A profound shift in the federal patent law is on the horizon, and some attorneys fear the changes will hurt startup companies in the Inland Northwest.

At a minimum, they say, Spokane-area inventors and entrepreneurs will have to change the way they handle their inventions and other intellectual property as a result of the expected changes. At the same time, patent attorneys will have to change the ways they advise their clients, they say.

Bill Jeckle, an of-counsel attorney at Spokane-based Lukins & Annis PS, says the U.S. patent system will shift from what's considered a first-to-invent system to what essentially is a first-to-file system. In other words, if patent reform passes as currently written, the first to file a patent will have rights to the idea, regardless of who first conceived it.

He says such a shift will compel companies and individual inventors to secure patents before being able to test marketability of ideas. Also, it could prompt more civil litigation regarding who first conceived inventions.

"In my opinion, patent reform is going to change my practice dramatically," Jeckle says. "Cynically, I'd say this is the full-employment act for patent attorneys."

Both houses of Congress have passed separate bills on patent reform, and as legislators reconvene this week, they are expected to reconcile those pieces of legislation and pass a revised bill on to President Obama.

While patent law reform took a back burner this summer to the debt ceiling, Federal Aviation Administration funding, and other issues, Congress likely will address this issue sooner rather than later, says Keith Grzelak, a director at Spokane-based Wells St. John PS law firm.

Grzelak served as chairman of the Institute of Electrical and Electronics Engineers' intellectual property policy committee from 2007 to 2010, and he now is on the organization's government relations counsel. In those roles, he has issued position statements on different aspects of patent reform and has met a number of times with legislators and their aides to discuss the subject.

Grzelak says a first-to-file patent system generally favors large corporations, which have the expertise and financial wherewithal to put together patent applications quickly. He says he has expressed concerns repeatedly throughout the past five years regarding the effects the proposed changes would have on startup companies and entrepreneurship in general.

"It will take good lawyering to advise startups, and they might not have the resources for that," he says.

Despite its potential effect on small business, reform is sorely needed in the patent system, which hasn't been altered in decades, says Lewis Lee, a founding partner in Spokane-based Lee & Hayes PLLC.

"We need to get some reform going," Lee says. "Is it perfect? Absolutely not, but we need to get something done."

He says he's in favor of changing the system so that patents can move through the pipeline more quickly and keep the U.S. competitive in the international intellectual property market. Other countries, he adds, operate on a first-to-file system, and the change will harmonize the U.S. with the rest of the world.

Under the current first-to-invent system, an inventor has 12 months from conception of an idea to file for a patent. This grace period, Jeckle says, allows an inventor—whether it's an individual or a corporation—to perform a patent search to determine whether an idea is patentable and whether it infringes on another patent. Also, to a degree, the grace period allows an inventor to test the marketability of an idea before filing for a patent.

Grzelak says, "The dirty little secret is that the patent system has always helped the little guy."

A first-to-file system erodes that grace period, however. Consequently, Jeckle says, the decision as to whether or not to pursue a patent will need to be made before determining whether an invention is patentable.

"You're going to have to fish or cut bait, and it's going to be at the front end of the process," he says.

This will result in additional filing and legal fees. Jeckle says the cost of researching and filing for a patent can vary, but a typical total cost for a simple mechanical patent is less than $10,000. Costs rise as the complexity of the invention increases, he says.

What might add more to the cost is a clause in one of the bills that calls for prioritized examination. In other words, as one version of the law is written, the U.S. Patent Office would consider an applicant's patent request before others if that inventor pays a premium fee. Grzelak says that fee is listed at $4,800, which is roughly 10 times they typical cost for filing a patent application. If that portion of the bill becomes law, he asserts that it won't be a true first-to-file system, but rather a first-to-pay-the-premium system.

In a first-to-file system, an inventor still can allege wrongdoing against another party that files a patent application on the same idea, but such disputes would be handled in civil court, not through the patent office. Currently, the patent office sorts out such matters to determine which party was the first to invent.

One aspect of the bill that Grzelak, Jeckle, and Lee support is an end to Congress' ability to take money generated by the U.S. Patent Office and use it to fund other government functions, a practice known generally as fee diversion.

Currently, Grzelak says, the patent office is self-supporting, with its operations funded by the fees it charges. In the past, however, Congress has siphoned money from that office and used it to fund unrelated government activities. Consequently, the patent office has had to make due with fewer people than it would have if it were able to keep all of the money it generated, which has increased the amount of time it takes to secure a patent, Grzelak says.

If the component of the bill that calls for an end to fee diversion becomes law, the patent office could hire more personnel and curb delays, which would be a positive development for all inventors.

In general, Lee says, intellectual property is becoming a larger factor in business at both the local and federal level. He says that in the 1970s, 90 percent of the S&P 500 consisted of companies with tangible assets, and the balance was intangible assets, or intellectual property. Now, Lee says, with companies like Microsoft Corp., Apple Inc., and Google Inc. among the leaders in market capitalization, those percentage have flip-flopped, with the majority of the value being in intangible assets.

"We do need to have some reform that recognizes intellectual property is integral to our economy," Lee says.

In the lnland Northwest, he adds, more technology companies already are investing in protecting their intellectual property during the research-and-development process. Also, he says, leaders of companies outside of the technology sector are considering more carefully how to preserve their IP.

"Here in Spokane," Lee says, "clients are starting to pay attention to IP in a way that wasn't true before."