Poisoning the Next Apple? the America Invents Act and Individual Inventors

Article excerpt

     A. First-to-Invent: U.S. and Canadian Approaches
     B. First-to-File: U.S. and Canadian Approaches
     C. The Policy of Patent Priority Rules
     A. The Canadian Law Change
     B. Prior Literature on Priority Rules
     C. Data Used in This Study
     A. The Rate of Patenting in the United States and Canada
     B. The Effect of First-to-File: Individual Versus Corporate
     C. Patent Quality Changes
     D. Addressing Potential Concerns and Robustness Tests
        1. The contemporaneous patent term change
        2. The introduction of maintenance fees
        3. Deferred examination
     E. Interpretation and Analysis of Our Results
        1. Possible mechanisms
        2. Welfare implications


The garage inventor is an American icon. The image of the solitary genius tinkering away in order to perfect her idea captures our imagination, and the long line of world-changing inventors and their companies--from Thomas Edison (in Menlo Park, N.J. and West Orange, N.J.) (1) to Bill Hewlett and David Packard (in Palo Alto) (2) to Steve Wozniak and Steve Jobs (in Los Altos) (3)--only confirms this uniquely American vision of innovation. The patent system works hand in hand with this sense of the small inventor by providing those who have little more than good ideas much-needed clout in the commercial marketplace. Indeed, without the protection of inventions by the patent system, the world might never have known General Electric, Hewlett-Packard, or Apple. (4)

On September 16, 2011, President Barack Obama signed into law the Leahy-Smith America Invents Act (AIA or the Act), (5) almost certainly the most sweeping set of changes to the U.S. patent system in almost sixty years. (6) The most important provision of the Act, and the subject of this Article, is the change in the rules used to establish priority between competing inventors. (7)

Until March 16, 2013, the United States used a first-to-invent (FTI) priority rule. (8) This means that when there was a dispute as to patent priority, the party that had the inventive idea first was entitled to the patent. This could be established by using lab notebooks, emails, and other documentation of the date of invention. By contrast, a first-to-file (FTF) rule relies on the date (and possibly time) when a patent application was filed with the U.S. Patent Office for the priority determination. As we explain further below, the AIA implements a modified version of the traditional FTF rule, wherein in most cases the first inventor to publish his invention will be given the rights (as long as he follows the publication with a timely application to the U.S. Patent Office). (9) But in broad strokes, the Act implements a shift in American patent law from FTI to FTF; the United States is the last country to make this change in its patent system. (10)

Although the FTF system has advantages--it is simpler and less costly to administer, and it encourages earlier patent applications (11)--it may have a darker side for small inventors. (12) Since they are likely to be slower in turning an invention into a patent application than larger corporations, they will be less likely to win a patent race. Under the FTI rule, this was not especially relevant, because the date of invention determined patent priority and the scope of prior art. But under FTF, a successful patentee must not only invent, but also win the race to draft and submit a patent application that satisfies the requirements of the patent law. Companies with significant research and development (R&D) operations are more likely to have patent attorneys on staff with experience working with the company's inventors. This can substantially cut down the time necessary to transform an invention into an application. Small inventors are much more likely to be resource constrained, and much less likely to have staff attorneys or existing relationships with outside counsel--placing the small inventor at a potential disadvantage in a FTF regime. …