Under Wraps

Two new bills allow small businesses to keep patent applications a secret.
Magazine Contributor
4 min read

This story appears in the August 1997 issue of Entrepreneur. Subscribe »

Inventors and entrepreneurs may be close to winning an important battle in the patent war: being able to keep their applications a secret.

The tide took two important turns in April and May when first the House and then a Senate committee dealt big business a big blow: In House and Senate patent reform bills (H.R. 400 and S.507), legislators refused to allow publication of pending patents.

Strong small-business opposition to the provision that would have allowed publication 18 months after a patent was filed forced last-minute changes in the House bill. When the bill came to the floor, Rep. Marcy Kaptur (D-OH) proposed an amendment allowing small businesses, inventors and universities to keep their patent applications secret as long as they satisfy two criteria: They cannot publish the application in a foreign country, and they cannot use dilatory tactics to slow the application's consideration. Much to the surprise of many Fortune 500 firms, the House passed the amendment by a narrow margin (H.R. 400 had passed earlier).

The narrowness of the vote caused small-business groups to worry that it would be an uphill fight to persuade the Senate Judiciary Committee to include a Kaptur-type amendment in its bill. But when the committee voted on S.507, bill sponsor Sen. Orrin G. Hatch (R-UT) agreed to replace his 18-month language with wording even more favorable to small business. The bill then passed unanimously. It allows any company to keep its application secret as long as it is not filed outside the United States (most countries publish patents after 18 months).

Explanation, Please

Why is patent publication causing such a feverish battle? Inventors want to keep their applications secret because they believe big companies will, if not steal their ideas outright once an application becomes public (and before a patent is issued), file for improvement patents, which make the original invention commercially useless.

Large companies want patent applications made public so they don't develop a product based on technology soon to be patented by someone else. They also argue that some inventors could purposely delay consideration of their applications, keeping them below the surface at the U.S. Patent and Trademark Office (USPTO) like a submarine to torpedo corporate products.

Despite their success so far in eliminating the 18-month publication language, small-business groups still have problems with other provisions in the two bills. One deals with the conversion of the Patent Office from part of the Commerce Department to a for-profit government corporation, which some groups believe could open the USPTO to political and industry interference. So far, Congress has not acted on this objection. However, small business was heartened when the House approved an amendment prohibiting the president and Congress from redirecting USPTO user fees to other federal agencies.

Although the issue is far from settled, it's fair to say small-business political pressure forced the House and Senate to develop bills that turn the tide in favor of small business.

SBA Update

When the Small Business Regulatory Enforcement Fairness Act of 1996 passed last year, small-business owners breathed a sigh of relief. With regulatory compliance simplified, judicial review of laws enacted and other provisions in place, entrepreneurs' efforts to comply with federal agency regulations such as those from OSHA and the IRS were greatly simplified.

The SBA is now holding up its end of the bargain with the appointment of a national regulatory enforcement ombudsman and the opening of 10 regional small-business regulatory fairness boards to comment on federal agencies' enforcement activities. If you have a complaint regarding federal regulatory agency enforcement, your case can be heard by the ombudsman and your region's fairness board. The ombudsman may then follow up with the agency and inform you of its response. All comments from small businesses are reflected in the ombudsman's annual report to Congress. To obtain a form to register your concern, call (888) REG-FAIR.--Aida Alvarez, SBA Administrator

Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.

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