Cushioning the Impact of First to File for Small Businesses: The Provisional Patent Application

On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act (“AIA”), the most substantial change to patent law in the United States since the Patent Act of 1952.[1]  Over the eighteen months following enactment, a number of alterations to the process that the U.S. Patent and Trademark Office (“PTO”) uses to evaluate patent applications will take place.  The single most significant effect of the AIA is the transition from a First to Invent (“FTI”) patent system to a First to File (“FTF”) patent system.  Many commentators have noted the challenges that the FTF system poses to small businesses and entrepreneurs.[2]  Indeed, small applicants, often operating on a limited budget and lacking the funds to fully pursue novel ideas, are at a significant disadvantage under FTF when compared with larger entities.  However, the AIA is now the law of the land, and it behooves small applicants to implement the best possible methods to mitigate the disadvantages that FTF presents.  To that end, it is likely that small applicants will come to rely increasingly on provisional applications to protect their intellectual property.[3]     


A FTF system is, practically speaking, a race to the patent office.  Under a FTF system, large, well funded entities like corporations and universities enjoy a marked advantage over small businesses, start-ups, and the archetypical lone inventor, compared to a FTI system.  Consider the following hypothetical:  A is a lone inventor, working out of her garage.  B is an inventor employed by a major corporation.  On January 3, A creates a patentable invention.  On January 13, B independently creates that same invention.  A needs four weeks to write her application and secure financing to pay the patent application fees.  B’s employer enlists the aid of an expert patent law firm to help with the application, and can immediately pay the application fees, allowing B’s application to be submitted two weeks after B’s discovery.  B’s company submits the application on January 27, while A’s application is not submitted until January 31.  Under a FTI patent system, A would receive a patent for the invention.  Under a FTF system, B’s company would be awarded the patent.[4]  


Apart from any considerations of justice and fairness, a major problem with the FTF system is that it may dis-incentivize innovation.  A primary purpose of granting patents, and the purpose described in the U.S. Constitution[5], is to encourage the free exchange of ideas by granting temporary exclusive rights to profit from those ideas.  When a patent is published, others can engage in further development of the core ideas into new patentable technologies.  By temporarily protecting the profit expectations of inventors, patent laws discourage keeping innovations and technologies secret.  An FTI system supports this public policy goal by allowing inventors to discuss and publish their inventions prior to applying for a patent without sacrificing their intellectual property rights.  A FTF system may reduce the level of protection available to inventors, discouraging them from freely discussing ideas in progress.      


Some provisions in the AIA indicate an awareness of the challenges faced by small businesses under the new legislation.  To supplement the pre-existing “small entity” class, who receive a 50% reduction on patent application fees, the AIA creates a “micro-entity” designation who pay only 25% of the standard application fees.  Micro-entity status is limited to solo inventors who have filed fewer than four previous patent applications and have an annual gross income of less than three times the median household income as determined by the Bureau of the Census.[6]  Institutions of Higher Education are also considered micro-entities.  Further provision is made in the AIA for a report on the impact on small businesses of the changes to patent law.  The report will be due to Congress on September 16, 2012.[7]  These provisions constitute at least a token acknowledgement of the need for providing additional support and consideration for small businesses affected by the AIA.


What is a small business or an individual inventor to do under the AIA?   One option to mitigate the negative impact of FTF is increased use of provisional patent applications.[8]  Provisional applications allow a filer to establish a claim of priority for an invention without filing a full and exhaustive patent application.  A provisional application is good for one year from the filing date, and any complete application for the same invention filed by the same inventor during that one year period will be treated, for the purposes of priority, as if it was filed at the time of the provisional application.  In essence, a provisional application allows an inventor to hold his place in the priority line.  Since a provisional application can be completed with less precision and has fewer components than a full application, it can be submitted more quickly and with greater ease.  Provisional applications are not reviewed by the PTO, and do not require a claim, an inventor oath, or an inventor declaration.[9]  Provisional applications can also be used to establish an extra year of patent protection in addition to the standard twenty year term.[10]             


In addition to the time benefits of provisional applications, the financial impact of filing a provisional patent is lighter than that of a full application.  As of September 26, 2011, the basic filing fee for a provisional patent is $250 plus a $50 processing fee, compared to a basic filing fee of $380 for a utility patent.[11]  Also, while a full application for a patent requires payment of search, examination, and other incidental fees, a provisional application can be filed with no additional fees.  Finally, since a provisional application requires a lessened standard of precision and may be subject to less scrutiny compared to a full application, it can be completed with lower or no attorney’s fees.


For a lone inventor or small business, this lessened financial burden is key.  While it might be difficult for a micro-entity (aside from Institutes of Higher Learning) to scrape together the fees for a full application, the fees for a provisional application might well be within their means.  With rights to his or her intellectual property protected under the provisional application, an inventor will feel more free to seek outside investment to further develop the invention and the patent application without risking his patent.  Investors, for their part, will be more likely to risk providing funding a full application if they know that rights to the invention are protected by a provisional application.


There are, of course, downsides to the provisional application process.  First, when a full application can be filed immediately, there is no reason to pay the extra fee for a provisional application.  More importantly for a small entity, the provisional application must enable the invention to be patented.  The final form of the product or service to be marketed may be different from the first invention, and protecting the patent right would require a series of intermediary filings to protect the priority.[12]  Each additional filing imposes additional costs on the inventor.  Finally, the provisional application does not remove the barriers to free exchange of ideas that the FTF system erects.  Allowing a provisional application may shorten the period in which an inventor feels unable to discuss or publish his invention, but it does not eliminate it, and an inventor may be inclined to secrecy in the important development phase for fear of losing his patent right to a competing early filer.   


Provisional patent applications are already fairly common.  In 2009, 486,499 total patent applications were filed, of which 134,438 were provisional.[13]  As a result of the switch to a FTF system, that number will likely rise.  It is conceivable that filing one or more provisional patent applications to secure priority will become de rigueur in the patent application process.  While this may impose additional burdens on the PTO, any increase in applications will hopefully be offset by a decrease in challenges under the FTF system.  While the FTF system unquestionably changes the patent game in significant ways, provisional applications help to level the playing field between large and small entities, and hopefully will be able to play some role in protecting the rights of inventors over corporations and in stimulating innovation through the free exchange of ideas.     

             As a new piece of legislation, AIA will likely evolve in the coming years as administrative regulations and court challenges arise.  The report on small businesses due to be submitted next year hopefully will provide a better window into the effect of AIA on small businesses, and suggestions on how to mitigate the deleterious effects of the AIA on innovation.  Until then, small entities must take whatever steps are advisable to protect their interests, and err on the side of caution with regards to submitting provisional applications early and often.


[1] “Immediate and Delayed Effects of the America Invents Act,” Steven J. Lee, 2011 Emerging Issues 5897.

[2] For a selection, see “Patent Reform: America Invents Act for Small Applicants,” Irene Keselman, Patent Trademark and Copyright Law Daily (Oct. 21 2011) and 

[3] Of course, small entities remain subject to the challenges that they faced prior to the AIA, among which is the ability of a patent applicant with deep pockets to hire more and better patent lawyers, and the resources to market the end product more swiftly and effectively.   

[4] This hypothetical, of course, assumes good faith by both parties.  In a situation where one party claims that another patent is derived from their work, they may institute a derivation proceeding.  This replaces the prior challenge system of interferences.  While the process of a derivation proceeding s not entirely clear at this point, the fundamentally litigious nature of the action will likely favor parties with pockets deep enough to employ skilled advocates.  See Leahy-Smith America Invents Act, Pub. L. No. 112-29 §3 125 Stat. 284 (2011).  

[5] 1 U.S. Constitution §8

[6] 35 U.S.C. 11 §123(g) The median household income in 2010, according to the Bureau of the Census, was $49,445, meaning the gross income cut-off for micro-entity status in 2011 would be $148,445.

[7] Leahy-Smith America Invents Act, Pub. L. No. 112-29 §31 125 Stat. 284 (2011)

[8]35 U.S.C. §111

[9] Chisum on Patents §11.02(i)

[10] 35 U.S.C. §154(a) 2-3

[12] “Conferences: Patent Reform Will Force Sequential, Broader Patent Application Filings by New Ventures,” Tony Dutara, Patent, Trademake, and Copyright Law Daily, (September 6, 2011).

[13] 2009 Performance and Accountability Report available at