Wake-Up Start-Up: A Start-Up and Small Business Patent Strategy for the Future

By Amy Allen Hinson
© 2012 Nexsen Pruet, LLC
April 18, 2012

The American Invents Act (AIA) is not a complete overhaul of the patent system but its passing should certainly cause most businesses, especially small and start-up innovation businesses, to reconsider and overhaul their patent strategy. Because small and start-up businesses typically have limited capital for obtaining patent protection, their traditional strategy has been to file patent applications to secure protection for only those inventions they perceive to be the most profitable and important inventions, while delaying seeking patent protection on improvements and what they believe are less profitable inventions until the real value of the latter is fully understood. Such a dilatory strategy, however, should not be the strategy for securing your company’s future.

On March 16, 2013, less than a year from now, the United States will change from a “first- to-invent” patent system to a “first-inventor-to- file” patent system. For those of you just learning about the AIA, this means, with a few caveats, that patent protection will be issued to the first inventor to file a patent application on an invention instead of the first inventor to conceive the invention. While this distinction may sound more like semantics than substance, it is not.

Under the current “first-to-invent” patent system, an inventor can challenge a filed patent application by initiating an interference proceeding to determine who was “first-to-invent” and there- fore who has the right to patent protection. While very few patent applications are actually involved in interference proceedings, the ability to initiate one, if needed, is currently crucial to the patent strategies of small and start-up businesses everywhere (whether they know it or not). Thus, the “first-to-invent” patent system, with its ability to initiate an interference proceeding, has at least created a semblance of a level playing field. Under the current system, small companies with limited funding for obtaining patent protection have the means to counter large companies with more substantial resources who can fund early filings to obtain patent protection on almost every potentially profitable invention.

The transition to a “first-inventor-to-file” patent system, however, eliminates the level playing field created by interference proceedings and thereby results in a significant advantage to large companies having large pools of capital and resources allowing them to sprint to the patent office every time they invent anything potentially profitable. So how does a small or start-up business compete under the new patent system?

Small and start-up businesses have to take a hard look at their traditional patent strategy. For example, instead of focusing on patent protection for only the inventions they perceive to be the most profitable and important inventions, these companies need to consider protecting more of their inventions by filing provisional patent applications both quickly and consistently and by selectively and strategically timing the publication of their inventions.

Provisional patent applications are unexamined and, at least initially, unpublished applications that ultimately act as place holders to preserve priority of an invention for up to one year. Before the one year anniversary of the date the provisional application was filed, the provisional application must be converted to a formal utility application or the priority date is lost. One significant benefit of provisional filings is that, because of reduced filing requirements, they can be considerably less expensive than the formal utility patent applications. Indeed, all that is required to file a provisional application is a form cover sheet, a written description that provides enough detail to allow someone of ordinary skill in the art to make and use the invention (including informal drawings, photographs, and/ or sketches), and the filing fee (currently only $125 for small entities). Many law firms even offer inexpensive flat fees for consulting and filing provisional patent applications when the client provides the written description and drawings. Accordingly, the company will incur minimal legal expenses on the front end by shouldering most of the work while still protecting all of their inventions.

While most start-up and small businesses are familiar with provisional patent applications, the transition to a “first-inventor-to-file” patent system should make reliance on provisional applications and frequent communication with a patent attorney more important than ever. Indeed, taking advantage of provisional patent applications and basing a patent strategy around consistently and quickly filing these types of applications on all potential inventions is likely the best way to offset the advantages the AIA stands to afford larger companies.

Unfortunately, the cost of converting a provisional patent application to a formal utility application, together with the subsequent prosecution, can be very expensive and therefore small and start-up businesses may not have the funding to convert all provisional applications to formal utility applications. These businesses, however, could potentially benefit from publishing their inventive concepts at strategic times to decrease the likelihood that another company will seek protection for those inventions.

New section 102(b) of the Patent Act provides that an inventor’s public disclosure of the invention during the year preceding the filing of a patent application (provisional or utility) cannot be used as prior art against the application. That inventor’s public disclosure, however, can prevent another inventor from obtaining patent protection on the same invention. Thus, it is in the best interest of a small or start-up business to consider quickly publishing their inventions to block others from obtaining patent protection and still obtain a year to decide whether patent protection is a worthwhile endeavor.

Solely relying on early publication of an invention, however, may best be reserved for inventions that are not considered lucrative. For example, the patent process often takes several years and patents are not enforceable until they are issued. By publishing an invention early, you are providing potential usurpers with all of the information and tools to make and use your invention with very little, if any, recourse to stop them until the patent issues several years later. Further, the examination by the United States Patent and Trademark Office is typically based upon patentability searches of issued patents and published patent applications. It is a rare occasion that the patent office reaches beyond these documents to cite prior art against a patent applicant. Thus, despite your prior art publication, a competitor may obtain a patent and seek to enforce it against you leaving you with the significant cost of defense through litigation or filing a reexamination proceeding with the Patent Office. Finally, while the United States acknowledges a one-year publication grace period, most foreign countries do not.

Therefore, the safest overall strategy for small and start-up businesses is to file provisional applications on as many inventions as financially realistic and to strategically and selectively publish certain inventions.

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