Tech Entrepreneurs Take Caution With Obama's New Patent Law

Earlier this month, President Obama signed the America Invents Act into law after it past in the House and Senate with strong support on both sides. This is the first major step in patent reform, according to some, since 1952.

The most notable reform is a change from "first to invent" system to a "first to file" system. This is the system that most of the world operates on, according to CNN, that prevents "investors from coming out of the woodwork and laying claim to a patent." Obama and others tout that this new system will spur jobs. Business Insider guest writer Henry Nothhaft says it will do the opposite:

This will shift the advantage to large, deep-pocketed companies who, with their legions of lawyers and many millions of dollars in resources, can now swamp the USPTO’s inboxes with a tsunami of applications. Independent inventors and small start-ups who do not have the equivalent legal and financial resources to compete, meanwhile, will be forced to the back of line at the patent office.

He notes entrepreneurs saying in the 2008 Berkeley Patent Survey that getting a patent is the first set to getting financial backing. Without this patent, they will not be able to get the financing. Nothhaft also brings up the fact that 100 percent of job growth in the past 35 years, based on data from the U.S. Census Bureau, was from start-up companies, without which the country would have experienced negative job growth:

“These findings imply that America should be thinking differently about the standard employment policy paradigm,” said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation. “Policymakers tend to focus on changes in the national or state unemployment rate, or on layoffs by existing companies. But the data from this report suggest that growth would be best boosted by supporting start-up firms.”

In regard to the fact that the rest of the world operates on a similar first to file system, Nothhaft writes:

[...] less than 1 percent of patents are filed by job-creating small businesses and independent inventors compared to 28 percent in the U.S. [...] Our patent system is a big reason why almost every major technological breakthrough of the last 100 years — from autos and airplanes to semiconductors and PCs — originated in America rather than Europe or someplace else.

On a similar note, Forbes guest writer Gary Lauder reports several examples of how Europe is discontent with its own system:

In May, the U.K.’s Small Medium-sized Entity Innovation Alliance sent a letter to their prime minister complaining that they “know only too well the failure of the patent system and have given up.”  Two years ago, a European research organization published a study titled “Lost property: The European patent system and why it doesn’t work.”  In February, the EU declared an “innovation emergency” due to how far behind us they are falling in innovation and in R&D investments.

Some in the gaming industry also have misgivings over the law. Gaming Bus reports that the new patent system for this industry will result in favoritism of larger companies that file patents for everything they invent, while small businesses selectively choose patents they apply for due to cost.