October 15, 2009

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Patents Pending

A Recovering Economy Could Spur Changes

By Tom Haraldsen

October 15, 2009

It should come as no surprise that Utah is a national leader in submitting applications for a United States patent, at least on a per capita basis. But the state’s entrepreneurial spirit and tradition of individual business ownership has increased the trend over the past five years. So, will the nation’s sagging economy and subsequent tightening of business equity and venture capital affect that trend in Utah and nationwide? The answer to that question, like with patent applications, is still pending. A first glance, the numbers recorded by local intellectual property law firms and the U.S. Patent and Trademark Office could be a bit misleading. In Alexandria, Virginia, the USPTO reported that 2,507 patent applications were filed by Utahns in 2008. That’s up markedly from the 1,995 filed in 2004. Subsequent years showed 1,987 filings in 2005, 2,304 in 2006 and 2,391 in 2007. The USPTO also issued 713 patents to Utah applicants last year. Still Going Strong Ruth Ann Nybold, public affairs officer with USPTO, says those types of increases have been seen across the country the past few years. She says there has been a slight decrease this year, “but nothing significant.” That could change, particularly since most of the patents under review now were filed before the economic meltdown really began a year ago. In fact, with a normal lag time of 18 to 24 months between application and “publishing” of a patent (the first step toward its issuance), the real numbers from the economic downturn may not be in for another year or two. “It has affected Utah to a small degree,” says Kory Christensen, a partner in the technology and IP group with the Salt Lake City law firm of Stoel Rives. “Conversely, a lot of new start-up companies are filing for patents. I think that given the current environment, many entrepreneurs are realizing the importance of their intellectual property and filing to protect their ideas. We’ve seen an increase in the numbers of small businesses seeking patents.” Christensen is a board member of the Utah Technology Council, which has its fingers on the pulse of technological developments in the state. UTC President and CEO Richard Nelson says, “Utah remains the No. 1 technology state in the country, per capita. We always have one of the highest rates in the nation for patents, and it’s a natural assumption that we’ll continue to be highly-ranked in the number of patents issued by the USPTO.” Thus far, 2009 numbers could be comparable to those of previous years. Nelson says that as of July 1, there have been 1,044 published patents for Utah inventors and 552 issued patents. He added that optimism in the business climate seems to remain fairly high. A UTC study of 98 sample Utah businesses, when measuring their revenue year-to-date versus 2008, revealed that 67 percent were either “thriving or growing.” Another 28 percent were “level,” while 5 percent say their revenues were “declining” compared to the first six months of 2008. The Ewing Marion Koffman Foundation called Utah the “16th most confident state” for entrepreneurship and first in “economic dynamism.” That was defined as a combination of jobs in the fastest-growing industries, the number of Deloitte Tech Fast 500 and Inc 500 firms in the state, the number and value of company’s IPOs, the number of entrepreneurs starting new businesses and the number of individual inventor patents issued. “We were second only to California in inventor patents,” Christensen says. “The Beacon Hill Institute called Utah the most competitive state for business.” He says two metroplexes in Utah, Salt Lake City and Provo/Orem, were among the top 25 in the Milken Institute’s list of 200 best-performing cities. Mechanical devices are a large part of the inventions being issued patents in Utah—they composed 46 percent of those issued to Utah inventors during 2007. That number is dictated by the types of businesses in the Beehive State. For example, Autoliv, Inc. of Ogden, the maker of seatbelts and airbags for cars, is the state’s leader in the number of patents received for mechanical devices. “There’s been growth in the number of computer hardware and electrical device patents issued to Utahns, but no where near the size of the mechanical devices sector,” Christensen says. “It’s kind of unique to our state.” By comparison, the state of Washington, home to high tech companies like Microsoft, was issued 661 computer software and 157 semiconductor patents in 2007. Its numbers for mechanical devices were less than half of that. For the past few years, the USPTO has faced its own budget problems, forcing layoffs of some examiners and causing a huge backup in the process. Already backlogged with applications, the approval time was slowly increasing from time of submission. “The Senate just allowed $70 million to be moved from the trademark side to the patent side, which should help a bit,” Christensen says. “But that still doesn’t help with pendency.” The Waiting Game The well-used phrase “patent pending” has never been more accurately applied, or been more frustrating for inventors and entrepreneurs. Even under normal circumstances, it can take three to five years for final issuance of a patent. For makers of computer software products, for instance, that is too long. “A lot of the technology is out-of-date by the time a patent is issued,” Christensen says. “It can be frustrating and costly for an individual or company waiting for that patent to be issued.” That could force a change in the venture capital community towards its focus in the patent application process. Christensen says investors may be more content with the “patent pending” designation than before, since granting of the patents could remain slow. “They want to protect their inventions and their investments,” he says. “With budgets for many businesses set on an annual basis, and with those budgets being slashed in many places, entrepreneurs may be more content to wait out the process with the simple ‘pending’ designation while the examinations proceed.” Nybold says those in Alexandria continue to find ways to improve turnaround time and streamline the operations. Recently, the USPTO began testing an electronic patent filing program, where applicants receive an electronic notification of office communications instead of paper mailings. “We received very positive feedback from applicants who participated in the pilot program,” says John Doll. acting under secretary of commerce for intellectual property and acting director of the USPTO. “Not only have we dramatically reduced paper processing and mailing costs but also expedited notification allowing applicants to take full advantage of their time period for reply to an office action.” According to a press release from the office, the program minimizes the possibility of lost or delayed postal mail and helps participants efficiently process and docket USPTO communications. “Getting a patent is still a very important and much sought-after achievement for an inventor,” Nybold says. “We remain dedicated to helping make that happen as quickly as we can.”
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