Patent Battles in the Auto Sector
NEW YORK ( MainStreet) Ask people about the most storied battle around patents and they will respond with Apple v. Samsung . Yet, more than a hundred years ago a defining patent battle was being fought between Henry Ford, a soon-to-be-household name, and a patent attorney called George Selden. Selden filed and ultimately lost the lawsuit he brought against the Ford Motor Company, alleging patent infringement on his invention of the car. The judge ruled that he had invented only a two-stroke engine and that the rest of the car was just an idea, which Selden had not realized.
Today, the auto industry is the third-largest generator of patents after telecommunications and computing. The 23,000-odd patents filed in the auto sector in 2012 marked a 40% increase over 2010.
"The wide availability of low cost hybrid-electric vehicles in today's marketplace is a good example of how automotive-related patents have transformed the automobile sector," says Eric W. Schweibenz, a noted IP lawyer with law firm Oblon, Spivak, McClelland, Maier & Neustadt, L.L.P.
The Patent Evolution
With the U.S. having switched lanes on March 16 of this year from a first-to-invent patent system to a first-to-file system under the new America Invents Act (AIA), industry watchers, IP experts and consumer groups are watching with keen interest on how the industry is impacted.
Why did the law need to be changed? The answer to that lies in the modern day descendants of George Selden, the rather disparagingly named patent trolls.
A patent troll is defined as someone who files and acquires patents not for the purpose of building a business but for suing and claiming compensation from legitimate businesses engaged in inventing similar technologies and products. Patent trolling is estimated to have caused companies $29 billion in 2011.
Ford managed to attract the attention of patent trolls again in 2011 with two firms Eagle Harbor and Medius Tech LLC filing lawsuits. Yet with 89% of patent cases reviewed by the U.S. Patent and Trademarks Office held to be invalid, it was clear that the country needed a new patent law.
Under the first-to-invent system, which the U.S. operated on for more than 200 years, inventor A could delay the filing of a patent application compared to inventor B working on the same invention and claim patent rights as long as A was able to show through documentation that he or she had completed the invention of the product before B.
The rest of the world though followed the opposite system where the person first to file for an invention got the rights to it. So, in the above example, inventor B would have gotten the rights to the invention. Now, this might be seen as unfair, which is why the U.S. first-to-file system is actually a "first-to-disclose" system. If Inventor A had disclosed the existence of this invention in a research paper or in the media, there would be a one year grace period from that date to file a patent. As long as inventor A filed during the grace period, he or she would be awarded the patent.