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Franks: Patent Reform Key to Job Growth

America’s economic recovery as well as its ability to stay ahead of the cutting edge of global technological development are both becoming increasingly centered on the future of patent reform.

The unprecedented explosion of American growth and prosperity over the past two centuries has been built on the engine of the genius, industry, entrepreneurship and innovation of individual men and women who have made the United States the global leader in technological advances in every field from finance to defense to medical science. These advances have allowed Americans to enjoy a standard of living almost unimaginably higher than any other civilization in history.

The role of Congress in protecting our free-market economic engine and spurring innovation has evolved over time, but it is clearly rooted in the Constitution’s mandate “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

Patents play a vital role in incentivizing the risk-taking inherent in technological development. Consider, for instance, that by 1928, Thomas Edison’s inventions comprised 7 percent of the nation’s gross domestic product. He was the holder of more than 1,000 patents. Indeed, President Ronald Reagan said in his first inaugural address that, “If we look to the answer as to why for so many years we achieved so much, prospered as no other people on earth, it was because here in this land we unleashed the energy and individual genius of man to a greater extent than has ever been done before.”

However, as the importance of patents has increased, the backlog of patent applications has climbed to a historic 1.2 million applications waiting to be reviewed, which has heightened concerns about the fairness, effectiveness and efficiency of the current system, drawing Congress’ eye to the need for reform.

As a patent holder myself, I have several concerns with the patent reform legislation currently making its way through the Senate in the form of S. 515, the Patent Reform Act, which will likely serve as the vehicle for reform.

First and most importantly, the Senate managers amendment changes the current patent process from our unique “first to invent” system to a “first to file” system. Purportedly, this change is being done to eliminate costly contests called “interferences” that occur between near-simultaneous inventors who claim the rights to the same subject matter. The goal of eliminating interferences is achievable by simple amendment changing Sec. 102(g) to a first-inventor-to-file criterion.

However, the current version of the amendment does much more, actually altering all of Sec. 102 to redefine the prior art and essentially gut the American one-year grace period, which has historically been a unique characteristic of the U.S. patent system. The one-year grace period is a time in which inventors are allowed to further develop, perfect and begin to market their product to investors and potential business partners in order to obtain the necessary funds to complete the patent application process. Many times, this is the first opportunity inventors will have to start a small technology-based business for the first time, which often requires obtaining loans and legal counsel as they seek to navigate the tedious patent process. The grace period has thus provided a critical protection against losing their patent rights because of leaks or inadvertent disclosure of information related to their invention prior to making their patent application. To alter or eliminate this grace period would be a grave mistake and would only serve to undermine patent holders’ rights and hamper innovation.

Two other areas of concern lie in the need to (1) refrain from creating an administrative post-grant opposition procedure that would only increase the uncertainty and bureaucracy in the current patent process, and (2) protect inventors’ ability to amend their pending patent applications. Changes have repeatedly been made to both these areas; however, it is a positive sign that the Senate manager’s amendment to S. 515 seems to adequately address both of them by lowering the threshold for authorizing post-grant review and by including a new post-grant supplemental examination section to allow a patent owner to submit potentially pertinent art to the U.S. Patent and Trademark Office. I believe these changes will prevent serial challenges to patents at the USPTO and in the courts, thereby protecting the value of U.S. patent rights at a time when America’s economic recovery is dependent on the strength of U.S. innovation. It’s important that these changes remain preserved when the House reviews patent reform legislation.

The U.S. Patent and Trademark Office could potentially hold the key to creating literally millions of jobs if the patent process is reformed effectively. In fact, a recent study estimates that the “forgone innovation” that has resulted from the significant patent delays is costing the economy billions of dollars annually. As Congress undertakes to bring significant reform to the patent system, it must take caution to avoid worsening the bureaucratic mess hindering Americans’ ability to realize the benefits of their own intellectual property.

Rep. Trent Franks (R-Ariz.) is ranking member on the Judiciary Subcommittee on Commercial and Administrative Law.

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