The America Invents Act Turns Ten: What That Has Meant (and Could Still Mean) for Startups

By Abby Rives, IP Counsel, Engine Advocacy & Foundation

The America Invents Act (AIA), signed into law ten years ago today, was the most substantial update to the U.S. patent system in recent memory. Reflecting on the past ten years reveals the ways in which the AIA has supported startup success but also shows room for improvement.

Prior to the AIA being enacted, there was only one Patent and Trademark Office (PTO) location — in Alexandria, VA — meaning startups in every other part of the country had a harder time accessing the Office’s resources. The AIA established regional offices, and now there are PTO staff across the country who can work with, e.g., startups and accelerators in every time zone.

The AIA also established the Patent Pro Bono Program, through which the PTO helps connect small businesses thinking about applying for a patent with free legal advice. Over the past six years, more than 1,800 volunteer attorneys have helped applicants file over 1,500 patent applications. And the pro bono program has seemingly had a positive impact on underrepresented innovators against the backdrop of a patent system that is dramatically lacking in diversity.

Similarly, the AIA created new fees for so-called “micro entity” patent applicants — so small businesses that are newer to the patent system pay less than big companies when they apply for patents. The overall cost to apply for a patent can easily reach $10,000 — $25,000 (including legal costs and PTO fees), but, while a large company pays approximately $15,000 in PTO fees to apply for and maintain a patent, micro-entities pay closer to $4,000. Since the AIA, U.S.-based micro-entities have obtained an increasing number of patents — they held only 1 percent of utility patents issued in 2013 but that grew to 4.2 percent by 2020.

Importantly, the AIA also acknowledged that the PTO occasionally issues invalid patents, and when that happens it can create a substantial drain on U.S. innovation — especially for startups. Before the AIA, PTO reviewed issued patents through reexamination processes that had several limitations, rendering them under-utilized and ineffective at clearing out low-quality patents. That left expensive, lengthy court cases as the only other way to challenge low-quality patents.

To combat this, the AIA created accessible, affordable mechanisms to weed-out patents that never should have issued in the first place. With inter partes review (IPR), a third-party can go to the patent office’s Patent Trial and Appeal Board (PTAB) and petition it to take a second look at a patent to assess if a patent was (in)correctly granted. Since its inception, IPR has helped improve patent quality in the U.S., weeding out invalid patents that stifle innovation and helping reduce the cost and amount of abusive patent litigation filed by patent assertion entities (so-called “patent trolls”).

“Since reforms like the [AIA] which instituted IPR, . . . startups have been able to operate with much more ease, that they aren’t going to be targeted by patent trolls as much as they were.”

– Michal Rosenn, Former General Counsel, Expa Labs

Startups are unfortunately familiar with abusive patent assertion. Many face vague infringement accusations over low-quality patents, and few are able to afford costly litigation. Startups also report how this litigation significantly impacts their operations. IPR lowers those costs by an order of magnitude, leveling the playing field and freeing up resources so startups can instead invest in growing their business.

IPR “level[s] the playing field and . . . make[s] it easier for us to defend ourselves against low-quality patents.”

- Kenneth Carter, General Counsel, Bitmovin

The AIA has provided the U.S. startup ecosystem with support innovators need, but there is still room for improvement.

The diversity of the U.S. patent system does not reflect the diversity of the nation. As we have previously noted, policymakers should build on the AIA’s success by creating, for example, PTO outposts in other parts of the country to do an even better job meeting innovators where they are at. Congress should also revisit the Patent Pro Bono Program. Aside from the fact that many startups do not even know it exists, the admission requirements can feel challenging to navigate. Congress should evaluate what has worked best and expand on the program’s most successful features.

The PTO fee structure is complex and can feel opaque to startups. At the same time, the PTO’s filing fees are well below what it needs to cover its own examination costs. This creates troubling incentives that can lead to granting low-quality patents, because the office can close budgetary gaps by collecting patent fees at the time a patent issues. Researchers have proposed restructuring the PTO’s fee schedule, increasing fees for large companies that apply for scores of patents, and using those funds to subsidize applications from small businesses.

Finally, while the government should strive to improve the quality of issued patents, startups will always need accessible, affordable mechanisms to challenge weak, overbroad patents. Yet the costs of IPR can still be out of reach for many startups. And recent PTO policies restricted access to IPR, leading the agency to ignore meritorious petitions and contributing to an uptick in abusive patent assertion.

“The [IPR] system is really important, but it needs to be reformed. The whole intent of IPR is to give a company targeted by a patent abuser an alternative path to challenge a bad patent. What we are finding now, under the current policy, is that a company that files with the [PTAB] within 30 days of being sued has their IPR thrown out because of parallel litigation. This is not what Congress intended in . . . creating IPR, and it creates a series of challenges for startups.”

- Joshua Montgomery, Founder, Mycroft AI

Ten years out, the AIA has helped open access to the patent system while mitigating the problems caused by low-quality patents. The PTO should use the next ten years to continue that momentum. As the Biden Administration chooses the next PTO Director, we hope that person will keep both the AIA’s contributions and these further opportunities in mind.

Engine is a non-profit technology policy, research, and advocacy organization that bridges the gap between policymakers and startups. Engine works with government and a community of thousands of high-technology, growth-oriented startups across the nation to support the development of technology entrepreneurship through economic research, policy analysis, and advocacy on local and national issues.