Critics: Patent overhaul could hurt startups

When the Senate passed legislation last week overhauling the U.S. patent system, large multinational corporations like Eli Lilly and Co. rejoiced. But small-business advocates cried foul, saying the changes would put innovative startups at a disadvantage.

“This legislation will irreversibly damage the ability of small-business owners and entrepreneurs to create, develop and commercialize their innovations,” National Small Business Association chief Todd McCracken said in a prepared statement.

The America Invents Act, which President Obama is expected to sign, is intended to speed up the patent review process, strengthen the quality of patents, and bring the United States in line with other countries by awarding a patent to the first inventor to apply for it.

That first-to-file provision is a change from the U.S.’s existing first-to-invent rule, eliminating the time-consuming process of determining who had an idea first.

But that’s the rub, small biz backers say. They predict the resulting rush to the patent office will favor large companies that have the resources file applications early and often.

Indeed, the change will increase the capital burden for innovative startups out of the gate, said Joe Trebley, head of startup support and promotion at the Indiana University Research & Technology Corp.

“It doesn’t allow startups to delay their patent costs,” he said. “They will need to raise that capital a little earlier.”

On the other hand, the shift could save companies money later, said Marie Kerbeshian, IURTC’s vice president for technology commercialization. Under the current system, a dispute over who was the first to invent a product or process can be costly as well as lengthy. And the legislation will lower patent fees for the smallest companies.

Still, Kerbeshian admits that the patent system overhaul—which IU supported—will require some adjustments for smaller organizations and entities that are focused on the U.S. market.

“Whenever you’re looking at worldwide markets, you’re already trying to file early,” she said. “If you weren’t first to file, you’re losing those markets anyway.”

IURTC patent counsel Brian Cholewa expects to see innovative firms of all sizes filing for patents earlier—increasing the use of provisional applications that are updated as development continues.

“Time will be more critical,” he said.

No doubt. But will small businesses suffer as a result? What do you think?