Oregon startups turn to patents


0213 Data 02 233pxWDespite fees and backlog‚ ugly legal battles and new reforms‚ Oregon startups continue to innovate and see value in patents to protect their technologies.

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BY BRANDON SAWYER

0213 Data 01Working a high-stress job for a certain semiconductor company in Hillsboro, Mark Tipperreiter needed a good night’s sleep. In the nightly battle to get comfortable, he improvised a device to support the bedcovers above his feet and legs in order to relieve pressure on them and ease sleep. A friend who suffered from gout noticed his device and asked where he could get one. Tipperreiter found through research that foot and leg pain from ailments and injuries was quite common, so he decided to build a business, Blanketbooster, around his invention. But before he could, he knew he needed a patent on his simple, effective design, which would be too easy to knock off. Within three years, in November, he received a patent, which grants him a 20-year monopoly on the device, manufactured in Portland and sold online and at Relax the Back stores in the U.S. and Canada.

“It was the right choice,” he says. “It was a cost of doing business. The cost of not filing a patent in the long run would be more expensive.”

Tipperreiter’s story shows how patents can work, but the system is beset by chronic problems that are now being addressed by new laws and policies. While it’s too early to tell how exactly these reforms will impact Oregon’s innovators, they remain undeterred by the system’s flaws or its new laws, and still find value in patents.

Problems include years of application backlog, complaints of poor-quality patents, and mounting infringement litigation clogging district and appeals courts and costing companies huge sums of money and time. This has led high-tech behemoths like Intel to stockpile patents through acquisitions and flood the system with filings. Thus armed, high-profile legal battles have resulted.

Much of the strife today is rooted in a late 1990s decision by the U.S. Patent and Trademark Office (USPTO) to allow patents on software processes. Many of these patents should have been rejected, but examiners did not initially have the resources to properly judge them. This mountain of dubious patents has given rise to so-called “patent trolls,” firms holding large patent portfolios that don’t produce anything. Their only function is to threaten and sue accused infringers for licensing fees and damages.

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In response to these issues, Congress passed the Leahy-Smith America Invents Act (AIA), which became law in September 2011. It prescribes three major reforms: First, to try to improve the quality before a patent is issued, it has allowed more third-party input so USPTO examiners might get more relevant “prior art” as they judge whether an incremental gap in technology warrants a patent. This adds a crowd-sourcing aspect to patent examination, says Gregory L. Maurer, partner and patent attorney at Klarquist Sparkman LLP, a global intellectual property (IP) law firm in Portland. “It allows somebody to surface information they would otherwise overlook. Part of the hope is competitors would do that, but there’s also public interest groups,” he adds, that could provide feedback on pending patents.

Secondly, the AIA increased opportunities for post-grant review so challengers can dispute an already issued patent directly to the USPTO for a fee, instead of having to go to court. Stephen J. Joncus, a Klarquist Sparkman partner and IP litigator, likes this process and uses it frequently “because both sides get to argue.” It was designed to improve patent quality and divert some of the litigation surrounding disputed patents.

The third and most anticipated AIA change takes effect in March and will align U.S. policy with that of other countries. The patent system will move from first to invent as it’s been for more than 200 years, to first to file, so whoever files a valid patent first receives it whether or not they actually developed the technology. Joncus is skeptical that it could reduce litigation: “I don’t think I’ve ever been in a litigation where the first to practice was an issue.”

In the shadow of these AIA reforms, Oregon startups are busy innovating under the radar, relying on their attorneys to sort out legal details. But they still value patents and are concerned about the policy shifts.

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John Bial, president and CEO of biotech firm Yecuris Corporation in Portland, thinks first to file means “people will have to be a lot more careful in their conversations,” and says it’s seldom clear in collaboration when a patentable idea has presented itself. “You never know until you’re done if it’s going to generate anything useful.”

“People are naive,” he adds. “They don’t get the right kinds of confidentiality agreements in place and they get scooped. And now it will be worse.” Yecuris has two patents pending for mice bioengineered to contain human livers and immune systems, which sell for $1,500 to $3,500 per mouse as research subjects for drug metabolism, toxicity and a host of infectious diseases. The company also has a patent pending on a rat version of its technology and licenses two patents to enable operability of the models.

Bial anticipates a five-year wait on patents. In the biotech field, slower patent examination is the norm, along with extended waits for FDA approval, so the 20-year monopoly on a product is often cut in half or worse. Bial hopes the reforms will speed up patents and reduce litigation. He knows of one infringement suit that lasted 10 years. “It cost time and money on both sides. I’m not sure that anyone won.”

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Tigard-based Agilyx also relies on patents, receiving five so far on technology that converts plastics back into crude oil. Chief technology officer Kevin DeWhitt is also watching AIA changes with interest. He attends a Portland inventor’s group and is wary of the first-to-file rule, but of the third-party input process, he says, “To the extent that it’s more of a real-time feedback as opposed to a surprise later after your patent’s issued, that’s not a bad thing.” Bial likewise is “all for it,” but both think the process could be abused by well-paid lawyers with time on their hands.

DeWhitt is encouraged by patent office progress. His first patent took four years, but he got the next four in less than two years and was pleased with his patent examiner, as well as backlog reduction. He credits the USPTO’s Track One option, which expedites applications for a fee, which he used for two patents.

Reforms and legal questions aside, DeWhitt says filing a patent is an important clarifying process. He tells budding inventors, “The best thing they could possibly do is go all the way through and at least write up a provisional patent application … because you really understand what you’re inventing. And a lot of times, if you don’t do that, you’re missing key things in the process.”

Blanketbooster’s Tipperreiter adds that a patent is much more than legal traction. “Beyond just litigation or defensible product … it gives a company like mine leverage in the marketplace,” he says, “and more tangible benefit to another company if they were to buy you out. If you’ve got patent protection or trademarks, those are tangible assets.”

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Brandon Sawyer is research editor for Oregon Business. You may reach him at [email protected].