The President signed into law yesterday the Leahy-Smith America Invents Act. The Act makes the most significant changes to U.S. patent laws in the last 60 years. One hopes the changes will, at least in the short to intermediate run, get to the Patent and Trademark Office (PTO) enough money to allow them to dig out from under its backlog of applications and significantly improve its operations. Whether the changes lead in the long run to a patent system that promotes formation new businesses and growth of existing ones, and that is fair and cost-effective, we’ll have to wait and see.
My partner, Tom Wright, and I wrote a brief summary for our clients of the changes that went out yesterday and is available on my firm’s web site. I’ve adapted below some of what we wrote about changes that I did not mention in my prior post. Any opinions and commentary are solely mine. Do not assume that it reflects the views of Tom, my firm, or our clients.
PTO Funding. The single change that is likely to have the most impact includes measures for increasing funding of the PTO. These measures allow the PTO to set its fees at levels necessary to recover costs and, subject to Congressional oversight, to keep the fees it collects. It does not guarantee that the PTO will be able to keep all of its fees, but the expectation is that it will, at least over the short term. Thus, we should start to see more significant reductions in pendency. Without adequate funding, the PTO will not be able to carry out within the mandated time frames the new procedural mechanisms for third parties to challenge patents at the PTO.
First to File. The most talked about change in the law, which will not go into effect for 18 months, is moving to a “first inventor to file” system. Under current law the “first to invent” is the rightful patentee, even if that person was not the “first to file.” The patent will go to the “first inventor to file” if there are two or more inventors trying to patent the same invention. The change generally conforms U.S. law to “first to file” systems abroad. However, unlike most foreign patent systems, the new law allows the inventor to disclose his invention up to one year prior to filing an application for patent without losing rights to the patent. A similar system has been in effect in Canada. Those who derive the invention from the true inventor cannot apply for a patent. A derivation proceeding can be brought in the PTO by an applicant for patent should he believe that occurred.
There has been a lot of debate over whether this system disadvantages the independent inventor and small business. However, many independent inventors and small business are interested in foreign patents, and that means that they must essential conform their conduct to the first to file systems outside the U.S. in order to preserve their rights abroad. Therefore, at least for them, the change is not likely to change their behaviors much. However, despite the fact that an inventor’s own public and commercialization activities cannot be be used against them, I foresee that such inventors may feel increased pressure to expend the money necessary to file an application sooner, rather than later.
However, there is one very substantial difference between our first to file system and the first to file systems in most, if not all, other countries. In the U.S. an earlier filed patent application can be used for purposes of evaluating not only novelty, but also obviousness. In other countries, only applications published prior to filing can be used to judge the obviousness, or inventive step, of the invention. We have used so-called “secret prior art” — information in patent application that is not yet public — in the U.S. for many years when evaluating whether or not an invention is obvious. This has always struck me as unfair in our old system. Under the the new system, I think it disturbs the careful balance struck in first to file systems between various competing interests and ease of administration. It clearly makes getting a patent in the U.S. more difficult that obtaining one in other countries.
Joinder Severely Limited. Relief requested in any new action for patent infringement must now relate to infringement arising from the same transaction, occurrence, or series of transactions or occurrences relating to the same accused product or process. This new requirement effectively means that it will no longer be possible for patent owners to join in a single suit parties solely on the grounds that they infringe the same patent, thus significantly curtailing the common practice of so-called “non-practicing entities” filing a single suit naming numerous, often more than 50, unrelated defendants. Expect a proliferation in the number of lawsuits filed, as well as a big uptick in the number of venue transfers.
Virtual Marking. Marking of products with patent numbers is still a prerequisite for damages for infringement in the absence of notice to the infringer. However it may now be satisfied by posting an association of the patent number with the patented article on the Internet at an address that is freely accessible by the public without charge, and marking the articles with the word “patent” or the abbreviation “pat.” and the address for the posting. Products for which marking was impractical or difficult should now be able to comply more easily.
Damages for False Patent Marking Limited. False patent marking cases under §292 may now only be filed by those who have “suffered a competitive injury.” This will put an end to false marking suits brought by “false marking trolls,” i.e. those not engaged in business affected by the alleged false marking.
Expansion of Prior User Rights. Although a use of an invention prior to patenting of the invention by a third party sometimes means that the patent is invalid, it does not always. The Patent Act’s prior user right had been limited as a defense to a claim of infringement of so-called “business method” patents. The Act immediately expands rights of users who have commercially used an invention claimed in any patent granted on or after today. However, there are a number of limits on the right and carve outs. The law prefers that inventions be disclosed, offering patent protection as an inducement, for purposes of seeding further innovation. Prior user rights, on the other hand, are intended to protect investments made in commercializing a process that the prior user invented but chose to protect using trade secrets. Whether the new prior user rights tip the balance, at least in some situations, toward choosing trade secret protection over patents may depend on whether changes in the law cause inventors and business to perceive the patenting route to be too difficult or costly. One section of the AIA requires the PTO to conduct a study on prior user rights and report back to Congress.
Supplemental Examination. Available for all patents starting today, this new proceeding is intended to allow patent owners to purge the patents of situations that could give rise to a claim of “inequitable conduct.” A patent owner presents the additional or corrected information to the PTO. If the PTO determines that the new or corrected information raises a substantial new question of patentability, it may order an ex parte reexamination. Under new Subsection (c) of §257, which also comes into effect immediately, a patent cannot be held unenforceable, except in certain situations, on the basis of conduct relating to information considered, reconsidered or corrected during the supplemental examination. Despite its limitations, this may become a very attractive mechanism in some cases for strengthening important patents, depending on how courts are applying the Therasense decision.
Inter partes Reexamination Going Away. Inter partes reexamination will no longer be available in 12 months, though reexams initiated before that date will continue under the existing reexamination rules. The threshold showing required for initiating them is now higher — a reasonable likelihood that at least one claim is invalid, rather than simply a substantial new question of patentability — it’s had to imagine that, in practice, this new standard will significantly impact the rate at which requests are granted. Three new procedures in the PTO for third parties to invalidate patents, or narrow their scope, will come into play at that point.
Inter Partes Review. A new inter partes review procedure will replace the current reexamination process in 12 months. A panel of administrative patent judges at the PTO will preside over the review and there is no internal appeal. All patents, whenever issued, are subject to review upon petition of a third party. Cancellation of a claim in a patent can only be sought on grounds that one or more printed publications and patents anticipate or render obvious the claim. The law requires a final decision by the panel within one year of filing. Because inter partes review must be requested by a defendant in a patent infringement action within one year of the complaint, it will in effect not be available to defendants in patent infringement actions filed before today. For defendants involved in such suits, they will have to initiate inter partes reexamination within 12 months if they wish to have the PTO take a look at the patent, unless it is a “business method patent,” in which case the will have another option in 12 months (see below).
Post-Grant Review. Post-grant review is similar to the new inter partes procedure except that it is only available for a period of nine months from patent issuance, and it is not limited to challenges for novelty and obviousness. It will be available only for patents granted on applications having earliest effective filing dates 18 months from today.
Special Post-Grant Review for Business Methods. Anyone being sued for infringement of a so-called “business method” patent, regardless of when the patent was issued, may petition the PTO for review of the patent under the post-grant review procedure starting in 12 months. A business method patent is one that “claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”
Yet More Changes. There are number of other changes that I will try to discuss in another post. Of course, many aspects of the new law require new rule making and revised procedures.The PTO is expected to publish, starting in the next month and continuing for over the next year or so, several rules packages for public comment. These rule packages will include substantial rewrites of many existing regulations, as well as a significant number of new rules. They could easily have just as big an impact on the patent system as the changes in the laws. I encourage everyone to participate in the process.
The Hub of IP 