By Shelia Watson

Tom Fair understands the dilemma of working in the world of the U.S. Patent and Trademark Office. Its world moves at a snails pace and has caused a backlog of applications and a process that can take up to four years for approval.

He sees the need to reduce the backlog and speed up its process as mission critical for information technology companies, considering how rapidly that industry changes.

“The product being patented moves so fast that before any action occurs on the patent it’ll be almost unrecognizable,” said Fair, president and CEO of James Island-based Turnkey Technology Solutions, whose latest product, BackupKey, has a patent pending. Fair anticipates getting the award within four years.

“Some of the things that were unique two or three years ago are obsolete now,” he said. “And often the technology available to us has surpassed what’s included in the patent. By the time you get the patent, no one would want to use it.”

Innovation is a key driver of economic growth, and patents help ensure protection for the innovator’s design or process; therefore, patents are a critical part of economic growth, specifically in the area of research and development.

And yet, there is a backlog of more than 700,000 pending patent applications in the patent office, most of which can take up to four years for approval and award.

The patent office’s quagmire of delay is the focus of a recent report from the Information Technology and Innovation Foundation that highlights the need to reform the U.S. patent system.

In addition, two bills in Congress, S. 1145 and H.R. 1908, collectively dubbed the Patent Reform Act of 2007 and introduced by Sens. Patrick Leahy, D-Vt., and Orrin Hatch, R-Utah, would provide needed reforms.

The ITIF report analyzes problems in three main areas: the patent office’s delays in granting patents, patent quality and excessive litigation and damage awards. ITIF recommended reforms that focus on two key areas: those that will improve pre-grant activity at the patent office and those that influence post-grant review in the courts.

The recommendations include Congress increasing patent office resources to hire enough examiners to reduce the backlog and facilitate efforts to encourage public participation in patent examinations to increase patent quality.

The report also makes the case for reforms to reduce excessive litigation and damage awards, including those in areas of damage apportionment, post-grant review and patent venue. Some of the recommendations are being included in the proposed legislation.

The current set up of the patent office is costly in terms of both time and the potential of lost revenue, Fair said.

“Here’s a scenario: I create a product and file a patent in 2007. Within a year, some unknown competitor produces a product that potentially violates my patent. But my patent doesn’t get approved until 2011. By 2011, I could be out of business and in bankruptcy,” he said. “If I had the money to hire a lawyer at that time, the company that stole my idea may have a lot more money and more lawyers. Whether I’m in the right or not, there’s no practical means for me to defend my innovation.”

The problem is exacerbated, he said, when the violating competitors are outside the United States.

“In that scenario, even if the United States declares me in the right, the legal system overseas might not,” he said. “Even if I win the case, it’s likely I won’t get my money.”

The cost Fair described is above and beyond the fee for a typical software patent, which he said is between $15,000 and $20,000.

Jeff Grady, president of Digital Lifestyle Outfitters in Charleston, said his company is always looking to protect its intellectual property, so a great deal of time is spent working with trademarks and patents.

DLO was in the relative minority in that its patent took only 18 months to be approved.

“It was fortunate for us that the idea (of the product) was so novel that the time from application to the award of a patent was a year and a half,” he said.

The particular invention in this case was the Transpod, and Grady said there was nothing else like it on the market.

DLO has successfully defended its patent and settled out of court.

“We actually lost our first round and went to appeals, but we won and that company ended up paying us back royalties,” he said. “Once you’ve defended your patent, that’s when you show its value.”

However, defending a patent is not a cheap process. The ITIF report noted that technology companies may spend $100 million per year on patent litigation, which increased 120% between 1990 and 2005, while civil litigation in general rose only about 5%.

Damage awards also grew, providing windfalls to some patent holder at the expense of consumers who end up paying higher prices for the products, the report said.

In the end, the report concluded, the high cost can cause companies to drop development plans or discourage companies from asserting their patent rights.