Patent Office Plans Could Kill Small Company Innovation

If protecting inventions is at the heart of high tech competitiveness, plans underfoot at the U.S. Patent and Trademark Office (USPTO) plans will critically wound small companies. The agency has long worked under tremendous pressure and a growing backlog that has been the subject of heavy criticism. As details emerge of what the Patent Office plans in terms of improved performance and mechanisms to achieve it, one thing is clear: Patent filing and maintenance rates may shoot so high as to make it economically difficult, if not impossible, for many small companies to adequately protect their innovations.

The result could be even greater control of technology markets by a handful of large corporations that have the resources to file extensively and lock out small companies.

Commerce Department plans for the patent process raise eyebrows of those in the IP law field. Earlier this year, Commerce Secretary Gary Locke told a Senate panel that the USPTO is on the road to much faster patent grants. Locke said that, outside of pharmaceutical patents, by 2014 the time from first patent application filing to final grant would be 12 months instead of 34.

Given the agency's current structure, this is completely and utterly impossible. The backlog is so bad so bad that the USPTO has often been cryptic with details that would let anyone measure the pile-up's extent. In a recent essay, Locke said that the agency has a backlog of 750,000 applications.

The agency can't add people fast enough to whittle down the pile. There are only two choices: lower standards and grant more patents to reduce the pressure or find ways to drastically cut back the number of applications.

There is already evidence that the USPTO has accelerated the patent grant rate. The number of patents it grants per week has jumped sharply by 35 percent since last year. Given a staff of roughly the same size, how do you get that much productivity? You tell patent examiners to say yes to applications far more often. (Don't attempt to convince me that suddenly patent applications have become that much more clear and convincing.) Just when you thought large companies didn't have enough advantage in competing with smaller ones. For an example, look at how Microsoft (MSFT) and Apple (AAPL) plan to use patents to kill off Firefox and Opera.

However, if the patent grant rate goes up too much, critics will get suspicious. What the USPTO must do is reduce the number of applications it gets in the first place. Enter higher fees. As Locke wrote in his essay:

First, Congress will grant fee-setting authority to the patent office, which will enable it to adjust the actual costs of the services it provides. This could contribute significantly to the office's ability to reduce the application backlog by 40 percent.

If rates balloon that significantly, who will go off, discouraged? Large corporations such as IBM, Microsoft, and Apple? They'll probably reduce their flood of filings somewhat, but for the most part, it's small and even medium companies that will refrain. Their only rational option will be to completely disclose all of their research to prevent others from filing patents that would lock their developments out. Again, large companies become the beneficiaries because they have free access to the work of smaller companies, though the reverse would not be true. Large companies will be able to freeze smaller ones out, making the changes an innovative and competitive train wreck.

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