Small Businesses Say Patent Reforms Benefit ‘Goliath’
September 14, 2012-
Challenging a competitor’s claim on the best, fastest or smartest invention is about to become significantly more expensive for Houston Businesses.
On Sept. 16, a second round of patent re-forms, collectively signed into law last year by President Barack Obama as the America Invents Act, will become effective. Among the changes implemented at the U.S. Patent and Trade Office will be higher fees for patent challenges, a reworking of the patent review process and a new administrative law proceeding for challenges once a patent is granted.
Currently, if someone wants to challenge a patent that has been granted, they must do so in court, a process that can take years and exceed millions of dollars in legal fees.
“The cost of challenging a patent has always been fairly high stakes,” said Damian Olthoff, general counsel and chief compliance officer at Pros Pricing Inc. (NYSE: PRO), a Houston profitability management and optimization software company. “These (increases) represent substantial dollars, but it’s nowhere near if you compare it to trying a case in federal court.”
Olthoff said Pros holds five patents with about eight pending.
Much of the funds generated by the fees will go toward paying for the new Patent Trial and Appeals Board, a body of administrative judges who will preside over patent challenges. The patent office already conducts hearings on a limited basis, but the new proceedings will likely operate more similarly to courtroom proceedings, said Vinson & Elkins LLP intellectual property lawyer Steve Borgman in Houston. That will require experienced patent lawyers and staff.
“I think the patent office expects since the (previous process) is going away, that people will file ‘inter parte reviews’ and then post-grant reviews at a fairly good clip, and that will take a lot of manpower,” he said. “They will have the high fees to cover additional cost, recoup expenses and perhaps serve a gate-keeping function.”
Larger companies that have an international scope already will have the procedures in place to manage much of the reform, Borgman said.
“Some businesses in Houston – the established oil and gas companies, the Haliburtons, the Schlumbergers, the Baker Hughes fo the world – realistically, they tend to manage their businesses carefully so they don’t get stuck with a lot of patent disputes. Most of them know what it’s like, and they don’t particularly care for it.”
However, smaller businesses that perhaps don’t participate internationally may find some of the reforms require adjustments. In fact, Borgman said, many small business trade groups have taken a position that reforms are bad for individual inventors and small businesses.
Kathleen Malaspina, chief innovation officer at Houston’s OrthoAccel Technologies Inc., said the increased fees could make challenging a patent impossible for some startups.
“While we are better off than average startups because we have a product on the market, we have limited budgets when it comes to this type of work,” Malaspina said. “Big companies will have an advantage over startups.”
She said OrthoAccel will have to build new processes to review what’s coming out of the U.S. Patent Office more regularly. The company has several patents pending, Malaspina said.
“Since our company’s founding, we have been working with the patent office on many applications. It really is part of our DNA and company culture.”