Do you think that switching to the first-to-file is going to result in a substantial increase in the number of early patent filings?
LASERSOHN: I think it will result in some increase, but we have this system now, provisional filings, which is effectively the same thing. People tend to file provisionals now, essentially, the moment they conceive of an idea, even if it’s extremely early and very ill-defined and not reduced to practice, and all of those things. So I think that’s already happened, to some extent. Because of the provisional system, people have already started to file patents much earlier than they would have historically.

Considering some of the elements that are in the proposed legislation, do you anticipate that the research and development, the budgets, and procedures would change in high tech and medical related industries?
LASERSOHN: Well, I guess one way to answer that is we haven’t — we would not have until some of the other important aspects of the proposed reform legislation, right? And I can tell you that the National Venture Capital Association and the venture capital community, while we have been very, very involved in the discussions, we’ve certainly made our opinions well known. We have attempted to work compromises, and to address the issues that certain parties have raised. And most of them made it very clear that certain proposals will significantly undermine the basic balance of the patent system and reduce the value of patents in favor of infringement, basically, and reduce, in particular, the disincentives to infringement, which, if it’s done incorrectly, could have an absolutely devastating, negative impact on venture capital, the flow of venture capital to many industries, certainly not just biotech and medical devices, but across all of our industries, which include semiconductors, telecommunications, material, and now clean energy. And certain aspects, certain proposals, and in particular, I’m sure you’re aware of the suggestion to change the way damages are calculated has the potential to do that. And we have been opposed to the radical proposals. We have spoken to try to address the purported concerns of some of the large companies about how will damages work, but the proposal’s so far may have been just not acceptable and we oppose it strongly.

Any enhanced post grant review benefits large companies at the expense of small start-ups. Period.

Let’s talk about post merit review then.
LASERSOHN: As I said, our view is that some form of past post merit review is valuable, is in the public — is certainly in the public interest, is something I think that — any post merit review is the context of it. Any enhanced post grant review benefits large companies at the expense of small start-ups. Period. I mean it’s not worth arguing about that. That is simply the fact because large companies have the ability to use post grant review system to abuse small companies. They have money. They have resources. And most importantly, any abuse of the post grant review system undermines the certainty of the issuance of the patent by the smaller company. And the smaller company is much more dependent on that than the large company is on finding the patent, you know, making the patent invalid. One has to accept that any enhancement of the post grant review will have the absolutely predictable consequence of shifting the balance of power in favor of the larger companies using the system as lever to get smaller companies. Having said that, that has to be balanced against the benefit of an enhanced post grant review system for everybody. That is where the right type of system is going to help reduce the issuance of bad patents. So we are in favor of that. We believe that that is balanced and one has to make — despite the fact that it will cost our companies, we estimate that it will increase the cost of prosecuting a lot of our patents by essentially a factor of 10 — we are willing to accept that in the interest of, you know, public policy and better patents for everybody.

Yes. The cost of protecting…
LASERSOHN: There is a line that has to be drawn, and we think that where the Congress drew this line, where they have a single post grant review, which we would restrict a little bit more than they did. The better place to draw that line, and where the Senate has drawn the line, which is basically an unlimited series of post grad reviews, because that will produce such uncertainty in the prosecution of patents by small companies that we think that will ultimately do more harm than good. So this is not one of these black or white answers. This is an answer where it’s a thin cut exactly how you draw the line, what’s permitted, what’s not permitted. You know, what the standards are, what’s included in the post grant review. And all I can say is in general, something more in the direction of the House of Representative’s version is where we are going, where we would like to see this go.

If the current legislation in the Senate passes, your opinion is that the strength of the patents will be weakened. So now, from the perspective of the venture capitalist, looking at a company who’s developing something, and your desire to invest in that firm, to fund some of this research and development. What impact do you see there? Will that bring about a feeling that your investment is less secure or will this hinder investment in some firms because they have the concern that the patents filed for the companies’ products will be weakened?
LASERSOHN: Yes. There’s no doubt about that. And that, I mean there’s certainly no question about that, and it’s always a question of degrees of. I think an important context that you have to remember that while this discussion has been taking place in the Congress, the Supreme Court has been busy drastically curtailing the value of patents. So two cases, the Blackmar cases, have come down in the last year, while all of this reform discussion has taken place, and could by themselves potentially very negatively and significantly affect many companies that we’ve financed.

KSR versus Teleflex a few months ago significantly changed the law with respect to the test of obviousness, which is how you determine whether a patent is valid or not. And again, they significantly increased the hurdle for obviousness. The federal circuit had always had very objective tests for obviousness. They basically said look, if nobody made the suggestion to put two and two together before the inventor did, it’s not obvious. You had to have objective evidence that somebody had suggested this before or that it was in the common knowledge. And the Supreme Court said no, no. That the new test, what you have to prove now, when you’re particularly combining two things that were in the public domain, which are not, of course, everything. There’s no new invention. Every invention is made up of, I think, 60 components. It’s not like we discover kryptonite, and now make stuff out of kryptonite. You know, everything in the world is basically, largely, made up of components that are know at some level, except in biotechnology, where we really do tend to discover new things all the time, and really, fundamentally new things.

And they said that if you put two components together, the only way they’re not obvious is if the result of putting them together would not have been predictable. If you read that literally, that sort of would mean a surprising result. You would have sort of violated a law of physics or something. That never happens.