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Innovators' Dilemma

New patent laws may complicate life for inventive companies.
Avital Louria Hahn, CFO Magazine
November 1, 2007

New patent laws that go into effect this month are ostensibly designed to cut down on frivolous filings and a crushing applications backlog, but critics say they may have a chilling effect on innovation.

Previously, any person or company filing a patent application was allowed to file an unlimited number of continuation applications without supplying justification. This allowed a patent holder to win early protection for an idea and then expand on it over time, with all continuation patents deemed to be in effect from the date of the initial application. The new rules limit the number of continuations to three, unless a special justification is submitted and approved. They also limit the number of claims (a precise statement regarding an invention's capabilities that establishes the boundary of what a granted application would protect) to five, again unless special documentation convinces the U.S. Patent and Trademark Office (PTO) that additional claims are warranted.

That concerns some experts. "If a company is prolific with its inventions, it is going to have difficulties with these new rules," says Marc Sockol, partner and patent attorney at the Palo Alto, Calif., office of Thelen Reid Brown Raysman & Steiner. A biotech firm, for example, may believe that a new drug can be useful against many different health maladies but may be able to file a claim for only five. "Biotech companies face a new risk calculus," says Howard Brick, chief operating officer of research firm Panel Intelligence. "Do they file early and risk being limited in how fully they can flesh out their applications, or file later and risk no longer having a unique invention?"

PTO commissioner John Doll says the primary goal is "to make sure that the applicants have the best information in the best form in front of an examiner." Some patent-litigation experts wonder, however, whether another goal is to cut down on patent-infringement lawsuits. So-called patent trolls routinely file patents for inventions they have no intention of developing but that may resemble other products that come to market closely enough to make a subsequent patent-infringement lawsuit viable.

Doll says that the term "patent troll" is often misused. "Someone could wake up one day with a cure for AIDS without ever going to the lab," he says. "Some people are inventors but not product developers. They still have a right to have their intellectual property protected." But, he says, "if you don't know what your invention is, then you don't have a right to that property. Some people come in claiming the sun, moon, and stars and then want us to tell them what they're entitled to."

But Brick believes that the concerns expressed by some attorneys, particularly in biotech, are well founded. The process of patenting biotech inventions is complex and time-consuming, and "the fate of the company rises and falls on its ability to sufficiently extend its patent protection." Some investors, he suggests, might be scared off by the prospect of a more restrictive application process. "You get four bites of the apple," Doll counters, alluding to the PTO's new application and appeal process. That, he says, should accommodate any and all valid attempts to win patent protection.





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