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Forbes Explains How America Invents Act will Hurt Tech Entrepreneurs

Forbes Explains How America Invents Act will Hurt Tech Entrepreneurs

This excellent article shows that when Canada changed from a first-to-invent system to a first-to-file system, it was bad for individual inventors, technology start-ups, and Canadian venture capital.  The article then quotes a UK study showing how the European system is not encouraging innovation.  The article notes that the America Invents Act will effectively eliminate the one year grace period for inventors, which is particularly important for startups.  The new post grant review will allow large companies to tie up entrepreneurial companies in expensive litigation for years.  The post grant procedure has been used effectively in Europe to stifle startup competitors by large companies.  Unfortunately, one of the supposed benefits of the Act was to stop fee diversion.  The Patent Office is completely funded by user fees and Congress has taken (stolen) these fees to support other Congressional pet projects.  The result of fee diversion is that it now takes four or more years on average for a patent to issue.  This pendency time results in the patent often issuing long after the commercial opportunity has passed the company by.  If it took 3 to 4 years to obtain title to your car or house after you bought it, you would think you were living in a third world country.  However, this is what happens in the patent world everyday and the America Invents Act does not solve this problem.  The author concludes that Congress should be careful that the America Invents Act not become the equivalent of Sarbanes Oxley.

This article was written by Gary Lauder is Managing Director of Lauder Partners, a Silicon Valley-based venture capitalist and co-inventor of a dozen patents. More info on this issue can be found on his Web site.


1 Comment

  1. Dale,

    David Boundy has an excellent analysis here:

    Allow me to lift one noteworthy part here with inserts:

    … Once [a] company is formed [to solve an identified problem] , the hard work of research and development (R&D) begins. Many high-tech products require [many and] long trial-and-error [runs]: the inventors conceive and discard dozens of ideas before hitting the magic combination that results in a commercially-viable product. The work-and-rework for a commercial product often takes several years [of diligence]. Dozens of approaches, sometimes a hundred [proto-]inventions, are tried, explored, and mostly [all are] discarded. A company may pursue one for a year or more before finding that it doesn’t work, then go back and try one of the discarded ones modified by an insight from [the earlier] other work. The final product may embody only a tiny fraction of all of the inventions [tried and tossed]. Again, as we’ll see, today’s [old 1952] law fosters this R&D, but the new bill [AIA 2011] squelches it.

    Unfortunately, the America Invents Act makes these [above] two fact scenarios nonviable for startups—because the proponents concede that they “didn’t think” about them. [Oops, but then again, "mistakes" happen. So sorry.]

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