Patent reform is coming: Who should care

When Congress returns from its summer recess in early September, it will vote on patent reform legislation that should represent a major overhaul of the United States patent system. It won’t do away with patent trolls or the software patents that have so many technology pundits up in arms, but at least one prominent patent attorney says it will level the playing field between large companies and individual inventors.

First to file is coming

According to Bernard Codd, an intellectual property partner with McDermott Will & Emery, the proposed “first to file” provision “would be a fundamental change to patent law.” The U.S. is among the only developed countries that clings to the “first to invent” system, he explained, which tends to inspire litigation over who actually invented a particular product or system. Under a first to file system, the first party to file is the presumed inventor, which creates what some refer to as a race to file.

Not everyone is happy about this likely change, with opponents claiming it unfairly favors large companies that can more easily afford the relatively expensive and complex process of filing patent applications. However, Codd thinks this characterization of the first to file system isn’t entirely accurate. Ultimately, he said, it means “you can’t afford to sit on ideas anymore,” regardless who you are, because if the guy across the street files first, you get nothing.

It might actually end up leveling the playing field for small businesses, according to him. Large companies often go through elongated processes when filing patent applications, Codd explained, and they’ll have to adapt to the new system. He added that there’s a tactic called the provisional patent application that should become a lot more popular. Codd thinks provisional applications will be a godsend for small inventors because they can draft and file a provisional application in a day and then have a year to undertake the laborious patent-application process.

Provisional patent applications are less formal — and less expensive — than official patent applications and give applicants one year to convert the proposed system into an official patent application. The contents of provisional applications are kept secret until the formal application is filed, and provisional patent holders are given the priority date of their provisional applications rather than that of their formal application, at least for the contents included in the provisional application.

Some protection against patent trolls

Of importance to the technology world, said Codd, is a proposed unlimited deadline for seeking post-grant review of business method patents. Business method patents generally cover software as well, as software is an intangible invention and the actual code is protected under copyright law. The line is blurry as to what types of business methods or software is patentable, except that abstract or strictly algorithmic processes generally are not. How those terms are applied, though, varies on a case-by-case basis.

There’s a fairly strong movement among technology professionals, and even a few members of the Supreme Court, who believe software patents should be abolished altogether. They believe software patents stifle innovation because the broadness of software patents leads to lots of potential unknowing infringements even from across a diverse pool of software developers.

With an unlimited deadline for seeking review, parties could question the validity of a particular business method patent whenever they happen to discover a potential issue. Post-grant review for all types of patents is presently limited to nine months after the application is made public.

The only point of contention between the House and Senate patent-reform bills on this issue is around the timing of the sunset provision, or the length of time before this new provision expires. Whatever that ends up being, Codd said, Congress will likely extend the unlimited post-grant review of business method patents if they end up being invalidated more often than other patents while the provision is in effect.

Codd said there was talk about provisions for cracking down on so-called patent trolls and patent litigation, but no such provisions made it into either bill. Probably, he said, that’s because “one person’s troll is another person’s hard-working small inventor” who’s being ripped off by large companies.

That stance certainly has merit. Although patent trolls give patent litigation a bad reputation, too high a standard for infringement or overly harsh penalties for losing a case could make small companies or individual inventors hesitant about enforcing their patents.

Interestingly, though, one class of software inventors do appear likely to feel some sting from the likely legislation. Codd said both bills prohibit patents for software claiming to find tax savings.

Why all the hubbub about patents?

Patents have been the talk of the tech world lately, especially in the white-hot mobile space. Oracle (s orcl) and Google (s goog) are embroiled in litigation over Android; HTC just sued Apple again (s aapl); Apple purchased a large cache of Nortel patents; and Google just bought Motorola Mobility (s mmi), ostensibly to get its hands on Motorola’s wealth of mobile phone patents.

Codd thinks there are several factors driving this activity, but it all comes down to money. Patent litigation is expensive, he explained, and the consequences can be even more expensive, so companies in big-money areas like mobile phones are girding their loins and preparing for battle.

Companies not selling products can make money by licensing patents and suing infringers, and companies afraid of getting sued can snatch up their own collection of patents to either defend against infringement claims or to threaten countersuits, he said.

It seems unlikely that new patent laws will have too great an effect on existing litigation, but a first to file system and post-grant review of business method patents could spur a lot of activity going forward as companies race to get priority and try their hands at invalidating longstanding patents.

Image courtesy of Flickr user Alexandre Dulaunoy.