Engineers at a California-based company called Danger Inc. filed a patent in 2000 for just the kind of innovation that helped the United States gain a reputation for ingenuity. But the company’s experience with the patent process illustrates why the nation is gaining another kind of reputation—that of losing a step. It’s a problem that the Senate debated this week as it considered an overhaul of the patent system.

Danger’s engineers had developed a swivel-hinge for a T-Mobile phone that allowed its screen to be pulled away from a separate keyboard, a revolutionary design at the time. The phone, called the Hiptop, was later renamed the Sidekick and won a designation in 2003 from PCWorld as product of the year.

But what should have been a routine and straightforward patent process became a time-consuming and ultimately expensive bureaucratic nightmare. It took seven years for the U.S. Patent and Trademark Office to approve the application, says Danger’s former CEO Hank Nothhaft, underscoring how important two little words—“patent pending”—can be for a fledgling company.

As T-Mobile incorporated the swivel-hinge into its phone, another company filed a similar patent, and a patent-holding company called Wireless Agents took over the latter’s application. In 2005, Wireless Agents filed an infringement lawsuit against Danger, now owned by Microsoft, that ended up costing the company $3 million in legal fees and settlement costs.

“Patents can often give a start-up an edge in attracting investment and succeeding in the market, but an underfunded and dysfunctional patent office can erase that edge and sometimes even kill a company,” says Nothhaft, who is now CEO of the microtechnology firm Tessera.

Since the 1990s, patent applications have surged, topping out at more than 1.2 million in 2008. But the U.S. Patent and Trademark Office hasn’t kept up. More than 700,000 patent applications are awaiting action, with each taking an average of almost three years to get agency approval.



The patent office is funded by the fees it collects, but its IT systems are antiquated. In the past 20 years, congressional appropriators have siphoned off more than $800 million for other programs. Legislative fixes have stalled year after year in Congress.

after year in Congress.

Now President Obama and congressional Democrats have made patent reform a centerpiece of a larger innovation agenda. Best of all, proponents say, is that fixing the patent office wouldn’t cost taxpayers a dime and could spur job creation.

However, despite unprecedented attention by administration officials and congressional leaders, patent-reform supporters fear that the bill will once again get bogged down.

Soon after the 112th Congress convened, Senate Judiciary Chairman Patrick Leahy, D-Vt., introduced the latest comprehensive version of patent legislation. The legislation would be the first major overhaul of the patent system in 60 years if it becomes law.

Leahy’s bill got off to a good start. The White House endorsed the bipartisan measure, and it passed the Senate Judiciary Committee unanimously. Yet hurdles remain.

Some large companies, including Google, Verizon, and Intel, have lobbied for more certainty in the process for challenging patents in court. They say that unjustified patent-infringement claims are a major burden and cost companies millions of dollars. Amendments to Leahy’s bill approved on Tuesday may help the legislation win support from these businesses, as well as from House Judiciary Committee Chairman Lamar Smith, R-Texas. But the Patent Fairness Coalition, which represents many large tech companies, said it wants still more changes.

Some small businesses and conservative activists are unhappy with the bill because of the “first-inventor-to-file” system that Leahy proposes and the Obama administration endorses. Unlike almost every other country, the United States currently issues patents to the person who proves he or she invented something first. Under a first-to-file system, patents would be awarded to the initial applicant, even if someone else later claims to be the inventor. Supporters say that this will streamline the process and put the U.S. in line with other patent systems; critics counter that it weakens patent protections and favors large companies that have more resources to get through the application process faster.

Despite the disagreements over certain provisions in the bill, almost everyone agrees on one thing: The patent office needs more resources. That goal tops the wish lists of many, if not all, of the various businesses, industry and advocacy groups, and politicians who have weighed in on the patent issue.

“People overwhelmingly agree that the patent office needs more funding and resources,” said Paul Michel, a retired chief judge for the U.S. Court of Appeals for the Federal Circuit, which has jurisdiction over patent cases. “That is issue No. 1, and everything else in the bill is secondary.”

Leahy’s bill would allow the patent office to set its own fees, and it would prevent Congress from diverting agency funds to other projects. Similar proposals have faltered before because of opposition from congressional appropriators. The fear, Michel said, is that the funding provisions may get pushed aside by the more controversial but less pressing issues.

Although agency Director David Kappos has dismissed such concerns, many groups have called on Congress to abandon the comprehensive approach in favor of a smaller, more targeted bill to help modernize, streamline, and improve the patent office. If this reasoning wins out, less may indeed be more for patent reform.