After six years of debate, the Senate passed a final patent reform bill that overhauls the U.S. patent system by an overwhelming vote of 89-9 last Thursday evening.  The bill has been sent to President Obama who  is expected to sign it into law.

NVCA supports comprehensive patent reform that is balanced, rewards small company inventors for their innovation and ensures a vibrant investment climate that spurs continued research and development.  Improving the quality of the patent system is critical to our nation’s leadership in innovation. 

NVCA played a significant role making improvements to the bill during the debate including the removal the damages language. Unfortunately, while there were several favorable ammendments throughout the process, we believe that, on balance, the final bill largely favors big business and not small company innovators.

Among other changes, the new bill will change the U.S. patent system from a “first-to-invent” to a “first-to-file” system, harmonizing our patent system internationally.  It will also create a new post-grant review (PGR) process that will allow a one-time 12-month window for challenges to the validity of patents once they are issued by the U.S. Patent and Technology Office.

NVCA believes that the new PGR does not provide adequate safe guards to deter large companies from using a PGR as a mechanism to harass small companies. NVCA now plans to work with the USPTO to try to minimize the negative impacts the new bill could have on small business, particularly as they move forward implementing the new post grant review process.

Constituents of the venture capital, growth equity and buyout segments of the private equity community should be aware of the Institutional Limited Partner Association (ILPA) documents currently open for comment.

There are two documents posted on the ILPA website for review:

1.  Proposed new standards for GP to LP quarterly reporting

2.  Capital call & distributions notice templates (which were released several months ago)

ILPA plans to release its final standards in September 2011 and have requested comments from all interested parties by September 9. Documents are posted here.  

NVCA is making its members and others aware of these exposure drafts so that those interested can weigh in accordingly.  However, as in the past, we will not take a formal position on these guidelines, as we believe that issues relating to GP to LP reporting procedures and templates are best addressed by the managers of each fund and its investors.

This week, NVCA sent a letter signed by more than 70 of its member firms to the chairman and president of the Financial Accounting Foundation (FAF) supporting the recommendations of its Blue Ribbon Panel on Private Company Financial Reporting.   Two of the significant recommendations are 1) the development of more relevant and useful private company accounting standards and 2) the creation of a separate board to develop and maintain them. Currently, private company and public company accounting principles and standards are under the purview of the Financial Accounting Standards Board (FASB).

The letter comments that through this independent board, appropriate modifications to existing U.S. GAAP (Generally Accepted Accounting Principles) for private companies would be driven to reflect their financial statement users’ unique needs. Past efforts by FAF and FASB have not adequately addressed issues faced by private companies. Under current standards, areas of financial reporting such as FAS 157 and consolidation have proven to be extremely problematic. Applying accounting standards designed for public entities diverts precious private company resources to meet standards which result in statements which are not relevant, reliable, nor comparable. A private company board comprised of members with constituent experience would be best positioned to recognize the important needs of private company reporting. Such a group would also be able to ensure an effective and useful path to public company accounting principles as a company moves toward becoming public.

NVCA board member Jason Mendelson of Foundry Group served on the BRP along with a number of senior industry officials.

FAF is the parent organization of the Financial Accounting Standards Board (FASB) and the Government Accounting Standards Board (GASB). The Blue Ribbon Panel approved these recommendations in October 2010 and issued its final report in January 2011. On March 4, 2011, FAF announced an outreach effort by a working group of the trustees. NVCA felt it was important to state its viewpoint while the Working Group was actively seeking input and recommendations.

Today, the Department of Homeland Security (DHS) and the U.S. Citizenship and Immigration Services (USCIS) announced several administrative action steps it intends to take to ease a number of legal immigration processes and better inform foreign born entrepreneurs about their options.  These measures can be implemented without legislation which, given Congress's reluctance to address legal immigration reform as a stand alone policy, is the only current opportunity to support these important contributors to U.S. economic growth.  The action items include clarification regarding foreign-born entrepreneurs ability to qualify for a National Interest Waiver under the EB-2 green card process as well as H1-B Visas.  The USCIS also announced plans to re-invent the EB-5 investor Visa program, allowing for streamlined processing for select petitions.  The Administration also intends to keep the immigration dialogue active with entrepreneurs beginning with a series of meetings to garner feedback from a variety of stakeholders in the process.

The initiatives announced today illustrate 1) the support of the Administration to ease the immigration path for foreign born entrepreneurs and 2) the fact that there is only so much that can be done without legislative action.  These administrative measures are in the spirit of generating ongoing job creation and innovation in the United States, but make no mistake:  Major legal immigration reform must remain a top priority for the venture and entrepreneurial communities.  The Obama Administration clearly understands the powerful job creation possibilities that such reform could bring. The venture capital industry and start-up communities have long understood this dynamic.  We applaud today's step in the right direction and urge everyone -- The White House, Congress, and all stakeholders -- to commit to ongoing momentum for this critical issue of national importance. 

This week, two significant developments occurred with respect to NVCA’s clean tech priorities.  First, the Senate Energy and Natural Resources Committee passed the Clean Energy Deployment Administration (CEDA) as part of a larger package of energy issues. CEDA has historically been a bi-partisan issue, but the political dynamics on the committee have changed significantly and the pressure to cut spending forced all the Republicans, except Ranking Member Lisa Murkowski (R-AL), to vote against it. We are disappointed that an issue that has been supported by both Republicans and Democrats has fallen victim to partisan politics, but we are very pleased nonetheless that it passed the committee and Chairman Bingaman and Ranking Member Murkowski are steadfast in their commitment to get CEDA done this Congress.  NVCA is putting together a coalition of interested organization to help drive support for CEDA among the broader Senate.  Some of the groups may include TechNet, the Chamber of Commerce and NAM.

The second clean tech development just occurred this morning when the House passed the Energy and Water Appropriations bill.  This is the bill that funds important programs at the Department of Energy, like ARPA-E and the DOE Office of Science and Energy Efficiency and Renewable Energy.  The good news on ARPA-E is that yesterday Rep. Adam Schiff (D-CA) introduced an amendment that passed which would increase funding for ARPA-E from $100M (which is the amount Committee appropriated) to $180M. In the process, we even had to defeat an amendment offered by Rep. Jeff Flake (R-AZ) to defund ARPA-E, and other amendments by Rep. Paul Broun (R-GA) that would decimate many of the programs that NVCA supports.

This funding is a significant accomplishment as most programs are seeing their dollars cut rather than increased.  Many NVCA members were helpful in efforts by signing letters to Congress and getting portfolio companies to engage on this issue.  NVCA members also participated in meetings on Capitol Hill in support of ARPA-E and CEDA.  Thank you to all those who supported these initiatives. Our efforts paid off.

There is still much work to do on CEDA and ARPA-E, but these are very positive steps in the right direction.