America Invents Act – Patent Reform is Finally Here

September 2011

By: Chelsea A. Loughran

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What This Means to You

  • Assess and modify your patent filing strategies before the 18 month window of the “first-inventor-to-file” provision goes into effect.  
  • Use the one year window (to September 16, 2012) to strategically plan your inter-partes review or post-grant review options.
  • Weigh the pros and cons of filing a request for prioritized examination, since the PTO will only accept 10,000 of these requests in the next year.
  • Consider how the changes to patent marking requirements might impact your business.
  • File as a “micro entity”, if you qualify under the new statute (but note this may not be possible immediately because the PTO wants establish rules before accepting “micro entity” filings).
  • Revise your budgets to accommodate the increased PTO fees. _____________________________________________________________

Overview

On September 16, 2011, President Obama signed into law the America Invents Act which the US Senate had passed (89-9) on September 8. This long-awaited—and long-debated—law alters the US patent system in many ways with varied degrees of anticipated impact on patent value, patent acquisition cost, patent administration, and—at least indirectly—patent enforcement.

Of particular significance, the new law alters the standard for determining who is entitled to a patent as between two or more applicants for the same invention, provides a number of alternate routes for challenging patentability, both pre-and post-issuance, and limits who may have standing to bring false marking claims.

Although many of these reform provisions do not take effect immediately upon enactment, it is important for all constituents with a stake in intellectual property assets to adjust patent strategies to account for these legislative changes.

A Shift To A "First-Inventor-to-File" System

Historically, the US operated under a first-to-invent system of determining priority of invention (i.e., who is entitled to a patent on the invention), relying on the premise that the inventor who can demonstrate earlier conception and diligence in reducing his/her invention to practice will be deemed the "first" inventor. Under the new law, the US now joins the remainder of the world in determining priority of invention by the earliest date the patent application was filed with a patent office.

In light of this change to a first-inventor-to-file system, it will no longer be necessary to engage in costly and time-intensive interference proceedings to determine the inventor who is entitled to a patent. Interferences will be replaced by so-called "derivation proceedings," which will be used to determine whether an earlier filer had improperly copied, or derived, his/her invention from a later filer.

It is important to note this provision will not go into effect until after March 16, 2013 (18 months from enactment). Inventors/companies with ideas in the pipeline (and attorneys counseling them) should use this window of time to assess the potential impact of the rule change and modify filing strategies accordingly.

Scaling Back Applicants’ "Grace Period"

Previously, a patent applicant enjoyed a one-year grace period under which a prior disclosure of an invention (by that applicant or any other entity) up to one year prior to the applicant's filing date does not count as prior art (negating the novelty of the invention and the applicant's right to a patent), provided the applicant was able to show a conception date prior to the disclosure and diligence in either reducing the invention to practice or filing a patent application for the invention.

The new law changes this rule by replacing this absolute grace period with a "personal grace period." Now, an applicant's own prior disclosures (or disclosures derived from the applicant) within one year prior to the filing date are exempt as invalidating prior art. However, other disclosures of that invention by third parties will constitute invalidating prior art. This alteration to the grace period takes effect 18 months after the date of enactment and applies to all patents with effective filing dates on or after that date (March 16, 2013).

Challenging Patents

The new statute provides for a number of different mechanisms for challenging patents both post-and pre-issuance.  

Post-Issuance Challenges

Congress’ goal with the new law was to make the US Patent and Trademark Office (PTO) a more viable venue for challenging patents, which it hopes will result in faster, lower-cost and more rational decisions on patent validity. In furthering this goal, the previous inter-partes reexamination procedure is being replaced with two similar—but unique—provisions for challenging the patentability of an issued patent: (1) inter-partes review, and (2) post-grant review.

Inter-partes review parallels the previous inter-partes reexamination practice but removes the threshold requirement that an alleged basis of unpatentability be "new." This procedure will be available beginning September 16, 2012 (one year after enactment) and will apply to any patent issued before, on or after that date. However, the new standard for declaring inter-partes review (i.e., "a reasonable likelihood that the requester would prevail" instead of the previous "substantial new question of patentability") takes effect immediately.

Post-grant review will be available to challenge an issued patent only within a 9-month window after issuance, but it expands the available legal theories upon which a challenge to patentability may be brought. In contrast, current reexamination proceedings may only challenge an issued patent based upon prior art patents and printed publications.

The post-grant review provisions also mandate the PTO to resolve the challenge entirely within a year of request (with a six month extension available). This procedure will be available beginning September 16, 2012 but will apply only to patents with an effective filing date or priority claim date that is on or after March 16, 2013. It is interesting to note that this results in a six month window during which the procedure is technically available but cannot be applied because there will be no patents that qualify. This may be addressed when the PTO establishes new rules and procedures to go with the new statute.

Under the new law, the PTO Director is directed to promulgate regulations governing the procedural requirements for these new review routes before the newly created Patent Trial and Appeal Board, within one year of enactment. These new procedures, for example, will guide the PTO on how to accomplish the post-grant review process. Thus, a practitioner should begin familiarizing him/herself with any proposed regulations governing these post-grant review procedures as soon as such proposals become available. Further, the one year window post-enactment should be utilized to strategically plan one's inter-partes review or post-grant review options.

Pre-Issuance Challenges

In addition to provisions for post-grant challenges, the new statute allows any third party to submit any patent application, patent, published patent application or any other relevant printed publication for consideration by the examiner during examination of a patent application.

Such a submission, however, must be made in writing and be submitted before the earlier of: (1) the date a notice of allowance is given or mailed, or (2) the later of (i) six months after the application is published or (ii) the date of the first rejection. This provision expands the time frame for submission but is largely similar to that regulating previous third party protest/submission opportunities, which are of limited use.

Supplemental Examination

The new law also contains provisions to reduce the litigation burden on patent owners planning to assert their patents. Congress is taking aim at charges of “inequitable conduct.” Because a finding of inequitable conduct can block enforcement of an entire patent—even when the accused conduct by the patent owner is unrelated to the validity of any asserted claims—charges that a patent holder failed to candidly deal with the PTO are frequently made in litigation.

Under the new law, a charge of inequitable conduct cannot be based on information presented or corrected in a Supplemental Examination that has been timely requested by the patent owner. Though the PTO may opt to reexamine the patent, if the presented information does affect the validity of any claim, the safe harbor provided by Supplemental Examination may make this a valuable tool for a pre-assertion “scrub” of patents.

Significant Changes in Patent Marking

A patented product (or associated packaging) may be marked with the word "patent" or "pat." followed by an address of a posting on the Internet, accessible to the public without charge, that lists the patent number(s) that cover the patented product. Previously, the patented product needed to be marked with the actual number(s) of the patent(s) covering the patented product to give public notice.

In addition, the marking of a product with the patent number of a patent that covered the product but that has expired will no longer be actionable as a false marking.

Finally, the new law amends the false marking statute in two ways. First, it grants only the US government standing to sue for per-article fines. Second, it permits only those who have suffered competitive injury as a result of false marking standing to sue for compensatory damages.

These changes could quickly limit the growing number of false marking suits since they apply to all false marking cases pending on or after September 16, 2011.

Prioritized Examination

Under the new statute, the PTO was required to implement (by September 26, 2011 – 10 days post enactment) a prioritized examination program for utility and plant patents. Under this program, applicants may file a request for prioritized examination with payment of a fee of $4,800 ($2,400 for small entity), which is in addition to other filing fees.

The patent application for which the request is made must have, or be amended to have, no more than 4 independent claims and no more than 30 total claims. The PTO may not accept more than 10,000 such requests per year, until further regulations are prescribed.

Establishment of Micro Entity Status

Applicants qualifying for the new “micro entity” status are entitled to a 75% fee reduction for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents. Although this provision was to take effect immediately upon enactment, the PTO wants establish rules and guidelines for this status before accepting “micro entity” filings, so it will not be available as yet.

To qualify as a micro entity, an applicant must certify that:

(1) in addition to qualifying as a small entity, the applicant has not been named as an inventor on more than four previously-filed US utility applications, has a gross income that does not exceed three times the median household income for the preceding calendar year as reported by the US Census Bureau, and has not assigned a license or ownership interest (and is under no obligation to do so) to a non-micro entity; or

(2) the applicant obtains the majority of her/his income from an institution of higher education, or that s/he has assigned a license or ownership interest (or has an obligation to do so) to an institution of higher education. 

Significantly, in situations involving certification (2) above, the applicant need not also satisfy the conditions required for small entity status restricting licensing or assignment to non-small entities. Accordingly, most university-owned patent applications and patents should qualify for micro entity status regardless of their licensing status.

Additional Fees

Under the new statute, all patent fees charged by the PTO were increased 15% as of September 26, 2011 (10 days after enactment).

Also, to encourage patent applicants to use electronic filing, an additional $400 fee ($200 for a small entity) will be instituted for patent applications not filed electronically after November 15, 2011 (60 days after enactment).

Takeaways

Patent reform will change many aspects of patent prosecution and litigation and could significantly impact the value of individual patents. Companies and organizations should reevaluate their patent strategies and consider the impact of patent reform on both 1) managing and protecting their own intellectual property, and 2) monitoring and challenging third party patents. Both of these aspects have important strategic and budgetary implications.