Overview of the  changes:

PowerPoint deck of the fee changes.

While this announcement may mean higher fees for larger R&D departments, Patent fees are overall a smaller portion of the cost of patenting when considering the costs of attorney fees. The bigger issues for R&D departments arise in making decisions about what to patent and what not to patent in light of the Patent Reform Bill’s changes from first to invent, to first inventor to file, and the effects those changes have on choices about what to patent when and if an invention is within a company’s overall technology strategy.

However, the rules should be reviewed, and here’s a synopsis of the proposed fee changes with image of the new fee structure in this post.

-USPTO is now enabled to set its own fees.

-In setting the fees the office attempted to put the office on a more sound financial footing, and want to build a better cash reserve.

-The office intends to reduce the backlog of unexamined patent applications. Aim is to reduce the backlog to 329,500 by 1015, and first action pendency to 10 months by 2014, and total pendency to 20 months in 2015. But these goals are being delayed a year for lack of resources.

-USPTO is introducing a new fee schedule, and expects in 2013 fee revenue will increase by 10%, and in 2014 by 5%. This revenue will enable the office to meet some of its pendency goals, so much so, that by 2016 fees will be reduced.

-Filing, search and examination fees are maintained below their full costs to the office to reduce barrier to entry for the patent system. However the fees are actually increased.

-Maintenance fees are set above cost to recoup the front-end subsidy, when applicants have more knowledge about the commercial viability of their patent. However, the fees are increased.

-In summary. Fees are increased for filing, search, exams, request for continued examination (RCE), excess claims and application size, extensions of time, notice of appeal, maintenance fees. And fees are decreased for prioritized examination, and publication and issue fees.

-People who qualify for micro entity status will pay less in fees.

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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.

Newlogic is a management consultancy to R&D executives. So we think a lot about how the processes of R&D organizations operate. We’ve been wondering how R&D processes are going to change because of the US Patent Reform bill of 2011. So I’ve been conducting a number of interviews with industry colleagues, and writing a series of articles about Patent Reform, R&D and product development.

I decided to interview Bob Stoll, who is a new partner in the Drinker Biddle & Reath’s (link: http://www.drinkerbiddle.com/) Intellectual Property Practice Group., Mr. Stoll, is the former U.S. Patent Commissioner.  Chatting during our interview he suggested that while the act wasn’t perfect, which Act is? He said, “The act is taking the system into the 21^st century, and will stimulate economic growth and invention.” Here’s the rest of the interview.

John: R&D organizations are concerned with technology strategy, that process of determining which projects to develop based on the company’s business strategy. Given that what organizational changes do you think R&D organizations should make to prepare for the US Patent Reform bill?

Bob: I think organizations will be in a hurry to file, because of first inventor to file.   You will find now more of a move to be first to disclose or the first to file instead of waiting to perfect and relying upon first to invent. Companies will not develop their inventions to the fullest instead there will be a move to get to the office quicker, something that will affect R&D. There will be more provisional filings.  But those provisional filings have to be fully enabled and have enough information to serve as the basis for the filing of the utility application within one year.

Interesting provisions within the Act for prior user rights, they cannot be asserted against a university, this may encourage more companies to partner with Universities to do their research.

The most significant provisions of the act are post grant review, supplemental examination, and inter parties review

John: How do you think first inventor to file will change filing behavior?

Bob: There will not be much change with respect to filing behavior, if you disclose you lose your rights overseas but not in the US if you file in the US within one year.   Also disclosures derived from your disclosure cannot be used against you during that period. There will be more filings of provisional applications, here in the US. Yes, I see a real bulking up of provisional applications, and companies making determinations later about which to pursue.  I’m encouraging applicants not to disclose prior to a year.

John: How do you think R&D organizations should prepare for post-grant review?

Bob: I think R&D organizations should review their portfolio of patents, and decide strategies with respect to supplemental examination, inter partes review and ex parte.   Companies will have to bulk up regarding their patent efforts and analyze their portfolios considering the strength of their patents to see if there is a need to file supplemental examination or if their important patents could be the subject of a post grant review or inter partes review by their competitors. A lot of R&D organizations will be monitoring patents, so that step will be very important.

John: Now that prior art if expanded to foreign art, how will this change R&D business processes?

Bob:  That will make things much more complicated.  T there’s also the issue of prior use and sale in foreign countries, finding ways to learn about those foreign efforts will be new; art from a foreign patent application not in English is now available as Hilmer Doctrine is gone.

John: Do you see companies rising to the occasion?

Bob:  Definitely.  We are a huge market.   There are companies in China who are looking at how  to use the new system now.  For example we have established procedures with respect to prior use in the US.  Other countries may want to look to us to see how to run those systems and everyone will want to know how to succeed in the complex new system being implemented here in the US.

John: How do you think inequitable conduct changes R&D behavior?

Bob: I actually think supplemental examination is significant; it can cleanse a patent prior to being sued.  Also, I think that a recent case "Thereasense" has lessened the burden upon the practitioners.  There has to be material harm; a "but for", and an intent to deceive.   This narrows the problems of inequitable conduct.

John: Will Patent Reform make Patents more important as a source of intelligence? Please explain.

Bob: The law will make patents more gold plated; there will be a publication that provides people with the information, after 18 months most will be published.    R&D organizations and researchers will use that information to invent on top of that invention thus further stimulating inventive growth. It is very important to publish to support the system in barter for 20 years of exclusivity.

John: As a result of the new act, will there be any changes as to how IP is managed within a company?

Bob: Yes, patents are now more valuable, companies can rely on them more for revenue purposes. To that degree, there will be more careful management.

John: Will there be different reactions from companies that have less international patent experience, than those with more experience? If so what?

Bob: International companies may be more comfortable with the new system, but it actually helps everyone by putting more certainty into the system.

John: What are the consequences for trade secrets for companies in light of the rules about prior user rights?

Bob: Not much of an effect, as long as the knowledge is maintained as a trade secret. Prior user rights were expanded to all areas of technology but the scope upon assignment is limited to the sites of the original claimant.

If a patent gets challenged and there is some problem with the scope of the claim, patentee needs to be thoughtful about amending because intervening rights may arise.

John: Any thoughts or insights on organizing to prepare for patent reform? What timeline should a company prepare?

Bob: Will not see significant number of post grant filings until 2016, companies should focus on inter partes review, and supplemental examination very quickly.  Companies critically need to develop systems to analyze their portfolios to handle the new processes.  Their bottom lines could be strongly impacted by what they do or don't do.

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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.

Lee Marvin Taylor is a Specialist, in the Entrepreneurship Program (COE) for Technology Liaison at the University of Hawaii. Following my interview with Melba Kurman, I was introduced to Lee as running a top University Tech Transfer office in the US. He graciously answered my questions, and also asked Eric Cohen, Intellectual Property Attorney, at Brinks Hofer Gilson & Lione to clarify a point.

John: What steps has your college taken to prepare for the America Invents Act?

Lee: The deadline is March 16^th of 2013, and we are really kind of business as usual, however we will have to file earlier and more often. The grace period will go away. And so that means that while a good many of disclosures are given to us after publication, many Universities have relied on 102 b for the grace period. This has been the existing M.O. at Universities; professors do the publications, and then go to the tech transfer office.  Obviously if it’s a pharmaceutical matter, the professor and the office work harder. Now given the changes to the law the Technology Transfer Office will have to work harder, to get a professor to file before disclosure, because of the loss of US and foreign rights. Our education about the changes will happen in the fall of this year.

Because we will be filing earlier and more often, no tech transfer office is not thinking about the issue of filing earlier, in the past Tech Transfer Offices had a much more casual attitude, with the grace period we really had that time to make a provisional filing. Now with the loss of the grace period, we will have to decide at an earlier stage to go with a utility filing.

John: What organizational changes have you made to prepare?

Lee: This is a massive change for patents, the biggest in 60 years. We have very good interaction between the University and the Hawaii state bar; as such we are developing educational and tutorial opportunities about the provisions. I think there will be a process of learning in the first half of the year, and implementation in the second half of the year.

John: How will Patent Reform affect the R&D organizations relationship with Universities?

Lee: It shouldn’t really change too much. I honestly think there’s going to be a slight decrease in collaboration, meaning that existing University portfolios will shrink. There is at least one carve out benefit of University based patents as opposed to non-University based patents.

Eric Cohen of Intellectual Property Attorney, at Brinks Hofer Gilson & Lione provided the following clarification regarding Carve-Outs benefit for Universities:

Eric: The carve-out is under the Prior Commercial Use Defense. The prior commercial use defense can be used by one accused of infringement. The exception is if the IP is owned by an institution of higher learning (university), the infringer cannot use the defense, and thus the university is in a very good position as against the infringer. The carve out is that the university cannot benefit from the exception if the activities required to reduce to practice the subject matter of the claimed invention could not have been undertaken using funds provided by the federal government. This means for example, if the IP relates to programs barred from using Federal funds (perhaps stem cell research), the university cannot benefit from the exception.

John: Will Patent Reform make Patents more important as a source of intelligence? Please explain.

Lee: Because of the loss of a grace period, there will be an increased aggressiveness in terms of putting IP out there. One of the issues though is that universities, and the tech transfer process is a speculative venture, it’s a small revenue source given the overall research budget.

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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.

John: What organizational changes do you have to make to prepare for patent reform?

Melba: The unit that manages patents -- the technology transfer office in the case of a university -- will have to think through whether it can afford the time and cost of getting a provisional patent on most newly submitted inventions.  If a university is going to make the commitment to patenting more of its inventions, then many universities will need to make changes to their tech transfer workflow and budget allocations.  In terms of outreach, technology transfer staff should reach out to university researchers to make sure that researchers understand that there’s a weakened grace period, and that they should submit new inventions as soon as they can.  

Today, most U.S. research universities do not file a provisional patent on each new invention.  Of the few universities that currently file a provisional on most new inventions, interestingly, that commitment does not appear to be related to the size of the university, the number of tech transfer staff, nor the university’s research expenditures. To put some numbers around it, I looked at the Association of University Technology Managers (AUTM) data.  For each university, I compared the number of newly disclosed inventions that year against the number of new provisional patents filed in that same year.  The ranking did not play out by budget.  For example, the University of Hawaii files a provisional patent on nearly every new invention they receive.  As a result, their workflow should not be impacted too much by the new law.  Hawaii does not a have a large budget so provisional filing appears to be also a matter of a university’s culture.

Although local university culture plays a part in patent strategy, budget remains a real challenge.  Many universities struggle since their patent budgets just isn’t big enough to patent as many inventions as faculty would like.  As a result, the technology transfer office must make difficult decisions about which inventions are worth the $30-40K investment.  Under the new patent laws, universities should make sure they have a rigorous process to sift out the commercially viable inventions (hence worth patenting) from the non-commercially viable inventions.

Good common-sense business practices and a culture of honest and transparent two-way communication on patenting decisions will make the transition to a new patent law smoother.    Being able to explain patenting decisions to university faculty is key from a customer satisfaction point of view.  To get commercially-oriented faculty to continue to submit inventions early and often, it’s important that faculty perceive the technology transfer process as one that’s fair, rational and worth spending time and energy on.  For example, if a technology transfer staff member decides that an invention lacks commercial potential and therefore should not receive a patent application, that staff person should be able to clearly explain to the inventor why that decision was made.

In addition to clarity of process, it’s important that inventing faculty experience the commercialization process and one that’s smooth and efficient.  Consider that in the University environment, faculty and graduate students advance their careers by publishing their research to as broad of an audience as possible.  Therefore, for many busy faculty, patenting their research remains a “nice to have.”  If a university researcher has more than one less-than-ideal experiences working with the technology transfer office, he or she may decide to re-direct time and energy away from patenting and commercialization, and back to publishing, teaching and doing research.

John: How will first to file change filing behavior for the culture?

Melba:  There’s no such thing on campuses as a single “university mindset.”  Each staff role inside a university has its own unique goals and challenges; even between faculty members we see a wide range of attitudes and degrees of interest in nearly everything, including whether or not to pursue patents.  However, for the university faculty who have made technology commercialization a career priority, I suspect these researchers will quickly catch on that they should keep closer contact with their tech transfer licensing person.  These faculty will make it part of their workflow to disclose an invention before going to a conference or publishing a paper.  They will teach their grad students to do the same.  Commercially active faculty will ask their licensing staff member to keep them closely updated on decisions on patent filings.

John: How will Patent Reform affect the R&D organizations relationship with Universities?

Melba:  Again, this will vary tremendously by university, and by individual researcher.  Some researchers who want patents may become more cautious in freely sharing their preliminary research and in engaging in industry consulting activity.  However, given the complexity of the university innovation ecosystem, it is too early to tell how it’s all going to play out between the R&D organization, the researchers, and the tech transfer office.  I suspect that for universities that have clear procedures, good relationships with faculty and industry and are already filing lots of provisional patents, this new law won’t really impact them much.  R&D organizations fortunate enough to work with universities such as these will discover that the university technology transfer staff and researchers will continue business as usual.

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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.

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 16^th 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.

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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.

John: What steps has your college taken to prepare for the America Invents Act?

Jim: We have not done anything very much dramatic, no structural changes. One thing, we have tried to do, is better educate people on the consequences on public disclosure.

John: Do you think it is too early to tell with Patent Reform?

Jim: U.S. law now conforms more to international law, we are already managing to international law. Really we are already doing this, more or less. In the past,  we  have had US rights to fall back on in the event of  a disclosure and that is now limited under Patent Reform but since we have historically worked to preserve international rights anyway little has changed with our core practices and operations.

John: How will first to file change filing behavior?

Jim: First to file will certainly push filing earlier.  We try to preserve foreign rights by having a filing in before a disclosure date regardless. That said, we may lose some things in the U.S. that we wouldn’t have lost in the past. Silver lining on that is, it appears that the inventors own art is not going to be cited as prior art, and most often the premature public disclosures are the inventor’s own disclosures. We are not going to rely on this however at this point  because not clear how this is going to be implemented.

John: What will be the consequences of first to file for R&D organizations and how they work with universities?

Jim: R&D orgs will proceed more cautiously, faculty need to publish and now publication is of more a consequence in the U.S. There will be more tension in the timeline between discovery and need to publish. From a timeline standpoint, this may cause universities to consider more exceptions on publication requirements as a condition of getting support from R&D organizations. International rights have always been important so publication has always been a significant issue but now with the potential loss of U.S. patent rights, the dynamic has changed.

Professors working with R&D organizations will likely need to be patient with their publishing interests, and universities may need to consider this in evaluation criteria for faculty who conduct research on behalf of R&D organizations.

R&D organizations are likely to ask for more publication restrictions than in the past, we will be asking can we accept those restrictions or do we have to turn that work away? Or can we manage those restrictions. Most sponsors are already asking for publication restrictions to preserve foreign patent rights but now they will be more aggressive. There’s potential for decreasing relationships.

John: What will be the consequences post-grant review on R&D organization relationships?

Jim: Concerns about the integrity of patent or portfolio, always been open, and R&D organization licensees have always conducted their own review. The post-grant review provisions provide an additional formal process for that review to be conducted within the PTO. As a practical matter, if IP is unlikely to  survive the new post grant review process we’d have been very cautious about licensing it in the past.

John: Will you see more provisional patents?

Jim: My sense is we will see less, because the filing date is very important.  You will need to make sure your application has adequate support for the claims you will ultimately be seeking, so we will lean more towards a formal patent filing in general.

John: will it push up the cost.

The loss of the grace period will push up costs, or increase struggle with decision making within a fixed budget. We’ve seen a lot of provisional patents wind up not being able to be formalized due to lack of support and enablement. Provisional patents have been declining regardless of patent reform but with the loss of the one-year grace period in the U.S. it will be even more important to have the first filing be rather robust, and therefore more expensive regardless of whether it is a provisional or formal filing.

John: How will Patent Reform affect R&D project selection and management?

Jim: I suspect it will change the nature of projects R&D organizations partner on and the circumstances in which they partner.

John: Do you need greater funds?

Jim: Maybe not budget constraints, rather the value of enabling data, is going to grow, going to be critical to have a filing date. R&D organizations  may accelerate the schedule of research to address this. R&D organizations may decide to do more research themselves. Or may sponsor the majority of the project, may be willing to sponsor the development of the project at a higher level to get results sooner to get the data for the enablement of a patent application sooner. May go to university or do this inside researchers. Patent reform may accelerate sponsorship activities to get results faster.

John: Thanks Jim!

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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.

Rebecca Oesterle has worked at Energizer for 26 years and is currently the manager of global packaging development at Energizer Holdings. Rebecca will be presenting “Case Studies in Success: The Easy-Open Battery Package,” which describes the collaboration with Tegrant to develop an EZ Turn and Lock battery blister package for hearing aids.

Greg: What are some of the highlights of your presentation?

Rebecca: I plan on taking the audience through the ideation & implementation process of creating our new EZ Turn & Lock package for hearing aid batteries.

Greg: Your research indicates that you worked with Tegrant and other collaborators to develop new packaging, what inspired you to work with them?

Rebecca: For the package structure itself, we only worked with Tegrant.  At the time they were one of our blister card suppliers and had knowledge of thermoforming blisters.  We had an idea of how we wanted the card & blister to work together but needed their expertise to help finalize the design.  The other collaboration was mostly internal except for finalizing the graphics on the structure.

Greg: How do you work with R&D departments?

Rebecca: Well my group is for all intents & purposes the packaging R&D department.  We have a highly skilled group of packaging professionals and a state of the art Package Design Center that the organization can rely upon.  Several of us our trained facilitators and we routinely engage cross functional groups in ideation sessions.  Some ideation sessions are conducted to answer a specific consumer need, while others are more “what if.”  When we need some outside assistance then we look to our trusted suppliers or a select group of Package Design firms.  Many times we’ll bring them in during the ideation phase to spur thought or we’ll reach out to them during design finalization if we feel we need them.

Greg: What’s your background in the industry?

Rebecca: I came into packaging originally as an Industrial Engineering in packaging areas of Energizer’s manufacturing complex.  Later I had production management responsibilities of packaging areas.  I then had Supply Chain responsibilities with major retailers and packaging was often in the mix.  I officially began having packaging in my title in 2004 when I became the manager of packaging development for Energizer in the U. S.  At that point, I got more involved in the industry, attending conferences and packaging specific training.  This led me to obtain my CPP through IoPP,  I then enrolled in the Executive Leader Master’s Program in Packaging Sciences at RIT and received my M. S. in 2009.  I am currently the Leader of Global Packaging Development for Energizer Household Products.

The "Structural Packaging Summit" takes place from February 28 to March 1st in St. Augustine Florida.  Go to the structural packaging summit's website if you're interested in registering.

Compiled by Greg Covelle & John Cass

When was R&D First Outsourced?

Outsourcing of R&D began on a small scale prior to the 1970s and 1980s.  There are examples of R&D outsourcing dating back as far as the 1500’s with Italian Renaissance artist Michelangelo, who set up a network of specific suppliers to provide the materials and skills he needed to create his work.

More recently, the 1930’s saw companies in the United States were contracted to conduct R&D on the government’s behalf.  During that same decade, the largest American and European firms performed 7% of their R&D functions abroad.  This number has been steadily rising since the 1960’s, when a sample of 32 multinational companies were conducting 6.2% of R&D abroad, and by 1995 the number had risen to 25.8%.

During the 1990s, as a consequence of globally distributed R&D networks, R&D outsourcing began to rapidly expand.  The explosion of outsourcing innovation was additionally facilitated by a number of other factors such as improved intellectual property rights and changes in trade and investment governance.

Early Origins Of Outsourcing

While outsourcing and offshoring seem relatively new, the current movement mirrors events in the aftermath of the American Civil War when northern textile factory owners moved their operations to the southern United States.

Japan, recognizing a need to modernize its factory system, hired foreign engineers and technicians following their revolution in 1868 to put the country on the path to modernization.

The aftermath of World War II has created an even more global environment.  The first use of outsourcing was timesharing in the 1950’s, which lasted for 25 years.

1970’s marked the time when R&D outsourcing really took off and took the form as it exists today.  Pharmaceutical companies first began their R&D outsourcing efforts in the 1970’s.  At the same time, contract research organizations were first created.  Finally, the 1970’s saw transnational corporations shift their R&D strategy from the traditional model seen in the 1950’s and 1960’s of utilizing their own domestic environments to create a competitive advantage, to locating their R&D centers to other countries to take advantage of new talent, cheaper expenses, more resources, and emerging markets.

By the 1980’s, technology had advanced greatly, as did the ideas for outsourcing.  Major consulting firms set up remote management services.  By the 1990’s, with the invention of the Internet, companies began focusing on core competencies and outsourcing everything else.  Countries like India, due to a strong English proficiency and an education system that focuses on science and mathematics, have become major outsourcing locations ().

As we have mentioned in previous posts, many large, multinational corporations currently outsource at least part of their R&D functions to other countries, with the major hotspots being India, China, and Brazil.  In 1985, Texas Instruments was the first of these corporations to establish a major R&D center in India.  The center was the first of its kind in India, and opened up India as a viable outsourcing location.  Before Texas Instruments arrived, India did not allow private companies to import equipment into the country for the purpose of sending data transmissions overseas.  Texas Instruments changed that, and went further by providing each of its initial 17 engineers with state of the art workstations, which, until then, was unheard of in India.  Using the model set up by Texas Instruments, companies like Microsoft, GE, and Boeing set up successful R&D centers in India, and are now among 750 multinationals with a presence in India.

Coca-Cola built an R&D center in India the year after its chief competitor, Pepsico did.  Coca-Cola knew that it had to keep pace with Pepsico and followed Pepsico’s lead into a new market where the company could better tailor its products to the tastes of the local population.  Although Pepsico’s influence wasn’t nearly as profound as Texas Instruments’, the steps it took to become a more global brand forced the hand of Coca-Cola to follow suit or potentially be left behind.

Finally, there are reports that Apple is in the process of purchasing Israel-based flash memory firm Anobit.  Although Apple has been a customer of Anobit’s for several years, as Apple uses Anobit’s components in the iPhone, iPad, and Macbook Air lines, it will be interesting to see if Israel sees more multinational corporations look there for talent, now that such a high profile industry leader has demonstrated a larger interest in an Israel-based company.

What is the Current Internal vs. External Outsourced R&D Landscape?

According to a survey conducted by R&D Mag, as of 2007 companies outsource 24.4% of all R&D work, up from 21.5% in 2002.

A 2003 Gartner survey showed that 75% of medium and large sized companies would consider off-shoring part of their business by 2004.  The survey revealed that at the time, India accounted for 90% of total offshore revenue, although China, Israel, and the Philippines were quickly emerging as a viable challenger to India’s throne.  Elsewhere, countries like Singapore, Bangladesh, and Vietnam were just beginning to emerge as destinations for outsourcing.  The Eastern Hemisphere is such an attractive location for Western businesses because the natural time difference allows for a longer business day utilizing follow-the-sun styles of management, where work in one hemisphere is passed off at the end of the day there to work in the other hemisphere where the workday is just beginning.

An attractive outsourcing option like this allows companies to focus more directly on their own core competencies, while outsourcing the other areas in which they aren’t as competent.  Understanding the history of outsourcing is crucial for companies looking to outsource their R&D so that they can see what worked and didn’t work in the past.  Avoiding documented pitfalls, as well as building on successful outsourcing techniques will give companies looking to outsource R&D a greater chance to be successful with the significant undertaking.

Christopher Yows is a 17 year veteran a R&D/Leverage, and runs its Structural Brand Development Business unit. He will be co-presenting with Patrick George Director of Engineering at Dr. Pepper Snapple Group on the topic, Rapid Refresh in 28 weeks – An “Idea to tool” process.

John: Your Company is both a manufacturing and design company. What inspired your company to work on both areas?

Christopher: R&D/Leverage started as a job shop for the packaging industry, and initially produced mold & tooling components. Until 5 years ago, we were an engineering, package development, and mold manufacturing company that focused on the food & beverage, home & personal care, and healthcare industries.  We decided to develop a business model that allowed us the opportunity to engage in projects during the brand identification stage, resulting in a quicker product launch into retailers.

Looking back we realized there was often a gap in communication between ourselves and the brands. To get closer to the action, we created our own structural brand development offering and our teams now develop consumer preferred designs that incorporate an engineering voice.  Today we work direct with disciplines such as marketing, consumer/shopper insight, design, engineering, and operations to make sure all voices are part of the process. We saw this gap in the market space and decided to act upon it.

John: What did you learn from the design process for manufacturing?

Christopher: We’ve learned that success is a balance of both the creative & technical disciplines when moving through a product development process.  When this happens, new insights are generated, form factors developed, and innovation pops-up everywhere.  Again, the key is balancing the different disciplines and working together towards a common goal.

John: Can you describe the “idea to tool,” process?

Christopher: It’s a tag line for what we do.  For example, marketing generally arrives to us with an idea or brief.  We touch consumers through our discovery phrase; unlocking all their needs & desires, which then transform into form studies.  We work in both 2D & 3D when turning those form studies into reality.  Once design intent is created; RDL brings the pack to life by creating molds/tooling; whether it’s for development, pre-production, or full scale production.  Our “idea to tool” process brings life to ideas.

John: What are some of your highlights in your upcoming presentations at the Structural Packaging Summit?

Christopher: It’s a co-presentation with RDL and Dr. Pepper Snapple Group.  We’ll be reviewing a case study for the 20oz single-serve pack that Dr. Pepper Snapple Group uses across multiple brands.  The presentation will highlight some of the methodologies used to glean insights and will review both the qualitative and quantitative aspects of the program.

John: What’s your background in the industry?

Christopher: I was educated in the engineering world and created some balance by acquiring an MBA.  I was hired into our organization 17 years ago through the engineering door and now drive our structural brand development offering.  With my background, it was a natural fit to transition into our new division and help bring it to life.

The "Structural Packaging Summit" takes place from February 28 to March 1st in St. Augustine Florida.  Go to the structural packaging summit's website if you're interested in registering .

Compiled by Greg Covelle & John Cass

Looking at the consumer electronics industry, Apple is a category leader with a small product portfolio that only features the iPod, iPhone, iPad and Mac. Apple benefits from its strategy of choosing R&D projects and refining project goals. Apple has been providing consumers with different and exceptional experiences, yet they understand their audience by observation and using internal resources.

This week, we will recap several decisions in the product development process of the iPhone and iPad to explain Apple’s R&D strategies.

Strategic Project Portfolio Management

One important attribute in strategic portfolio management is to identify a project’s inventive merit and strategic importance to the business, and in the examples of the iPhone and iPad, both projects leveraged platform technology leadership, and by removing complexity in the product in order to keep the “purest possible simplicity.”

Apple has become the category leader of not only tablets but also MP3s and smartphones, and smartphones were not even initially developed by the company. One of the important innovations in technology is the multi-touch screen. Its successful leveraging on both the iPhone and iPad results from Apple’s strategic project portfolio management of the core platform technology.

Steve Jobs had the idea of developing a tablet with no stylus or keyboard in 2002. He recognized the multi-touch interface as a solution when his team had developed a multi-touch phone-size screen for the iPhone project. He decided to hold the tablet development and continue focusing on the touchscreen smartphone.

“If it worked on a phone,” Steve Jobs said, “I knew we could go back and use it on a tablet” (Isaacson, 2011, p. 468). It gives a good example of strategic portfolio management--choose the most promising project and concentrate on it.

When Apple was developing the iPhone multi-touch display, two alternatives was to use the iPod trackwheel technology or to have a physical keyboard. The discussion ended with choosing the multi-touch approach. Their next step was to boost this core value of the feature by simplifying other features. At every step of the iPhone and iPad projects, Jobs pushed to remove and simplify so that no feature or button would distract from the display, by doing this, Apple succeeded in the smartphone market and maximizing its product advantages from other phones.

Internal Consumer Insight Research

R&D leaders also need an understanding of the market and consumer needs to optimize product designs. Apple has succeeded in creating consumer needs and surprising them with unique product experiences. Steve Jobs relied on the engineering team to predict consumer reactions and revamp designs. “It’s not the consumers’ job to know what they want,” Jobs once said.

When the iPhone project first took off, as the company was new in cell phone manufacturing, Apple tried to work with Motorola. The joint project turned out to be a cobbled process, which was a compromise of both companies’ strengths. Apple’s later independent development of iPhone resulted from the whole Apple team’s continuous brainstorming and design revamps. In product innovation, R&D leaders need a team that share the same insights as well as that can compensate for any technical expertise shortage.

However, is that possible to create a product that dominates the market without collecting any consumer insight? Our conclusion is that Apple has consumer insights, but obtained through the approaches of observation and internal experiments.

In 2003, Jobs declared that they had no plan to make a tablet. “It turns out people want keyboards. Tablets appeal to rich guys with plenty of other PCs and devices already.” Apple watched the market trend and waited until consumers were ready. In developing the iPad, Jobs and his engineers played with twenty different models to find the right screen size that enabled people to easily “scoop it up and whisk it away” (Isaacson, 2011, p. 491). Consumer experiences are at the center of all the Apple products, and the company aims at building the best product they can conceive.

New Category Builder

From making smartphones to tablets, Apple has been expanding the definitions of what a cell phone and personal computer is. The iPhone project was born to create an iPod that could make calls. The iPad project got picked up again when the engineering team was brainstorming for a low-cost netbook computer.

Apple’s success comes both from technology strategy, and as a result of their category leadership with other products through leveraging the technology platform of one product to another.  And that technology strategy is derived from their ability to gain actionable consumer insights.

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