Ask SCORE: Big changes coming when it comes to filing patents

COURTESY TO THE BELLINGHAM HERALDNovember 12, 2012 

Question: People tell me that I'm very creative. In fact, I have several good ideas right now for products that seem marketable. These ideas are original and I think my designs should be protected in some way. What do I need to know about this?

Answer: Yes, you can protect your ideas and designs - sort of. And your timing is perfect. The U.S. patent system has a major change coming, soon. Let's talk about this.

All U.S. patents are processed by the United States Patent and Trademark Office. It's an agency of the Department of Commerce. It also handles other Intellectual Property like trademarks, copyrights and service marks. Their informative website is uspto.gov.

There are two common types of product patents:

• A utility patent covers the actual construction and operation of the item. A utility patent is granted for inventions that produce a new and useful result. The inventor is granted legal rights to prevent others from making, selling, using or importing the invention without the inventor's consent, for a period of time, generally 20 years.

• A design patent covers only the external appearance of the item, like furniture, jewelry or fashion clothing. This patent protects the unique, non-functional appearance of the item and grants you similar rights to act against others who use your design.

Last year the USPTO issued about 220,000 utility patents and 23,000 design patents.

Some have compared a patent to an umbrella - helpful during light rain, but not of much use if it's really blasting down. Here's why:

First, there is a potentially major problem which deserves caution. If you outsource the manufacturing of your items to some foreign countries, you may find it difficult or impossible to control their use of your IP. They might make your product and sell it to others, or even use your methods or technology in other ways, with no compensation to you.

And it gets worse. Numerous large American (and other) companies engage in open patent theft. Here's the deal. The company does a "cost/benefit analysis" of stealing the technology or method. It estimates the chance of being caught; the likelihood of losing a court battle; the resources of the rightful patent owner to press on; and what damages might be awarded if the owner prevails. Then this is compared to the incremental profit that is expected. This is called "efficient infringement" and it clearly victimizes smaller businesses, inventors and innovators. To find out more, including the very familiar names of some prime offenders, go to efficientinfringement.factsreviews.com. Patent infringement is not a criminal act. Your remedy is civil litigation against the infringer.

There's also a dark flip side to this issue. A "patent troll" is a term for a company who buys patents, often from businesses in bankruptcy, and then asserts infringement against large corporations. Often the patent troll will get some "go-away money" from the defendant, just to get rid of the suit.

The USPTO gets around 500,000 patent applications a year. The backlog of applications is around 700,000 and the waiting period is about three years. Just for perspective, Thomas Edison got the patent on the Edison Phonograph - a completely new idea and device - in seven weeks.

Last year the U.S. House and Senate considered sweeping changes in U.S. patent law. The "America Invents Act" passed both bodies with large majorities. This was the first significant patent reform since 1952.

Parts of AIA have yet to take effect. Here's the big one: on March 16, 2013 the U.S. will change the basis of how patents are awarded. The current system is called "first-to-invent." As that suggests, it gives precedence to the inventor with the idea. The new system is called "first-to-file" and gives priority to the first to file the patent application. Of course there are some technical exceptions, but in general it's a race to the Patent Office.

The U.S. is the only nation still using first-to-invent. Canada and the Philippines switched over to first-to-file in 1989 and 1998 respectively.

Some small-business advocates are concerned that the first-to-file system will allow large businesses, with big research and legal staffs, to muscle them out. So, the big question is: what impact will the change have? Based on Canada's experience, not very much.

Since you're a very small business, look into the AIA's new "micro-entity" designation. You're eligible for substantial reductions in many of the USPTO's fees during the application process.

And of course you'll need specialized legal help to do this right. Best wishes.

ABOUT SCORE

To learn more about managing cash flow, and other small business matters, contact SCORE, "Counselors to America's Small Business." SCORE is a nonprofit nationwide organization with more than 13,000 volunteer business counselors who provide free, confidential business counseling and low-cost training workshops to small business owners. Call the local SCORE chapter at 360-685-4259 to schedule an appointment. For details about the organization,visit SCORE.org.

Ask SCORE is prepared for The Bellingham Herald by Bob Dahms, a business counselor with the Bellingham chapter of SCORE. Submit questions for this column to newsroom@bellinghamherald.com.

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