Patent Reform Act would hurt small business owners

By Grace-Marie Turner

Small business entrepreneurs beware. The U.S. Senate is preparing to debate patent reform legislation that's designed to aid tech titans but which could trample independent inventors in the process.

The Patent Reform Act, which passed the House last year, would change how patents are assessed and enforced to better address the complexities of 21st century technologies.

The legislation's biggest supporters are big fast-moving technology firms. These companies often incorporate components that have been previously patented by others into their products. But in recent years, they've been confronted with numerous lawsuits from people who hoard patents primarily to sue for infringement.

Although the tech titans have legitimate problems, the legislation has many unintended consequences and could threaten small business owners and independent inventors by making it easier for others to reap the rewards of their work.

Take, for instance, a provision in the bill that would change the patent approval process from a "first-to-invent" to a "first-to-file" system. Theoretically, this makes it easier to resolve patent disputes. Determining who filed the paperwork first is much simpler than determining who had an idea first.

The legislation would put small-time inventors at a big-time disadvantage by making it much harder and more expensive for them to file for patent protection.

Specifically, the bill would eliminate the provisional patent application process that has long been a boon to start-up companies and garage-style inventors.

Currently, inventors can file for temporary patent protection for a modest $100 fee and retain the right to petition for permanent protection for one year. But the bill would scrap this introductory rate, which means that all applicants would have to follow the complex and expensive application process, which costs between $10,000 and $15,000 up front. This cost could be prohibitive to small-scale or independent inventors, many of whom depend on the provisional patent to buy time while they secure funds for a formal application.

The bill also would make all new patent applications available to the public online after just 18 months, eliminating any possibility for an extension. That would make it much easier for patent thieves to steal ideas, since they would have unlimited access to a bevy of potentially lucrative inventions that haven't yet received legal protections.

Large companies are inherently better positioned to file for patents, to have the resources to accelerate development of the product within the 18 month window, and to hire the army of lawyers necessary to navigate the patent approval maze.

Small-time entrepreneurs -- with fewer legal resources - clearly would be disadvantaged.

The bill actually makes it easier for people who hoard patents (known colloquially as "trolls") to file junk lawsuits against patent holders. It would grant plaintiffs unlimited legal challenges for a year after a patent is granted, rather than the one challenge they're currently allowed. Trolls could overwhelm small businesses with lawsuits, escalating legal fees to the point where a potentially unjust settlement is the least-costly option for a small inventor.

Small-businesses can't afford to ignore The Patent Reform Act, which threatens the legal protection that is the lifeblood of so many entrepreneurs. If the measure passes, those who would game the patent bureaucracy for their personal gain will have a substantial -- and unfair - advantage over genuine innovators.

The Founding Fathers understood the value to our economy of intellectual property rights and wrote protections into the Constitution. The U.S. Senate should be very cautious indeed before taking action that could undermine this fundamental right that is crucial to the strength of our economy.

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on free-market solutions to health reform. She can be re