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Entrepreneurs begin grappling with new patent priority

US patent owned by SDSU
The America Invents Act shifts the patent priority from the first to invent to the first to file a patent on that invention. Though it's aimed at increasing innovation, a survey of 36 Midwest entrepreneurs shows that those who have consulted an attorney are concerned about the impact these new rules will have on their businesses.

Should an entrepreneur protect an invention with a patent sooner rather than later? That’s the question that confronts innovators struggling to determine how recent patent law changes will impact their businesses.

The America Invents Act, which went into effect in 2013, replaces a system that recognizes the first to invent with one that gives priority to the first to file a patent on the invention. Proponents believe the AIA will increase innovation and thereby economic growth.

To find out how this change may affect economic growth, two South Dakota State University economics professors surveyed 36 entrepreneurs from North and South Dakota, Iowa and Minnesota. Though most entrepreneurs have not thoroughly reviewed the new rules, those who have consulted a lawyer are concerned about the law’s impact, according to Assistant Professor Craig Silvernagel, whose expertise is in entrepreneurial studies.

“We live in a market economy and the lifeblood of that economy is innovation,” said Professor George Langelett. “Consequently, the rate at which we innovate will affect economic growth.”  However, the entrepreneurs surveyed did not think the policy change would make them innovate more than they previously did, Silvernagel noted.

The results of the survey are published in the Journal of Entrepreneurship and Public Policy.  The SDSU researchers worked with Brian Tande, associate dean of the College of Engineering and Mines at the University of North Dakota.

“This is our first exploratory project to sense where entrepreneurs are at,” Silvernagel said. “Do they know about the new priority, have they gotten professional input on this and has it changed their strategic approach to innovating?”

Langelett said, “There is a sense among smaller or independent innovators that they are at a disadvantage compared to corporations and companies with deeper pockets.” However, Silvernagel pointed out, “Just because a respondent believes it does, does not make it true.

“Understanding and knowledge about intellectual property is important,” he continued. “It is wrought with pitfalls. Just because you secure a patent does not necessarily mean you have anything of economic value.”

Langelett said the change in patent law could make inventors more guarded about sharing their ideas. “Communicating with other people can be beneficial. The key to success is finding people who know what they are talking about.”

Beginning entrepreneurs may think they can get an idea, raise funding and then build a prototype, Langelett explained. “That is backward. They must first build a prototype and show sufficient market demand before raising funds.”

Silvernagel added, “There is no more convincing way to demonstrate feasibility than paying customers. If you unwind an Amazon.com, for instance, you will see there were all kinds of iterations and problems that had to be solved.”

The authors hope this study will inspire other researchers to ask similar questions in their regions to get a broader view of the new patent law’s impact. “This is an important topic to come back to. This could ultimately benefit U.S.-based entrepreneurs in the context of a system that is more aligned with those outside the country,” Silvernagel said. “This is just the beginning.”