted, disclosure of the prior publication or offer can invalidate the granted patent. Posting information on the internet can make it easy to find invalidating prior publication. Good individual inventors who find their ability blocked by a harmful change in the patent law designed to give larger organizations an advantage will find it better to make the patent law fair for individual inventors by just disclosing their invention and going on to their other inventions. This also applies to disabling foreign patents.

Remember, major progress was due to individual inventors.