New Patent Law: Patently Unfair?

What's Hot

2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Changing the way patents are handed out could result in a more efficient, faster, and less expensive process: something that could create jobs and enhance America's global competitiveness. Too bad it might crush the little guy.

Last March the Senate voted 95-5 to pass a bill called the America Invents Act, which would represent the biggest overhaul of the U.S. patent system in 60 years. Last week, the house passed similar legislation. The next step is to reconcile the two versions, then send the completed bill to the White House for the president’s signature. Since the White House has expressed support, it’s possible the bill could become law within weeks.

While there’s no argument that the Patent Office can use some streamlining – there’s a 3-year, 700,000-patent backlog of pending approvals – some insist the new law will benefit big business to the detriment of the little guy.

The changes

The law includes lots of changes. Some concern patents you probably never knew existed: For example, there’s a provision that bans the ability to patent “tax strategies.” Apparently, back in 1998, the courts starting allowing patents for “methods of doing business” – including methods of avoiding income taxes. And since that time, the Patent Office has been allowing them. But this rubbed some in Congress the wrong way, and the new law will make such strategies ineligible to earn a patent. From a press release by Senator Chuck Grassley (R-Iowa):

“Tax patents prevent taxpayers from being able to use certain tax strategies unless they’re willing to pay for them,” Grassley said. “It’s unfair for taxpayers to have to pay for these methods. Our legislation reins in the cottage industry of those trying to own tax planning strategies that should be available to everyone or that would encourage inappropriate tax avoidance.”

The law would also allow the Patent Office to set its own fees, charging less for simpler ideas or smaller inventors and more for big companies or complex patents. That flexibility would allow the patent office to focus more manpower on getting complex patents done quickly, while offering small inventors filing fees as low as $250.

But there are other, more controversial changes afoot: primarily first-to-invent, vs. first-to-file.

Patents grant an exclusive right to sell or license an invention for 20 years. Under existing law, they’re awarded to the person who can prove they first developed an invention or process. The new law would instead award patents not to original developers but to whoever first files a patent application. There’s some logic behind the change: Simply by saying they invented it first, today inventors can sue for inventions they never patented. In a process called “patent trolling,” some companies file patents on products they don’t intend to produce, then wait to sue others who develop them. Others delay competitors from bringing something new to market by suggesting they developed it first. Disputes can cost millions and take years to resolve.

The problem

Since large companies often have in-house teams to develop patentable products, they’re in a better position to file fast and without exposing their ideas to the outside world. The guy who tinkers alone in his garage, on the other hand, has little chance of going through the expensive and complicated patent process without first exposing his idea to people ranging from lawyers to venture capital firms.

In short, because big companies have in-house experts to rapidly and secretly shepherd discoveries through the patent process, they’ll gain an advantage. Just as important, they’ll face fewer challenges since the only legal issue will be when the patent was filed, not when the invention was first created – something much more complicated and time-consuming to establish.

Will this new way of approaching patents better equip American business to innovate, develop new products, stay globally competitive and create new jobs? Yes. Will it better enable big business to steamroll the little guy on their way to the patent office? Perhaps.

For and against

The patent push has been going on for six years, championed by the U.S. Chamber of Commerce and companies ranging from Exxon to Microsoft. Opponents include some small business groups, the American Bar Association, and the American Civil Liberties Union.

Said supporter and House Judiciary Committee Chairman Lamar Smith (R-Texas):

Today’s vote in the Senate is a victory for American innovators who create businesses, generate jobs and drive economic growth. The current patent system is outdated and is bogged down by frivolous suits and uncertainty regarding patent ownership. Patent reform unleashes American inventors and allows patent holders to capitalize on their innovations and create new products and more jobs.

Clyde Prestowitz, founder and president of the Economic Strategy Institute disagrees. From this article:

Most countries grant patents to those who first file their applications for patents on new inventions regardless of whether they were actually the original inventors. This is obviously a bureaucratically simpler procedure and also one that obviously favors big companies with platoons of scientists and lawyers who can scan the horizon for news of new inventions and then quickly file patent applications. This is the approach that the new act would impose on U.S. patent application procedures.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 10 Key Facts to Test Your Credit Card IQ

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,069 more deals!