Brad Barbera On What Patent Reform Means For Product Development
Patent Reform approaches, actually, it is already here given that some of the provisions are already in place, and product development managers need to be thinking about its consequences. That’s why I chose to reach out to Brad Barbera, who is the Executive Director of the Product Development and Management Association, he has been in his current role at the PDMA for about 9 months, but has a 15 year background with the association and over twenty years in the field of product development. Brad and I recently chatted about the issue of Patent Reform and product development.
First, however, Brad had a disclaimer: “I am not a lawyer, we do not have a staff PDMA IP lawyer, and I have not sought specific advice in this area. Everything is based on what I’ve read, and my own personal speculation.”
John: What steps has your association taken to prepare product development members for the America Invents Act?
Brad: We are trying to understand the act; I’m contacting IP lawyers, planning on webinars and in-person presentations at both the international and local levels. But I see that there’s an 18 month window here, where there’s a lot to still be settled, as not all the rules are written. So here at the PDMA we are interested in understanding the implications and helping our members operate effectively in the new system. My biggest single concern is that the rules are going to get in the way of innovation, more than they are going to help.
However, there remains a great deal to sort out with the America Invents Act, and the patent office itself still needs to define some rules about how some provisions of the law will be applied. I have even heard some objections to the law on constitutional grounds. While preparation is essential, there is not a need to rush to finalize preparations, as much could change in the next 12-15 months. Even then, the impact of a filing strategy probably won’t be felt for around three years or so, since an examiner won’t be able to even begin reviewing a patent application for a year or so after that date, given the current backlog of patents applications in the system already. I would anticipate that getting worse just before the deadline, with a surge of applications being submitted under the old rules by those uncertain about the new rules.
John: What organizational changes are your members making to prepare? What nuts and bolts changes does a company have to make to be prepared?
Brad: Our membership is too diverse to discuss specific actions being taken as a whole, and right now, so early in the transition, they are primarily just trying to understand and predict the impact. There is a diversity of opinion on what the impacts will be, even among experts. To best prepare, organizations need to understand first what the changes are, then try to imagine the possible ramifications for the future, how the law will change external behaviors, both positively and negatively.
The one certainty is that the change in the law will require a change in strategy, as a fundamental market condition has changed for innovators. Each inventor or organization will need to determine for themselves how the anticipated changes will impact their market, anticipate competitive moves, and determine the resource requirements necessary to compete effectively under the new rules.
Organizations, both academic and commercial, will need to review their processes for documenting, reviewing and filing patent applications. There will be many differences between organizations, as the fields in which they operate will impact their behavior. A fast-changing field will likely require faster application. A slower-changing field will probably allow for more preparation time.
John: How will first-to-file change filing behavior?
Brad: We’d obviously anticipate that people will start to file as fast as they can; this is a different mindset than when I was doing work as a practitioner, then it was a little easier to share a new product with a panel or consumer as an attempt to get improvements. Now people will want to file first and test later. This leads to some implications, some of which are going to be messy. I anticipate a surge of patent applications before March 16th 2012, innovators will want to file under the old rules that they understand better, and then an overall higher rate of applications after that date because people will think they have to get this into the patent office. The changes will create some problems down the road for the USPTO in terms of backlogs.
There will be a lot of provisional patent filings, especially if someone is considering the issues of first to disclosure. People will learn how to manage that. Filing a provisional patent when you make a public disclosure will probably be a good idea. There will be courts cases to figure this out, and the impact will not be realized for another 3-5 years.
In spite of the claimed benefit of harmonization of US law with that of the rest of the world, the US will not actually be a strict first-to-file country, as I understand it. As I understand it, the system will continue to be unique in the world, as a hybrid first-to-file or first-to-disclose system. Exceptions are built into the law to protect inventors and researchers that disclose their inventions to the public before filing for a patent for up to one year. It remains to be seen how these exceptions to a strict first-to-file system will be handled by the US patent office and federal courts. Those are some of the rules that the USPTO must still establish.
With that said, there will obviously be new incentive to get the application process done sooner, as rapidly as feasible after the moment of invention. I would expect, therefore, for patent application thoroughness to go down, and patent application volume to go up, as quality of application is traded off for speed of application. However, there is also incentive in the new law to be diligent in the application process. The new inter partes review and post grant review will put more patents at risk of being challenged by competitors, which may increase the number of patent challenges in the future. This increases the incentive for applicants to get things right, because competitors will have the incentive to review all issued patents for vulnerability to attack. Also, while it’s easy to say “file fast, file often,” we must keep in mind that filing has both financial costs and opportunity costs, so investment of resources must be carefully evaluated for their expected return. It almost becomes a “damned if you do, damned if you don’t” decision on filing an application.
Theoretically, pursuing a public disclosure strategy might be less costly, but doing so comes with a great deal of uncertainty. For example, it is uncertain how such a strategy would impact foreign patent rights. In most countries, a public disclosure before filing a patent application results in a loss of patent rights in that country. When foreign patent rights are not of concern, though, a first-to-disclose approach might prove to be an effective strategy, especially for a start-up, individual, or small business with limited resources to spend on the patent process.
It’s important to note that in a first-to-disclose scenario, the disclosing inventor bears the burden of identifying possible copy-cat applications, or having to pursue legal invalidation of an issued copy-cat patent within a narrow nine-month timeframe. That will be costly, and may reduce the market value of the invention significantly. After all, who wants to invest in an invention for which someone else possesses a patent?
John: What will be the consequences of first-to-file for product development?
Brad: I have concerns about the impact on many levels.
First, it creates additional uncertainty around new products, when the return on innovation is already quite uncertain. Such uncertainty may be a disincentive in the short run to launch new innovations, especially for risk-averse organizations in lean economic times.
The impact on the growing trend toward open innovation is likely to be negative. Due to the potential for copy-cat patenting, first-to-file seems to me to discourage the collaborative sharing of ideas between parties, compared to first-to-invent. The single biggest issue in the open-innovation space is already intellectual property, and AIA will heighten that concern. I believe organizations, at least in the near term, will tend to move back to being more closed in their innovation efforts, reducing cross-pollination of ideas.
Customer testing and engagement is likely to be delayed or reduced, in order to avoid the challenges of public invention disclosure. Under the current first-to-invent system, an inventor does not have to rush a patent application to the Patent Office. An organization or inventor can refine, test, and hone a concept before deciding if they should invest in applying for a patent. That opportunity may be more limited under first-to-file. While all organizations must manage their resources effectively, I think the first-to-invent system will have a greater impact on small businesses and independent inventors who have more limited means.
John: How will product development prepare for post-grant review?
Brad: That’s what I find fascinating about this, you have first to file, which means you have to get to the patent office as quickly as possible, which may turn out to be an incentive not to do as much due diligence. But the threat of inter partes and post-grant reviews may create a situation where product developers will want to do more diligence, managers will question when do I rush to the patent office, and how do I balance preparing enough information, when is enough, just enough?
There will also be examples of competitive review, where competitor A files a patent, and competitor B will conduct a post grant review. Post grant review could be used by competitor B to buy time to catch up with a novel innovation patented by their competition. This will create a lot of confusion about how much due diligence do I have to conduct. There’s an old saying, “you cannot be good, fast and cheap, but you pick two of those choices.” Different companies are going to pursue different strategies for these new procedures.
John: Will there be different reactions from product managers who have more international patent experience?
Brad: Certainly some are more internationally oriented, I used to work for the North American division of Kao Corporation of Japan, which does business world-wide, and we had to be very internationally focused, and you had to try to do the right thing for all the right places. I also worked for Walgreens, which at this time is an entirely US focused organization, so they are not generally going to be concerned about patent law outside of the US. Different organizations will respond in different ways. Global Universities and Corporations are going to have an advantage. Smaller and locally focused organizations will have to work harder to catch up.
John: Now that prior art is expanded to foreign art, how will this change product development business processes?
Brad: Global organizations are going to have an advantage over the independent inventor and smaller companies that do not have international experience.
The scope of prior art searches that must be conducted by patentees and accused infringers will obviously have to widen considerably as a result of this change. This will increase the cost of ownership of a patent.
There may be a surge in demand for different tools, be they personal solutions, more professionals who understand the law very well; or a market for new software tools. This could be good for those who practice IP law, business consulting, or software solutions, but that does not mean it will be good for the overall economy. Resources devoted to these new goods and services will have to be taken away from other potential new goods and services that people would have valued; we don’t know what will be lost as a result.
John: How will Patent Reform affect the product developers’ relationship with Universities?
Brad: Under our current first-to-Invent system, researchers can present their discoveries at scientific conferences and publish them in professional journals, and still have a year to file patent applications. Without a grace period, publicly disclosed results would not be patentable. Moving to a first-to-file system may have some unanticipated consequences for university research, as the incentive for researchers to publish and the pursuit of technology transfer revenues from licensing or purchase of university patent rights come into conflict.
It will all depend on how the public disclosure exceptions in the new law are interpreted, and what rules are defined for interpretation. Since collaboration and citation are essential to academic researcher, figuring out who owns what in terms of intellectual property could be a major challenge for US Universities.
International Universities might find that, in the near term, they have an advantage versus US Universities, as they already know how to operate under a first-to-file system in their own countries. US Universities will have to go through a learning curve in order to adapt their IP strategy to the new patent doctrine.
John: Will there be any changes to IP management as a result of the new act?
Brad: I don’t know if responsibilities have to be shifted around. We will likely see a surge in resources for IP management, certainly in the short term as the change takes place, and the uncertainty hits. This uncertainly will be for the first 3-5 years, and as a result there may be a decline in product development, because of the increase in uncertainty. One of the trends in product development has been open innovation, a kind of co-inventing solutions. Companies like P&G, have heavily promoted this, and I’m concerned in the short term, that companies will not know if they want to collaborate with people outside of the organization. This will impact some of the universities. Companies may be less likely to work with universities, and prefer to internalize their research efforts, until they spend more time on working out the IP issues.
--------------------
The “Structural Packaging Summit,” is nearly here (February 28th – March 1st) and Newlogic will be presenting on patent reform, patent portfolio management and the effect it will have on packaging R&D.