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First-to-File vs. First-to-Invent: Who Really Benefits from Changing the U.S. Patent System?

Wealth of Ideas Newsletter, October 2007

The United States patent system is based on a unique "First-to-Invent" doctrine, which means that the inventor who first conceived of the invention and then diligently reduced it to practice by filing a patent application (or actual reduction to practice) is considered the first inventor and is entitled to patent protection.

Almost every other country in the world has a patent system based on the "First-to-File" doctrine, in which the patent is granted to the inventor who is the first to file a patent application, regardless of the date of invention.

For a number of years there have been unsuccessful attempts to change the US patent system from a First-to-Invent to a First-to-File system.

The most recent proposal, embodied in The Patent Reform Act of 2007, which was recently passed by the House of Representatives and is awaiting a vote in the Senate, has gained some traction and deserves close attention. Among other things, the Patent Reform Act of 2007 does away with our time-honored tradition of First-to-Invent and replaces it with the European style First-to-File regime. This article analyzes the pros and cons of the two systems and what it means to American innovators, academia and industry.

First-to-File vs. First-to-Invent Patent Regimes

In order to understand the difference between the two systems, we first need to understand a few basics concepts in patent law. There are three important dates in the process of patenting an invention: the date of conception, the date of actual reduction to practice, and the date of constructive reduction to practice. The date of conception is when the inventor first conceived of the invention in its complete form. The date of actual reduction to practice is when the inventor built a working model or a prototype. The date of constructive reduction to practice is when the inventor filed a patent application.

In the United States, an inventor who diligently worked on reducing his or her invention to practice by building a prototype and/or filing a patent application is entitled to the date of conception as the "priority date," so long as that inventor did not abandon, suppress or conceal the invention. Under these circumstances, the first inventor to conceive of the invention is entitled to a patent.

When two inventors file patent applications on the same invention, there may be an interference hearing before the Board of Appeals and Interferences at the US Patent Office to determine who conceived of the invention first, and whether the inventors have been diligent in reducing their inventions to practice. This is an expensive and involved procedure.

This is, in essence, how the First-to-Invent patent system works. The United States and the Philippines are the only two countries in the world whose patent systems are based on First-to-Invent regime. The rest of the world uses the First-to-File system, which gives priority to the inventor who first files a patent application, regardless of the date of conception.

Among the advantages of the US First-to-Invent system is that it rewards the first inventor, not the winner of the race to the Patent Office.

The only apparent disadvantage of the First-to-Invent system is a costly and lengthy interference proceeding to determine who of the two inventors conceived of the invention first. Indeed, the expense of fighting patent interference may prove prohibitive for a small inventor, leading to abandonment of the patent application. It is not inconceivable that an inventor who was first to conceive of an invention and first to file a patent application may not receive a patent due to prohibitive cost of proving the date of conception. However, such situations are rare and interference proceedings are infrequent. Most patent attorneys involved in patent prosecution go through their entire professional career without ever representing a client in an interference dispute.

The theoretical basis of the First-to-File system stems from the contract theory of patents. Under this theory, a patent is a contract between an inventor and the public which grants the inventor a public franchise (i.e., a patent monopoly) in exchange for public disclosure of the invention. If a patent is a quid pro quo for public disclosure of the invention, then it is not unreasonable to reward with a patent monopoly the first inventor to disclose the invention to the public.

A practical advantage of the First-to-File systems is its utter simplicity. There are no interference disputes - whoever gets the earliest postmark stamp on the patent application gets the patent.

Another advantage of the First-to-File system is that it eliminates so-called "secret prior art," which are inventions for which patent applications have not yet been filed and therefore cannot be found through a prior art search. If they are filed, such patent applications could preclude other inventors from getting a patent (if the date of conception by the first inventor is earlier than the date of conception by the second inventor.) This seldom happens, and the advantage is of marginal value.

Constitution

Some opponents of the First-to-File system raise a constitutional argument. Indeed, the First-to-Invent system is deeply rooted in the US Constitution. Article I, Section 8 of the Constitution states:

"The Congress shall have power...To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."

The Constitution grants Congress the power to secure exclusive rights, i.e. to grant patents to inventors, not winners of the race to the Patent Office. The inventor is, by definition, the one who invented first. An inventor can hardly be defined as the one who is first to file a patent application. Replacing the first inventor with the first filer, as proposed in the Reform Act of 2007, may not be exactly what the Framers of the Constitution had in mind. Other countries which have First-to-File systems do not have this problem because their patent laws are not rooted in their respective constitutions.

It is instructive that the copyright, another form of intellectual property protection stemming from the same clause in the Constitution, vests with its owner as soon as the creative idea is fixed in a tangible form, not when the copyright is registered.

Quality of Invention Disclosure

Under our patent system, an inventor has sufficient time to perform a thorough search of prior art to determine if the invention is patentable. Having sufficient time to prepare a patent application has positive effect on the quality of the filed application and the breadth of disclosure. Recent research demonstrated that patentees in "First-to-file" countries lag far behind US patentees in patent disclosure breadth. The study shows that US patents have significantly higher page count (indicating breadth of disclosure) and claim count (indicating breadth of protection) than patents originating from the countries with a First-to-File regimei.

Although our system does not require the actual reduction to practice (i.e. building a prototype), it indirectly encourages this by giving the inventor time to reduce the invention to practice before filing a patent application. This results in a better patent application and a fuller disclosure.

US patent law also requires disclosure of the "best mode," i.e. the best way to practice the invention. Needless to say, building a prototype or otherwise further developing the invention allows the inventor to experiment with and contemplate upon the best way to practice the invention, thus leading to a meaningful best mode disclosure1.

An inventor who has written a novel idea in her notebook is not concerned about discussing her idea with others because she has a record of the conceived idea - the evidence is in her notebook (even if someone copies the idea and files the application first). Under a First-to-File regime, inventors would be justifiably hesitant to discuss their ideas with others for fear of being beat in the race to the patent office. This could stifle development of an invention that might have benefited from the cross-pollination of ideas. Such concerns may slow down research and development collaboration, and the exchange of ideas vital to technological progress.

A First-to-File system, however, necessarily leads to a race to the patent office, which leads to half-baked patent applications. Such a system clearly discourages inventors from taking the time to build a working prototype. Moreover, it is hard to imagine how an inventor could disclose the best mode if never given the chance to practice it! In countries where disclosure of best mode is not a requirement, this is not a problem. In the US, however, best mode disclosure is required.

Effect on Small and Independent Inventors

Another unique feature of the American patent system is the "Grace Period." The twelve-month Grace Period afforded by US patent law allows an inventor to file a patent application within one year after (a) public disclosure of the invention or (b) first sale of the patented product. Under the First-to-Invent regime, there is no necessity for the inventor to rush a patent application to the Patent Office. The inventor can take his time to figure out a marketing plan and business model, and decided whether or not it is prudent to invest in preparing and prosecuting a patent application. Although a proposed change to First-to-File regime does not eliminate the Grace Period, as a practical matter, such regimes would set off a race to the Patent Office, any grace period notwithstanding. A First-to-Invent system, therefore, is very important to small businesses and independent inventors who need to take their financial resources into consideration.

Under the First-to-File regime, large corporations with well-established invention disclosure procedures, patent committees and armies of in-house attorneys will always beat a lone inventor in the race to the Patent Office, thus placing small and independent inventors at a severe disadvantage.

Effect on Universities

Universities derive significant income from technology transfer and patent licensing. However, academic realities put different pressures on university professors and researchers. Operating under the academic mantra "publish or perish," scientists are more concerned with presenting their results at conferences and publishing them in peer-reviewed journals. After all, their academic career depends upon it. Patenting the results is usually an afterthought.

Under our current First-to-Invent regime, there is no necessity for a researcher to rush a patent application to the Patent Office. The grace period afforded by the US patent system allows researchers to present their discoveries at scientific conferences and publish them in professional journals, and still have twelve months (from the date of the earliest disclosure) to file patent applications. A First-to-Invent regime is, therefore, very important to American universities. Without a grace period, previously published results may no longer be patentable. A change from the First-to-Invent to the First-to-File regime may have the unintended consequence of a sharp decline in university patents, ultimately resulting in a decline of technology transfer revenues.

Harmonization of Patent Law

The proponents of the change from First-to-Invent to First-to-File argue that it is important for the US to harmonize its patent laws with the rest of the world. Harmonization may be a noble goal but needs be approached with caution.

The US patent system is one of the first and most developed patent systems in the world. Historically, the US was the first (and the only) country to recognize the vital importance of intellectual property protection in its Constitution. The US continues to lead the way as the first country to recognize the patentability of software and business methods. The superiority of the US patent system is widely recognized throughout the world. This begs the question, is it wise to change our superior and time-tested patent system to conform to the arguably inferior patent systems of other countries in the name of harmonization? What about other countries harmonizing their patent laws with ours by, for example, adopting our twelve-month grace period that leads to fuller invention disclosures and more mature patent applications?

The United States is undoubtedly the most inventive country in the world. It is the world leader in many fields, including science, hi-tech and biotechnology. In the US, we create original and innovative products, which are copied and sold back to us as counterfeit goods by foreign infringers. Should we really rush to harmonize our patent laws with those countries that routinely infringe our patents? Shouldn't the Congress be asking who is going to benefit from such harmonization?

The answer is clear – it is not to the benefit of American inventors, American manufacturers or American universities; the change will only benefit foreign businesses trying to compete with American businesses in the American market. Is the role of the US Congress to help foreign competitors put American manufacturers out of business?

Conclusion

In the final analysis, a First-to-Invent vs. First-to-File debate cannot be considered outside of the context of the complete patent reform proposal. In a fair and balanced patent reform, goals of patent law harmonization would be balanced with the interests and concerns of universities, small businesses and independent inventors. In such a scenario, one may be inclined to consider the relative pros and cons of both systems.

The proposed Patent Reform Act of 2007, however, is so consistently and unmistakably biased in favor of large corporations that the purported motivation for the proposed change to a First-to-File system must be viewed with deep suspicion.

Our founding fathers had the foresight to afford first inventors, not first filers, the exclusive rights to their inventions. This Constitutional right is the basis of our Patent System – one of the oldest and the best patent systems in the world, a system that has served our county well for over two centuries. Before we tinker with the system, perhaps we should give some deference to the framers of the Constitution who, after all, were the first to invent our First-to-Invent patent system.