The America Invents Act is bad for the economy

For 220 years, the U.S. first-to-invent patent system has fostered more innovation and opportunities for inventors than any other system in the world. However, in the name of “harmonization,” Section 3 of the bill will change our patent system from one that values the inventor to a first-to-file system that values government bureaucracy and bigger corporations. Section 3 will create a “race to the PTO” favoring larger companies, force inventors to spend money on filing unnecessary patents (before vetting the invention’s merits) that could otherwise be used to create jobs, and increase the PTO’s workload.

Section 5 establishes adversarial court-like procedures for infringers to challenge issued patents at the PTO. This will create new work for the PTO that it is ill-equipped to handle and further burden small/medium sized businesses; forcing them to spend more money on lawyers and less investing in R&D and jobs. 

Most troubling, Section 18 of the bill amounts to a special earmark inserted in the Senate at the last minute per the request of the banking lobby. The provision discriminates against a class of patents that big banks infringe, financial related “business method patents” (“BMPs”). While the bill’s court-like opposition procedures are forward looking and time limited for every other type of patent, Section 18 expands the time limits just for BMPs and even allows banks to institute these procedures against already issued BMPs (even patents already tested in court). 
   
Section 18 will affect many companies, including ours. TT owns patents that have gone through a trial in Federal Court, an appeal and two different reexaminations at the PTO. Yet, Section 18 will likely require TT to spend more time and money defending these tested patents. Only lawyers stand to benefit from this.   

House Judiciary Chairman Lamar Smith (R-Texas) asserts that Section 18 is “not a gift to any industry or group.” If this is true, why doesn’t Section 18 apply to all BMPs, instead of discriminating against only those “used in the practice, administration, or management of a financial product or service”?  The answer is clear: banks want a retroactive weapon against patents on any technology they may be infringing.
 
Section 18 does not enjoy broad support as claimed by Chairman Smith. Reps. Aaron Schock (R-Ill.) and Dan Boren (D-Okla.) have recently proposed an amendment to remove Section 18 that is supported by a wide array of representatives on both sides of the aisle. 

Chairman Smith’s defense of Section 18 is based on unsupported and incorrect anecdotal claims. For example, BMPs were not created in the late 1990s. They existed long before; the PTO did not grant an unusual number of “bad” BMPs. Since the early 2000s, the BMP examining group has been the toughest at the PTO, with specialized quality review procedures resulting in an annual allowance rate of between 10-15 percent, compared with the overall PTO allowance rate of around 80 percent.

The bill will not allow the PTO to consider the “best prior art.” The PTO is not equipped to assess alleged “prior uses” (as opposed to publications). Assessing alleged prior uses requires dealing with faulty memories and even attempts by interested parties to mislead. For example, it is easy for skilled people to modify software without detection. Getting to the truth requires costly/complex discovery and, often, the use of computer forensics experts. TT has experienced this first-hand, uncovering that a party fabricated evidence of an alleged “prior use” software.

TT agrees with Reps. Jim Sensenbrenner (R-Wis.) and John Conyers (D-Mich.), the two former chairmen of the Judiciary Committee, and endorses the Schock-Boren-Sensenbrenner-Conyers-Franks-Waters-Kaptur amendment as well as other amendments to remove the bill’s problematic provisions. Unless these provisions are removed, the bill should be scrapped entirely.

Steven F. Borsand is the executive vice president of Intellectual Property at Trading Technologies.