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Interesting News Regarding Patent Reform

June 28, 2011


Last week, a patent reform bill, the America Invents Act (H.R. 1249), passed the House of Representatives. On March 8, the Senate passed a similar patent bill (S. 23) by a broad margin. There is no doubt our patent system is broken with backlogs and litigation, but the bill’s net effect on innovative entrepreneurship is still unclear.

In a nutshell, the legislation will change the system of patent award from “first to invent” to “first to file.” It will also extend the time when a patent may be challenged after it has been approved.

In a piece titled “Patent Reform is Patently Offensive to Start-ups,” Valerie Gaydos, chairman of Private Investors in Entrepreneurial Endeavors, argues that the first-to-file system would represent a financial roadblock for innovative startups by making it harder for early stage companies to raise capital. A race to the Patent Office would reduce the time that a company can perfect their product and generate revenue. “Thus, investors will be unlikely to invest in a company or technology that doesn't have some market acceptance,” argues Gaydos. Furthermore, she argues, the extension of post-grant review increases the risk for investors, who might have to see their funds exhausted in the opposition.