What the Recent U.S. Patent Reform Law Means for Startups




Nitin Gupta is the co-founder of LawPivot.com, an online marketplace for businesses to receive crowdsourced legal advice from lawyers. You can follow LawPivot on Twitter @LawPivot. This post was co-authored by Eric Hutchins, a patent attorney at Kilpatrick Townsend, & Stockton.

On Sept. 8, Congress passed a patent reform bill named the “Leahy-Smith America Invents Act.” President Obama signed the act into law on Sept. 16. The most relevant aspect of the act for startups is the switch from a “first-to-invent” to a “first-to-file” system.

The United States has long been the sole nation with a first-to-invent system, which ensures — in theory — that the first person to invent something receives the patent protection for that invention. The rest of the world has long employed a first-to-file system, in which patent rights are awarded to the first person to file an application for the invention, regardless of the date of invention. The America Invents Act will harmonize U.S. patent laws with international standards.

Here are three things startups should do, given the new patent reform.


1. Have the Rights to File Patent Applications on Behalf of Your Employees


Add language to employee agreements that give your company the right to file patent applications on behalf of the inventor. Prior to the Act, the Patent Office required a declaration from an inventor stating under oath that he or she was indeed the first person (to his or her knowledge) to conceive of the invention. While this declaration was of key importance to the first-to-invent system, the Act recognizes the realities of the modern workforce, where inventors migrate frequently between employers, and provides companies with the ability to submit a substitute statement. This statement functions in lieu of an executed inventor declaration. In it, the employer states that it has the legal authority to seek the patent without the inventor’s declaration because the inventor is deceased, legally incapacitated, unable to be found after a reasonable search, or refuses to assign his or her patent rights to the employer in violation of a valid contract to do so.

Startups should review existing employee agreements and revise them if necessary so that they can use these substitute statements to avoid delays when locating a former employee or when obtaining his or her consent proves difficult.


2. Encourage Your Employees to Quickly Report the Inventive Aspects of New Product Features


Emphasize to your teams the importance of quickly reporting inventive aspects of new product features. Rather than leave the process to chance, work with your patent lawyer to have a clear protocol in place to identify inventive features and to prepare a description of the invention that will allow business managers to decide whether a patent makes sense. This will enable the lawyer to quickly prepare the application.


3. Make Rapid Decisions on Whether or Not to File Patent Applications


Once a team member identifies an inventive feature, decisions on whether or not to file a patent application will need to be made quickly in a first-to-file system. More frequent communication with your patent lawyer is key. Rather than hold monthly or quarterly meetings with your patent lawyer to discuss new inventions and the status of pending applications, plan to notify your lawyer of new inventions earlier and more often to avoid being beaten to the patent office.


The first-to-file system will take effect 18 months from now. This gives you time to plan ahead, consult patent attorneys and adjust your processes to account for these changes.

Image courtesy of iStockphoto, aluxum

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