America Invents Act: The Implications of Patent Reform
November 2011
By: Patrick R. H. Waller and Chelsea A. Loughran
IP Magazine
After years of debate and legislative tangles, patent reform has become a reality in the United States. Eight days after the US Senate passed (89-9) the Leahy-Smith America Invents Act, President Obama signed it into law on September 16, 2011. This long-awaited 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.
The new law alters the standard for determining who is entitled to a patent when two or more applicants claim the same invention, provides many 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, those with a stake in intellectual property assets should begin to adjust their patent strategies to account for these legislative changes as they continue to unfold.
A Shift To A “First-Inventor-to-File” System
Unlike the rest of the world, the US has historically operated under a first-to-invent system of determining priority of invention (i.e., who is entitled to a patent on the invention), with the “first inventor” being whoever could demonstrate earlier conception and diligence in reducing his/her invention to practice. Now, the priority of invention will be determined by the earliest date the patent application was filed with a patent office.
The first-inventor-to-file system will eliminate costly and time-intensive interference proceedings to determine the inventor entitled to the patent. Instead, “derivation proceedings” will replace interferences to determine whether an earlier filer had improperly copied, or derived, his/her invention from a later filer.
However, 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 replaces 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.
The “grace period” changes take effect 18 months after the date of enactment and apply to all patents with effective filing dates on or after that date (March 16, 2013).
Challenging Patents
The new statute provides for many different mechanisms for challenging patents both post-and pre-issuance.
Post-Issuance Challenges: The new law is intended to make the US Patent and Trademark Office (PTO) a more viable venue for challenging patents, hopefully resulting in faster, lower-costing and more rational decisions on patent viability. The previous inter-partes reexamination procedure is being replaced with two similar—but unique—provisions for challenging the patentability of an issued patent: inter-partes review and 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 begin 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 the first nine months after issuance, but it expands the available legal theories used to challenge patentability. 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 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. Interestingly, 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 that will guide the post-grant review process.
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. Thus, once available, practitioners should become familiar with the new regulations and procedures while using the one year window post-enactment 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 similar to 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 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 allowing applicants to file a request for prioritized examination with payment of a fee (in addition to other filing fees) of $4,800 ($2,400 for small entity).
The patent application for which the request is made must have, or be amended to have, no more than four 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 percent fee reduction for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents. Although this provision was to take effect immediately upon enactment, it will not be available yet because the PTO wants established rules and guidelines for this status before accepting “micro entity” filings.
To qualify as a micro entity, an applicant will have to 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 the second certification option, 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 percent 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 that today’s competitive organizations need to understand.
