It's already clear that the U.S. Patent and Trademark Office (USPTO) is broken. The problems are manifold. It's an overwhelmed agency. Abuse of the system is widespread, most notably patent trolling. Some companies will apply for patents or trademarks no matter how dubious the claim. These issues seem to be forcing a complete overhaul of our current system in the U.S. for protection of intellectual property.
At some point, patents seemed to change focus from the traditional understanding of "inventions" to include less tangible ideas, including business processes as well as software processes. Having grown up with an inventor grandfather who never made a dime off his inventions due to others rushing to patent his ideas, I was curious to see if the current shift was having an impact on companies as well as the USPTO.
The closest personal experience that I had with the USPTO was a patent that my husband's name appears on: a "method and system for processing transactions." Like many patents, it was for a business process driving a software methodology. Filed for in 2001 after months of red tape, the final patent was issued in April 2005, after my husband left the company, and not long after the company was merged with another start-up and finally sold off, the patent most likely being sold along with other assets. The four-year process wasn't that long based on typical process times seen. Some patents are in the system for upwards of six years by the time they are finally issued. Three other patent holders had experiences that note a disturbing trend: by the time many business or software patents are granted, companies are no longer in business. Device patents seem to have better luck, and take much less time.
I spoke with Jay Mari of Techrigy about a patent he and Techrigy CEO Aaron Newman were granted. Taking slightly over five years to process, the patent details a cryptographic infrastructure for encrypting a database:
"I don't think it had much impact on the company at the time, or even currently. I think at the time we wanted to protect the work we were doing (database encryption). Then our view changed, we thought maybe having it will make us or the product attractive for an acquisition. The company had changed focus during that time, but not because of the patent process. It changed because of the market. I think if we were to stay focused in the database encryption market the patent would have been viewed differently.
"Do I feel it's worth it? I think for a company it might be, but I can't imagine a private individual going through this process. Even for a company, unless you are doing something regarding a new media compression algorithm, a new encryption algorithm, or something really low level like that, I don't think it would be worth it for a company. There are other faster and better ways to protect your Intellectual Property. For example, with a company like Techrigy, we can provide access to our data and Ranking algorithms through our web app, or an API, which we have 100% control over... the whole USPTO in regards to technology is old and outdated."
Anthony Citrano describes a similar experience, with patent applications that were eventually abandoned:
"[The patents] were brilliant, if I might say so myself, and are now being used for billions of dollars in transactions annually. (USA Today story for some background)
Cyndy -
Unfortunately, your premise looks at only the veneer of the issue, while the substance goes much deeper.
First, not all companies want patents granted quickly. Pharma companies that require lengthy clinical trials before a new drug is approved want patents grants delayed as much as possible to align as closely as possible to the FDA approval date in order to maximize the benefit of the patent term. The strategies used to extend the patent pending period ("pendency") or patent term are many ... too many to go into here.
On the other hand, some companies in fast moving technology areas want patents granted quickly, so they can assert against an alleged infringer. In those cases, the applicant can request an Accelerated Examination which guarantees a final decision by the USPTO within 12 months of filing.
http://www.uspto.gov/web/patents/accelerated/
There are risks with opting for accelerated examination: the complexity of procedural compliance is high, there is a requirement to perform a comprehensive prior art search, and there are limits on the number of claims, to name a few. Mastering the process however, can provide some significant competitive advantages to high tech companies, and perhaps their investors.
Next, there are offensive and defensive reasons to build a patent portfolio (not placing your bets on one, "silver bullet" patent). They include: increased licensing revenue, or stronger position for cross-licensing negotiations - a response by one company to an infringement assertion, or to position a company within an industry standard (such as owning patents considered "essential" for Blu-Ray, Bluetooth, MP3, MP4, and so forth), and more.
Finally, know that 85% of the market cap of the S&P 500 is attributable to intangible assets, of which patents usually play a majority role. At this point, correlating patent quality (and portfolio size) to market cap becomes a more serious mission. Understanding how to evaluate patents in M&A, enforcement, or defensive corporate strategy environments, with an objective of increasing shareholder value, puts patents high on the list as mission-critical business tools (some shareholders get happy about that).
In the big picture, I echo the voice of many other industry experts regarding the need for the USPTO to timely grant only high quality patents as a service to its constituents. Patents are a business tool, not a one-shot lottery ticket. Managing patent pendency periods, patent quality, patent investment, and long term patent maintenance is not unlike managing accounts receivable cycles, inventory for products in a declining cycle, or maintaining physical plant and equipment. The software tools available to manage patents are not unlike CRM, integrated accounting systems, or shop floor control systems.
Managing patents is deemed such an important mission that some companies have received patents on managing patents. IBM (which generated $1B + in licensing) owns "Intellectual property management method and apparatus", US 7,089,192.
And while patents may grant rights to "intangible property", make no mistake that properly managed patents produce VERY tangible business results.
Ask Blackberry, Microsoft, SanDisk, Medtronic, Microsoft, IBM ......
Andy Gibbs
CEO, PatentCafe®
PatentCafe.com, Inc.
Mine Your Own Business™
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