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Four Reforms Needed For The Ways Patent Reform Will Change How You Innovate

In order to gain patent protection for their inventions, almost every US based innovation, R&D and new product development organization will be forced to adapt to the Patent Reform Act’s dramatic changes.

The law will bring changes to the kinds of innovations that are patentable, who owns inventions, who can use other companies inventions, and how patents are challenged and defended.  These changes will affect the costs, processes and strategy of innovating in America.

Be Afraid, Very Afraid:

The Patent Reform Act (known simply as Patent Reform), was officially the “America Invents Act” (AIA).  The Patent Reform Act was signed into law in September of 2011.  It’s major provisions will go into effect on March 16, 2013.  These provisions will demand a significant shift in innovation, R&D and new product development (NPD) processes.

  • Patent reform will change innovation, R&D and NPD strategy
  • Patent reform will change the time available for innovation
  • Patent reform will change how much budget is available for innovation
  • Patent reform will change which innovations can be protected

Patent reform encompasses many changes, but for the purpose of R&D, innovation and new technologies, we’re going to focus on these two major provisions:

  • First inventor to file
  • Prior User Rights
First Inventor to File:
Starting on March 16, 2013, the US will change the definition of who has the right to be granted a patent for an invention.  The US will institute a first-to-file system, also called “first inventor to file” system, which grants the right of a patent for a given invention to the first person or organization (the first inventor(s)) to file a patent application for protection of that invention, regardless of the date of the actual invention.

First inventor to file has three major effects on how innovation is patented and what can be patented:

  • The first inventor to file an application at USPTO will be granted the patent for an invention.  A subsequent application can’t invalidate a patent based on an earlier invention date
  • The first patent issued for an innovation cannot be invalidated unless a subsequent patent owner can prove the invention from derived from prior art.
  • The definition of prior art has been expanded to include worldwide patent and marketed products.  An innovation patented in another country or marketed publicly in a foreign market cannot be patented in the US.

The Effects of First To File on New Product Development:

  • You will have decide what to file with USPTO as early as possible in order to be the first to file.
  • Open market testing may constitute public disclosure; however, secret ideas may be at risk as well.
  • To manage costs, patenting strategy has to be an integral part of new product development strategy and processes.
  • Patent Reform my significantly affect open innovation initiatives and the willingness of inventors to disclose early-stage and unpatented ideas.  It is expected that savvy inventors will not disclose inventions until they are issued patent protection. (link)
Prior User Rights
A key provision of patent reform affects the rights companies have to undisclosed inventions.  With the prior user rights provision, inventors have the right to ongoing use of undisclosed inventions (if prior use was greater than a year), even if another entity is grated a patent for the invention (due to first to file).

An example may be a modification to a piece of manufacturing equipment that is used at a single plant.  If another inventor independently develops the same invention and is granted a patent for it, they would not be able to sue for infringement if the manufacturing plant can prove it has been using the invention for more than a year.  Patent reform law allows the manufacturing plant to continue use of their invention, limited to its existing use.  The manufacturing plant cannot expand the use of the invention without infringing.  However, if the invention was filed by a university or technology transfer office, the manufacturing plant is not granted the protection of prior use and can be sued for patent infringement by the patent holder.
The Effects of Prior User Rights on New Product Development:

  • The use of secret innovations can be severely limited once another party is granted a patent for the same invention
  • A need to continually review agreements for research and innovation conducted with Universities and other research institutions
Four Reforms to Innovation Management Will be Required to Address Patent Reform:
In order for US based R&D, NPD and innovation organizations to adapt to the changes demanded by patent reform.  The changes required are top-down in nature, reforming the processes, strategy and investments of innovation organizations. The changes we propose will not only improve a company’s response to patent reform, they will improve all aspects of R&D and NPD activities.  The following four strategic the companies big and small need to implement in order to respond to the new patent law:
1: Practice Objective R&D Portfolio Management:
Because Patent Reform increases the cost and time-to-market of innovation, it becomes more important that innovation leadership is focused on organizational efficiency and outcomes.  The best practice for increasing the effectiveness of innovation is to practice innovation portfolio management.  Innovation portfolio management enables companies to identify, build consensus and defend go/no-go project decisions that support the company’s strategic and business targets.
2: Review Your Innovation Process:
Patent Reform forces innovation teams to spend significant time and efforts considering the IP implications of their work beginning in the earliest stages of new product development. Companies need to update their stage-gate and NPD processes to integrate the additional process steps demanded by Patent Reform. The expectations for time-to-market and the cost of innovation will need to be reassessed as well.
3: Implement Technology Platforms:
The changes to patent law make IP easier to challenge. No longer can valuable innovations rely on a single patent. Patent reform will force companies to develop multiple patents protecting their important new innovations. The most effective way to accomplish this is through a organizational structure of technology platform teams. Technology platform teams focus on developing innovations that support long-term competitive advantages. Working outside the stage-gate project-based structure, technology platform teams should be incentivized to continually develop (or co-develop) valuable IP assets, resulting in continually refreshed IP estates that support the company’s most important products.
4: Utilize Tools for Technology Competitive Intelligence:
It is critical to identify your patentable innovations as early as possible. Inexpensive software tools, such as InnoInventory can help capture new ideas from throughout your company. These tools also provide your IP team with tools to determine if the new ideas rise to a patent-worthy level, allowing you the opportunity to take appropriate steps to protect those innovations.
Marc Drucker is President of Newlogic, located in Newton, MA. Marc works closely with business owners, executives, entrepreneurs, inventors, scientists and investors to help ensure that innovation efforts accomplish their business goals. This includes strategies for creating and protecting intellectual property assets.  Newlogic works with clients in consumer products, food, beverage and technology. 
This article is intended to provide information of general interest.  It is not intended to constitute legal advice regarding a client’s specific legal issues and should not be relied upon as such. 
photo credit: Leo Reynolds via photopin cc

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