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Patent Reform Briefing to Senate Staff

Patent Reform Briefing to Senate Staff

There a number of youtube videos on the USBIC Briefing on Senate Consideration of House Patent Reform Bill H.R. 1249.  These videos provide invaluable insights into the America Invents Act.  Below I highlight some of the interesting points.



Judge Michel, “I can guarantee you that if I went into private practice I could hold up any patent for almost a decade in post grant proceedings, it would never get to trial in the district court.”  The value of patents will plummet because of this, since they are not enforceable for almost a decade.

Judge Michel

The funding problem not being solved is the biggest problem.  The patent office will likely lose at least $100M next year.  The continuing resolution funding bill this years has killed the Patent Offices’ budget to hire examiners, fix their IT infrastructure, and create a satellite office.  It is inevitable that there will be another continuing resolution funding bill this year.  The 15% increase in Patent Office fees are going to be nothing but a tax on inventors.

First to file system: large corporations already act under this system.  But, this will hurt small companies and start-ups.  The advantages of first to file, if any, are more than offset by the funding issue and the post grant procedure.

The idea that this bill will create jobs is a joke.  If you want to create jobs, you need to clear the backlog of 1.2 million patent applications.  Passing this bill will slow down the process of granting patents, so it will not create jobs.

First purpose of patents is to disseminate technology information

Second purpose of patents is to incentivize investment.

Delays and backlog have increased during the time that Congress has been considering patent reform.

Fee diversion began in 1992.  In 2010 there was over $50M in fee diversion and in 2011 $85M, and it is likely that over $600M will be stolen from the patent office in 2012.  Without access to fees, the Patent Office will become a job killing agency, not a job creating agency.

The patent system isn’t broken, the patent office is broken because of the diversion of patent fees.

Fatal defects of the legislation includes section 18 (business method patent – Wall Street giveaway), section 14 (no patents on tax strategies), parts of section 5 (prior commercial use – trade secret protection system), parts of section 6 (post grant review).

Thomas Edison got his patent on the light bulb in 3 months.  It now takes on average over 3 years to obtain a patent and many patents 5-10 years to issue.


Gary Lauder

Small business, startups, and investors have not been heard on this issue.  Many Venture Capitalists are not aware of the changes that are occurring.

Every famous living inventor is against this bill, including Dean Kamen – inventor of the segway, Steve Perlman – inventor of quicktime.

The national venture capital organization, IEEE, National association of seed and angel funds is against the bill, all of which represent small companies and small company innovation and do not have the money for lobbying.

Kappos lobbied for these same changes when he was at IBM.  This is a violation of the administrations revolving door rules.

Misrepresentations of what the bill says or will do: Include we need first to file because small companies cannot afford interference proceedings.  Interference proceedings happen 0.01% of the time or less, but interference proceedings are replace by more expensive derivation proceedings.  These proceeding require you to present evidence that was stolen from you.  So if you got hacked, you have to prove you got hacked and who hacked you.  There is not right of discovery under this America Invents Act.

First-to-file’s worst effect is on companies between the ages of zero to one.  The derivation proceeding make it almost impossible for these startups to prevail, because of the time, expense, and lack of discovery.

The rest of the worlds patent systems do not work.  They do not encourage startups or individual inventors. The advice to startup is that they need to apply for patent before they talk to investors, but they need investment to afford to apply for patents and before they talk to customers and potential employees.  There is 10 times more angel and venture capital investors in the U.S. per capita than in Europe.

This bill is also going to an enormous boon to cyber criminals, because IP will be worth more money.

Venture capital has declined by an order of magnitude since 2000.  Since 2007 it has declined by a factor of four.  If this bill passes the shrinkage in venture capital will accelerate.


Pat Choate

Ph.d economist, former vice presidential running mate of Ross Perot.  Dr. Choate has written extensively on the theft of America’s intellectual property and is the foremost expert on this issue.

We have run out of policy tools.  The way we worked ourselves out the 1970s was inventing a new economy and that is how we are going to have to work our way of this economic downturn. The companies that create all net jobs are startups.  Technology is way increase real per capita income.  The fastest way to kill creative destruction is to kill the patent system.  This is a bill to Europeanize the American patent system.  This effort has been going on since 1980.  This patent bill was written by IBM and 14 corporations.  In Europe, individual inventors get 0.6% of all patents  This bill will choke off American innovation and this will be obvious within 2-3 years of passage.


Valerie Gaydos

Angel Investor and founder of CEO Growth Capital.


There is much more on Youtube.


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