Taking The NanoPulse -- Shhh....Can Congress Keep Your Patent Secrets?

Proposed changes in patent laws could put entrepreneurs -- and innovation -- at risk.

It looks like there are changes coming in patent law. The Patent Reform Act of 2007 just cleared the House Judiciary Committee, which sets the stage for consideration by the full House. Another version of the law is making its way through the Senate.

Who are the players? The innovators versus the infringers. Investors versus end users. Greed versus common sense. Just compensation versus frivolous lawsuits. Might Makes Right versus Right Makes Might. Cast it in any terms you like, but it's really the classic fight: the Big Guys versus the Little Guys. And isn't protecting the Little Guy what the law is for?

That's why I'm wading into the fray. Nanotechnology is still driven by hundreds and hundreds of smart, innovative Little Guys. If America is going to continue to a global nanotechnology leader, our laws need to protect the ones who make it happen. As you can tell by the title of this column, I'm more than a little concerned. There are so many "ifs, ands, and buts" in the proposed law, I'm wondering if a patent is the best way to protect your intellectual property anymore. At my company we've long relied on trade secrets as an alternative to patents for protecting our intellectual property. And we may start doing it more.

But I'm getting ahead of myself. Let's lay out the provisions of the legislation. The first element would replace the current system that awards patents on a "first to invent" basis with a "first to file" system. This is how all foreign patents are granted, and most big companies operating in the international arena operate this way anyway. The change alleviates the cumbersome process of the Patent Office determining the invention date when there's a dispute, so it could streamline the patent process. The downside? Decisions made by a postmark date don't favor small companies that don't have a team of patent lawyers to handle this complicated process.

The second change makes it easier to challenge a patent without going to court -- either before or after a product has gone to market. A non-judicial review board within the patent office could mediate patent disputes. Who wins? We could eliminate sloppy patents and unpatentable ideas early, lowering litigation costs. That could be a benefit to everyone. But the change also gives Big Company challengers the upper hand. They still have disproportionate resources to mount the challenge and wait out the results. An entrepreneur whose idea is in limbo has a much shorter life expectancy. And what about alleged infringers who already have products in the market? Without the absolute authority of a legal injunction to stop alleged infringers, an inventor could be out of business long before any decisions are made.

The bill also proposes a new method for calculating damages in patent suits. Currently, damages are calculated on the total value of the end product, not just the value of the patented innovation. Seems like a reasonable change, right? For the ten-dollar nanocoating finish on a $40,000 car, that seems equitable at first look. But, of course, it's not really that simple. Is the carmaker building its brand by touting an "indestructible" car finish? Or offering a finish that acts as a wireless antennae for a laptop or Blackberry? Or cutting its warranty expenses by 20% with a more durable paint job? The equitable decision just isn't that easy. To add insult to injury, there are also provisions that make it more difficult to prove "willful" infringement and limit punitive damages. Chalk up another one for the Big Guys.

So, will the new law change the U.S. Patent Office into the U.S. "Big Company Always Wins" Office? Time will tell. But I promise you a fairer outcome if you get involved and let legislators know you're on the side of fair play.

I'm not saying there aren't greedy sharks "trolling for patents" to take big companies to the cleaners. And there are plenty of big companies that have strong, equitable partnerships with the entrepreneurial brain trusts they rely on. My company works with some shining examples. But, if the goal of this bill is to reform the patent system to encourage innovation, it's crucial to remember this: in any young, transformative industry, it's the newcomers, the outsiders, the Little Guys who drive the future. Protect them. Period.

Scott E. Rickert is chief executive of Nanofilm, Ltd., located in Valley View, Ohio. His e-mail address is [email protected].

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