Government Should Provide Tools, Not Just Money, for Small Business Foreign Patenting

Access practice tools, as well as industry leading news, customizable alerts, dockets, and primary content, including a comprehensive collection of case law, dockets, and regulations. Leverage...

By Tony Dutra

Patent community stakeholders big and small focused more on tools than funding to assist small businesses with international patent rights at an Oct. 27 hearing at the Patent and Trademark Office in Alexandria, Va.

The agency's “Public Hearing on the Study of International Patent Protection for Small Businesses” was held in response to Congress's request, in a provision of the America Invents Act (H.R. 1249, Pub. L. No. 112-29), for a joint report by the PTO and the Small Business Administration, due Jan. 14.

The request asked whether the government should implement a revolving fund or grant program to assist in overseas patent prosecution, maintenance, and/or enforcement, and indeed those presenters who represented small business concerns welcomed the possibility.

However, the participants appeared to recognize that the controversy over the government's failed investment in Solyndra LLC made such funding unlikely. They therefore added recommendations that the PTO engage in translation, harmonization, and enforcement efforts that would lower the cost to all patent applicants and patent owners, helping small businesses in that they could now afford what comes more easily to larger companies.

A second hearing will be held at the University of Southern California Nov. 1.

Small Business Study Due Jan. 14

In accordance with Section 31 of the AIA, titled “USPTO study on international patent protections for small businesses,” the PTO issued a Federal Register notice Oct. 7 announcing the public hearings and made a request for comments, due Nov. 8. 76 Fed. Reg. 62,389.

The notice invited the patent community to comment on 10 separate questions. The first four questions seek current experiences on the importance of and challenges to small businesses in international patent protection.

The remaining questions relate to if and how the federal government should assist small businesses regarding international patenting. Question 5 divides the possible assistance into how small businesses can obtain, maintain, and enforce international patents.

The next four questions relate to financing, asking whether the federal government should defray the costs of filing, maintaining, and enforcing international patents. The AIA asked whether a “revolving loan fund program” or a grant program would be appropriate, and the PTO asked for preferences if only one of those two options is to be made available.

Finally, the PTO asked, “Are there circumstances under which the Federal Government should not consider establishing any of these programs?”

In preparing this report, the AIA requires the PTO to consult with the secretary of commerce and the administrator of the Small Business Administration. David Donner Chait, senior policy advisor to the SBA administrator, attended the Oct. 27 hearing.

Mix of Presenters

PTO Deputy Director Teresa Stanek Rea opened the meeting and called for comments on the possibility of grants, subsidies, or loans to small businesses. But she also opened the discussion to go beyond funding by asking whether “a new work sharing model” among patent offices might help.

Janet Gongola, the PTO's patent reform coordinator, spoke generally on the AIA's provisions related to studies and reports. The AIA requires the PTO to take the lead on six reports due to Congress related to the impact of the legislation, she noted, and the current study is the first one due.

Also representing the PTO were: Chief Economist Stuart Graham, the study leader for this study; Albert Tramposch, the PTO's administrator for policy and external affairs; Dana Robert Colarulli, director of the PTO's Office of Governmental Affairs; and Saurabh Vishnubhakat, attorney advisor in the Office of Chief Economist.

Those providing oral testimony at the hearing were:

• Morgan Reed, director of the Association for Competitive Technology, a Washington, D.C.-based advocacy and education organization representing more than 3,000 small and mid-size application developers and information technology firms;

• Timothy King, global intellectual property manager of IPG Photonics Corp., Oxford, Mass., a developer and manufacturer of high-performance fiber lasers;

• Alan J. Kasper of Sughrue Mion, Washington, D.C., speaking on behalf of the American Intellectual Property Law Association as its immediate past president;

• Steven P. Caltrider, deputy general patent counsel for Eli Lilly & Co., Indianapolis, speaking for the American Bar Association's Intellectual Property Law Section;

• Stanley C. Erck, president and CEO of Novavax Inc., Rockville, Md., representing the Biotechnology Industry Organization; and

• Patrick R. Bahn, CEO of TGV Rockets Inc., Norman, Okla.

Entrepreneurs Focus on Funding Challenges

Reed, King, Erck, and Bahn described anecdotal evidence of the value of overseas patenting, the negative consequences of failing to do so, and the severe financial challenge faced by small firms in making those decisions.

Each noted that spending money on foreign patents typically meant a personal sacrifice to the entrepreneur—reaching the maximum on a credit card, borrowing from family, fewer gifts for children, etc.—and Reed and Bahn added that it can often mean fewer jobs, in that a minimum $30,000 average expense per country filing was equivalent to a full-time equivalent engineer.

None of the four entrepreneurs rejected the idea of government funding assistance, but they were generally wary of loans, based on their experiences with the SBA. The SBA backs loans granted by local banks, but banks “don't know how to price IP as an asset,” Reed said.

Erck, who said that the majority of BIO's members are small firms, agreed. “There is no reason to exempt patent rights from publicly-funded small business programs that are available for more tangible assets such as capital equipment, hiring, or leasing space,” he said.

In a barely veiled reference to Solyndra, Reed noted that, in the venture capital world, it is not necessarily a bad thing if seven out of 10 investments fail, while that is clearly intolerable as a measure of government financing performance. Reed said the question thus was, “How do we help the SBA deal with their risk aversion?” He undoubtedly did not expect an answer, nor did he get one at the hearing.

Bahn had one further reason to reject a loan program. He said that an SBA or other government loan creates a contingent liability that “freaks out other lending sources,” making follow-on funding extremely difficult.

As to the possibility of grants, the entrepreneurs also agreed on when the grants should be available—for purposes of patent application. As Reed said, “If I'm successful, I can get someone to give me money” to pay maintenance fees or enforce against infringers.

AIPLA Says No to Funding

Kasper said the AIPLA's overarching view is that the federal government should not become involved in funding patenting efforts or in “picking winners” if it has to choose which small business patents deserve assistance in getting or enforcing overseas patent rights.

Kasper and Erck insisted that, whatever the solution, the small business owners or its investors must have “skin in the game” as well. Kasper felt that the small business should put up at least 50 percent of the investment under either a loan or a grant program.

Bahn likely did not agree, but did say that, whatever funding might be provided, U.S. taxpayers had a right to make sure that the benefit stays in the United States. That is, he said, if the patent owner sells the patent overseas, the loan or grant should have claw back penalty at something like three times the amount loaned or granted.

King said the problem was really that small business owners need more time. He suggested an amendment to Article 4.C(1) of the Paris Convention, extending to 24 months the period of priority for patents and utility models. That would give the inventor more time to raise capital, with more knowledge about the viability of the patent.

King noted that, with the AIA's move to a first-inventor-to-file system, the chances of finding an earlier inventor after the 18 month publication of a patent application are low. Prior art in the form of almost-simultaneous applications on the same invention will be known, he said, and it will be easier for an entrepreneur seeking private funding to rightfully claim to be “first in line” on an invention.

Along similar lines, Bahn asked the PTO to focus on turning around a first office action quickly. However, when Colarulli noted the PTO's 2015 goal of an average FOA within 10 months, Bahn was not satisfied. “I need you to get it down to 90 days,” he said.

Though he was aware of the agency's new “Track I” option that would meet that time frame, he noted the steep price ($2,400 for small entities) and said that the new micro entity fee structure was important.

Assuming the PTO chose to make this expedited examination option available to micro entities—not required by the AIA—the price would drop to $1,200.

Translation, Other Tools Suggested

Graham was the first to bring up the greatest cost element of international filing, the translation costs. Reed said that anecdotal evidence shows translation costs to exceed legal costs.

Kasper said the PTO should work with foreign governments to delay translation, especially in jurisdictions allowing deferred examination.

Several of the presenters pointed out that China has a program of subsidizing translation of patents issued to Chinese inventors for the purpose of filing the comparable patent application in the United States. “If the Chinese are doing it, the U.S. should,” Colarulli said.

Tramposch noted that the agency is already looking at machine translation tools for translating prior art and is considering whether it makes sense to use the same tools to translate the text of patent applications.

However, Bahn felt that the PTO could do much more. “We need tools to help us do the filing,” he said. First he mentioned a tool by a “neutral third party” to assist in searching for prior art. That is to say, Bahn thought that using search engines such as Google exposed the entrepreneur, because the search terms entered gave a hint as to the invention.

He also suggested a “generic open source patent writing tool” sponsored by the PTO, and videos, available on YouTube or other social networking websites, “to tell us how something works and what it means. I don't want to pay a lawyer $300 per hour to tell me the basics of how the [Patent Cooperation Treaty] works.”

Finally, Bahn asked simply for more harmonization among international jurisdictions so that copying the patent application for use in another jurisdiction would not be so difficult. As Erck noted, “Patent claim scope and what is permitted can differ significantly from country to country, which complicates and increases the cost of international patent filing for biotech inventions.”

Tramposch recounted the 130 years of attempts at international harmonization of patent laws and lauded recent discussions at increasing harmonization. However, he set out a much narrower goal as realistic in the short term at least, attacking how to reduce the duplication in patent examination among the offices.

Nevertheless, he concluded the meeting by saying, “Today's discussion was an extraordinarily good step forward” in addressing international patenting concerns.

Notice at  


Request Intellectual Property on Bloomberg Law