Patent Reform in the United States: Lessons Learned: The New America Invents Act Resolves Some Old Issues, but It Creates Some Worrisome New Ones

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After seven years of controversy and debate, on September 16, 2011, President Obama signed into law the first major revision of American patent law in nearly 60 years. The legislation covers a wide range of procedural, substantive, and administrative changes, from fee-setting at the U.S. Patent Office, to implementing several new administrative procedures involving patents, to precluding patents on certain categories of subject matter.

Entitled the "America Invents Act" (AIA), this legislation amends the current patent law with provisions that take effect over an 18 month period from the time of signing, culminating in major transitions in March of 2013. The legislation has been touted by politicians as modernizing U.S. patent law, harmonizing it with that of our trading partners, simplifying the patent application process, and--most incredibly--stimulating 200,000 new jobs. The long gestation period of the statutory revisions was the direct result of the varied experiences of different stakeholders with the patent system and consequent disagreement as to the changes necessary to ensure effective patent outcomes. In particular, the pharmaceutical and information technology sectors held strongly differing views as to whether the patent system was meeting their needs.

I have previously observed in work with Mark Lemley of Stanford that this seven-year standoff illustrates the problems of developing a uniform system to apply to different industries. (See "Courts and the Patent System," Summer 2009.) Elsewhere, we have outlined a workable institutional and doctrinal framework for overcoming this problem. Here I measure the AIA against this framework, to evaluate both the end product of the American reform effort and whether the outcome might have been improved. I conclude that the AIA is in many respects consonant with the prescriptions of our framework, but falls disappointingly short of what might have been achieved.

Dynamic Patent Incentives

There appears to be a general consensus among regulators, commentators, and practicing attorneys that the primary purpose of the patent system is to encourage innovation by providing financial rewards and incentives for new technological developments. Yet we know that the innovation profiles of different industries differ dramatically. Technologies in some sectors require massive investment to develop new advancement; others require only modest investment. Some technological investments lend themselves to a natural return on investment; others cannot be recouped without vigilant legal enforcement. Some technological developments are durable, providing substantial returns for many years; others have rapid turnover and short product life cycles. Developing a patent system to accommodate such diversity poses a substantial challenge.

Moreover, not only the outcome of innovation, but innovation itself, is in a state of constant flux. Technological innovation by its nature is situational, fact-specific, and diverse. Industries mature, reconfigure, and die. New techniques and processes are adopted, displacing older methods. The tastes and needs of purchasers evolve. New ventures spring into existence and old ones fade into senescence or bankruptcy. Sources of revenue and capital shift or redirect their attention to new opportunities.

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As I have detailed in previous work with Lemley, technological development is dynamic and likely to outpace patent statutes that are not equally dynamically updated. Indeed, we might almost say that if the patent law is not struggling to keep up with the pace of innovation, the law is a failure; the whole point of the law is to encourage progressive change. The irony is that a successful patent statute continually sows the seeds of its own obsolescence, meaning that the patent system itself must constantly innovate to keep pace.

Thus, a fundamental question for any patent reform is how to accommodate almost continual reform; in essence, how to constantly re-invent the statute itself. …