New Patent Law Cheered by Large Corporations May Prove Beneficial to Small Entities As Well

On December 5, 2013, the House of Representatives passed H.R. 3309, the “Innovation Act” sponsored by Representative Bob Goodlatte of Virginia. The law has moved quickly through committee and made it to the floor of the house in just over a month. The bill has been interpreted as an attack on Non-Practicing Entities (NPEs), more commonly known as patent trolls, and numerous commentators have addressed the potential implications of the bill’s modification of infringement suits and the potential implications of requiring transparency by entities attempting to assert their patent rights. These issues are of dramatic importance, but many of the critiques have failed to address the potential significant changes to small business education efforts and the benefit of the studies commissioned on patent transactions, quality, and examination.

Section 7 of the Bill, entitled “Small Business Education, Outreach, and Information Access,” includes several actions directed toward small businesses. Among them is a directive for the Director of the United States Patent and Trademark Office (USPTO) to “develop educational resources for small businesses to address concerns arising from patent infringement” and a requirement that the newly established Patent Ombudsman Program “coordinate with the existing small business outreach programs of the Office to provide education and awareness on abusive patent litigation practices.”

These aspects of the bill seem directed at addressing the concerns that are quite prevalent in comments thus far. Notably, one news report was careful to note that the bill is supported by several tech giants including Microsoft, Google, and Oracle. Opposition to NPEs by major corporations, particularly in the electronics and computer industries, has been broadly acknowledged for years, and this legislation has the potential to assist those large companies by reducing legal costs associated with bringing new products to market. Unfortunately, the barriers directed toward limiting the damage that NPEs are perceived to cause may also inhibit access to the courts for small to midsized businesses that seek legitimate adjudication of their grievances.

The protection of individual inventors like Wilson Greatbatch, who developed the first implantable pacemaker in a barn behind his home, remains an important goal of the American patent system. Notably, however, the percentage of patents issued to independent inventors has decreased over the last decade. From a policy perspective, the interests of both the small inventors and the large entities that generate significant numbers of patents should be carefully balanced. To deny the Wilson Greatbatchs of the world the opportunity to effectively assert their patents could prevent the formation of the next giant in a crucial field. As Medtronic, the noted medical device manufacturer, grew around one of Greatbatch’s patents, many other small entities should be encouraged to innovate and develop novel, perhaps even earthshattering, products.

The recommendations in Section 7 appear to contain an express effort to assist these small innovators such that the light of their brilliance will not be snuffed out by the legislative blowback directed at NPEs. The USPTO currently provides information for inventors. Notably, the resources and guidance portion of the USPTO website includes instructional videos, explanations of different types of patents, training materials for dealing with the written description requirement and many other sections. It does not provide, at least not in a readily accessible form, information about filing patent infringement actions in the district courts. The inclusion of this material could be helpful to small entities, particularly if they are considering whether or not to hire legal counsel to further explore the potential for litigation.

The proposed “Ombudsman” position is also a potentially useful innovation. Litigation of almost any kind is already quite complicated, and patent litigation, even without the new rules proposed in the bill, is daunting. Creating a position to help small businesses and other entities that lack the resources to retain specialized counsel for each potential infringement issue could be a cost-saving approach that would allow small businesses to balance their interests in advancing their patent rights when they have legitimate claims to defend themselves against frivolous and/or inappropriate suits. Just as the America Invents Act’s establishment of a lower filing fee for micro-entities provides greater flexibility for innovators to allocate resources where they are most needed, the creation of the new position could help small businesses maximize the utility of their often limited budgets by entering the expensive legal system when necessary and avoiding such pitfalls when appropriate.

This section, whether attached to the “Innovation Act” or considered on its own, appears to be a strong step forward to the Constitutional exhortation in Art. 1, § 8, cl, 8 to “promote the progress of science and useful arts…” and could be a very positive improvement.


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