09/24/2013 08:20 pm ET Updated Nov 24, 2013

4 Ways First to File Changes the Patent System

In March 2013, the implementation of the Leahy-Smith America Invents Act (AIA) signaled major changes to U.S. patent laws. In essence, the system went from a "first to invent" scenario -- where the originator of an idea or product had first right to a patent -- to "first to file," where whoever applied first for a patent had claim to it. This type of filing system isn't novel; it is actually more in line with the rest of the world's patent laws.

Well, almost: As TechCrunch points out, the U.S. system does differ from the rest of the world, in that it actually sets up a "first to disclose" scenario, where the first person to discuss an original invention retains the rights to it, and has a year to file a patent application. These reveals don't even have to be super-formal; FastCompany notes that a disclosure can mean "presentations and demonstrations at trade shows, official postings on company websites, and even unauthorized postings by company employees on social networking sites."

Six months after implementation, the jury is still out about how the new system is affecting companies with potentially novel inventions, whether these firms are startups or established businesses. The effect it might have on how different sectors obtain patents is also still up in the air. But one thing is for sure: First to file is forcing inventors to be smarter and quicker about how they approach their intellectual property.

Here are four ways first to file has had an immediate impact.

1. It's accelerated the timeline of provisional patent applications. A provisional patent gives inventors the chance to file "without a formal patent claim, oath or declaration, or any information disclosure (prior art) statement" -- and after filing, inventors have a year to file a non-provisional (i.e., permanent) application.

For universities especially, it's sped up the timeline for filing these sorts of applications. "It used to be you'd make an invention, you'd work on it for six months and then when you felt you were ready to publish on it, you'd file a provisional," says Elyse Ball, Counsel, University of Akron Research Foundation. "As of late, as soon as we get the disclosure we're going to file a provisional -- and then take that year to look at the market for the technology, as well as to try and reduce that technology to practice and make sure it's something we can make in a lab and think we can license out."

But first to file has increased the number of patent applications overall, too; according to a Cincinnati Enquirer article by Laura Baverman, the number of patents filed so far this year (5112) already exceeds the total of applications from 2012 (5024). While some of this increased activity no doubt reflects people wanting to get patents filed before the law changed, Baverman also notes another positive (and perhaps unintended) consequence: "Lawyers expect more companies to take advantage of the opportunity to accelerate the process, and in many cases, get their product to market faster."

2. It gives quick decision-makers -- and strategists -- an advantage. With this acceleration naturally comes the need to make decisions more quickly about all aspects of a new technology -- when to disclose it, how soon to file a provisional patent application for it or how to develop the idea in the most efficient way. But despite what Dan McMullen, Partner, Calfee Halter & Griswold calls the "sense of increased urgency" created by first to file, there still needs to be some due diligence (and deliberate action) around the application process.

That's where having a strategic intellectual property plan comes in handy, McMullen says. "As new ideas and innovations percolate to the surface, you have an established way to look at them, evaluate them, deal with them and make a decision on how you want to treat them, rather than treating each one as an ad hoc event that comes along."

3. It makes patents more affordable for "garage inventors." With these new regulations also comes a new status category called "micro-entity," which makes it financially easier for certain types of entrepreneurs to file for a patent. "For individual inventors -- you know, the proverbial garage inventor -- [qualifying] for micro-entity status at least reduces some of the administrative cost associated with patent applications," McMullen says. These savings could be significant -- up to a 75 percent discount in fees, according to the USPTO.

4. However, companies with deeper pockets still have an advantage. For even slightly bigger organizations, filing for a patent can be pricey. (A quick glance at the current fee schedule gives insights into why.) Navigating the paperwork involved is also still complicated, which is why the USPTO recommends that a registered attorney or patent professional file these forms on behalf of the inventor -- which simplifies the process, but tacks on more fees if pro bono assistance isn't available.

Patent fees are especially onerous if you're a startup or small business trying to fundraise or develop your technology, says Patricia Smith, the owner of P.A. Smith LLC, a Northeast Ohio intellectual property and corporation transactions law firm. "You're trying to assess the commercial liability of your technology, and you might be looking for licensing deals or venture capital, but you don't have the money yourself to put into filing the patent application. You may need to hire independent contractors to help you to continue to develop your technology, but you're having problems being able to fund that. Larger companies already have the R&D departments in place; they already have the financial resources and the means in order to get the process going."

Keep in mind that these changes only scratch the surface of how first to file is overhauling the patent system. In fact, it'll take years to see how all the nuances of these new regulations play out, as well as the implications of this reform on startups, universities and other innovation hubs. In the meantime, it's critical that startup CEOs prioritize being knowledgeable about first to file and how best to act on it, in particular where it comes to their own company's intellectual property. At the end of the day, IP of any type -- be it patents, trade secrets, copyrights or trademarks, to name a few -- is the most important asset any young company has in its pocket. The more CEOs emphasize protecting intellectual property when they're looking at strategy development, the better off their companies will be in the future.