Patent Rush

by Adam Philipp on May 10, 2012

Rush to file patents;
America Invents Act
Makes startups hurry

As reported by the Washington Post, startups are among the companies likely to be the most dramatically affected when the Leahy-Smith America Invents Act (AIA) takes effect in March, 2013.  Some predict a gold-rush style “stampede” to the patent office before the Act takes effect.

(A similar “gold rush” happened around 1995, when the patent term changed from 17 years from the date of issue to the current 20 years from the earliest filing date.)

The AIA, which represents the most significant change to the US patent system in 60 years,  will convert the US from a “first to invent” system to a modified “first to file” system. 

A pure “first to file” system is used by the European Patent Office, and although the AIA will not completely harmonize the two systems it will bring them closer together.

Some critics have argued that the AIA will harm startup companies by pushing them to bear the expense of filing a patent while they’re still struggling to get off the ground.  A well-prepared patent application can cost from $5,000 to $15,000.

Critics also argue that the AIA gives large companies, which have patent lawyers already on staff, an even greater competitive advantage.

As reported in this blog, technology titans are battling over patent rights on at least four continents:  Oracle and Google are fighting over Android, Yahoo and Facebook are suing each other, etc.  Companies are also buying up patent portfolios belonging to companies like AOL, Motorola, Kodak, and Nortel for both offensive and defensive purposes.

More and more, startups are recognizing the value of investing in patents.  Patents can be used as bargaining chips in negotiations with venture capitalists and can attract potential buyers.  Studies have shown that startups with patents or filed applications attract more venture capital and get it faster. 

The existence of a valuable patent portfolio also reduces risk for potential buyers and investors, as patent rights can live on even after a company fails and provide valuable licensing revenue to their owners.

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