Small businesses likely to benefit from patent law overhaul

September 25, 2012

When new patent legislation was passed a year ago Alex Frommeyer was one of the first entrepreneurs to take advantage.

The Louisville, Kentucky-based inventor filed a provisional patent to protect the technology that went into making the Beam Brush – a toothbrush with a built-in sensor that records how long people spend brushing their teeth and relays the information to a mobile app that allows smart phone users to track their progress.

Before his provisional patent lapsed, Frommeyer recently filed two regular patent applications: one for the sensor technology and the other to cover the “infrastructure,” or system that allows the data to flow from the toothbrush and be displayed on a user’s phone.

Frommeyer said protecting that intellectual property (IP) was crucial to his plans for growing the business.
“A small business or startup leans very heavily on its IP, at least in the tech sector,” he said. “It needs to have that IP in order to establish and demonstrate value for the company.”

Almost a year to the day he filed his provisional patent under the new America Invests Act (AIA), Frommeyer closed a venture capital round of less than $1 million, led by Louisville-based the Yearling Fund and several angel investors.

Securities lawyer Charley Moore, the founder of San Francisco-based legal services website Rocket Lawyer, expects the new legislation, enacted last September, to lead to a flood of patent applications by tech entrepreneurs like Frommeyer.

“Patents are really valuable assets,” said Moore, who noted U.S. patent law was amended to favor first-to-file applicants from the former first-to-invent system. “If you don’t file first you’re going to have a hard time saying you were the first one to invent something.”

A survey conducted by Rocket Lawyer after the patent act was introduced last year found that 78 percent of respondents would be more likely to file under the new legislation.

Moore said the goal of the AIA was to speed up the patent approval process, which is notoriously slow and has created an extensive backlog of pending cases. He noted the average patent application takes about 3 years to be approved, but the new law introduced a fast-track feature that cuts that process down to a single year.

The fee, however, is considerably higher – $4,800 versus $380 for a regular filing. For small businesses those fees are reduced by half to $2,400 and $190 respectively.

There is a further discount for “micro-entities” that are generally defined by an applicant whose annual income does not exceed three times the U.S. median income.

The faster approval times and lower fees should help small businesses get their products in front of potential investors and consumers faster and ultimately lead to more jobs as firms ramp up production and hiring, Moore said.

“By getting more patents faster this is a way to give innovative companies what they need in order to hire.”
While the new system favors companies that file first, there remain a couple of appeals avenues for inventors who feel their technology or intellectual property superceded someone else’s patent. Up to nine months after a patent has been issued by the U.S. Patent and Trademark Office (USPTO), a “post grant review” application can be filed to contest an existing patent. However this costs $35,800 and is likely beyond the means of most small businesses.

Another recourse is the “inter partes review,” which occurs after a post grant review has been completed, or any time within the first year after a patent has been approved. This is a trial proceeding conducted before judges.

Frommeyer said that while the new measures are friendlier toward small business, the long turnover times will likely not spur a huge increase in the number of early-stage companies filing patents.

“The average startup lasts about 18 months and if you file a patent on Day 1 of your business, you don’t even have a shot of getting it reviewed in that average lifespan,” he said. “You can have IP that’s just sitting out there eating up fees, costs and review time and being pending for the entire life of your company.”

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