First to File

‘America Invents Act’ Changes Paradigm for Patents

On Sept. 16, President Obama signed into law the Leahy-Smith America Invents Act (the America Invents Act).[1] This legislation implements the most significant statutory changes in U.S. patent law in decades. Many of these changes will alter the impact of the U.S. patent system on your clients’ business. The changes are phased in over time, with some already in effect. The U.S. Patent and Trademark Office (PTO) must adopt new rules that will clarify and implement some of the additions and amendments to the U.S. Patent Act. This article highlights certain features of the America Invents Act that your clients should know about now.

A New Race to the Patent Office

Current law awards patents to the “first-to-invent”. That is changing — radically. For patent applications having an effective filing date on or after March 16, 2013, the date of invention is no longer relevant for determining patentability. Thus, inventor notebooks and records of invention will no longer help to overcome prior art. Instead, the America Invents Act moves the U.S. to a “first-inventor-to-file” system based on absolute novelty, similar to what is used in most foreign countries. In a “first-inventor-to-file” system, the first applicant to file an application on a particular invention is entitled to a patent (over a later applicant) a unless the first applicant did not actually invent the subject matter sought to be patented or the subject matter sought to be patented was available to the public prior to filing. The U.S. will retain its distinctive one-year grace period, which can be invoked by public disclosure of the invention by the inventor during the one-year period prior to filing. When one-year grace period is invoked by a public disclosure, any subsequent disclosures are not considered prior art against the filed application.[2] Because most foreign countries have no grace period, making a public disclosure prior to filing a patent application will generally sacrifice the right to international patent protection.

Because of these changes, your clients should determine early whether a patent application will be filed on each new invention. The time between invention and public disclosure or application filing should be minimized to prevent loss of rights due to third-party disclosures. A provisional patent application can be used to preserve a relatively early filing date and allow time for the client to determine whether to file a non-provisional application. The provisional application remains confidential unless a non-provisional application claiming priority is filed within one year, and it secures an early filing date for the subject matter disclosed therein. Your clients should prepare for March 16, 2012, as the date on which the new public disclosure grace period begins or prepare to file applications on all outstanding inventions before March 16, 2013 such that they fall under the old “first-to-invent” standard.

Prior User Defense

The prior user defense has been a little-known defensive provision that applied only to business method patents (e.g., software patents). Under the America Invents Act, the prior user defense now applies to all patents issued on or after Sept. 16, 2011, regardless of subject matter. It enables one to continue doing business as they have been regardless of what patents are later issued. The prior user defense, however, does not apply to patents owned by a university or its technology transfer office.[3]

For a process or apparatus that can be kept as a trade secret, your client can use a provisional patent application to reserve time for deciding whether to patent the process or apparatus or keep it as a trade secret. Although the implementing rules are not yet written, it may also be advantageous for your clients to partner with universities for developing their intellectual property in order to avoid the expanded prior user defense.

Pay Fees Early

As of Sept. 26, 2011, the America Invents Act had already raised most patent fees by approximately 25 percent.[4] The act also enables the PTO to adjust those fees by a rule making process.[5] Fees are unlikely to decrease and may increase at arbitrary times.

Your clients should consider paying fees as early as possible to avoid unexpected cost increases.

Patent Eligible Subject Matter

Strategies for reducing or deferring taxes are deemed to be known in the prior art and are thus not eligible for patent protection.[6] Claims “directed to or encompassing a human organism” are not patentable.[7] The term “human organism” has not been defined but this bar is expected to be extremely narrowly interpreted such that it does not apply to much, if any, biotechnology or pharmaceutical subject matter. In at least one instance, the America Invents Act states that computer implemented methods and computer program products are not barred subject matter.[8]

Your clients should know that tax strategies are no longer patentable, but that computer implemented methods and computer program products (e.g., software) have been implicitly affirmed as patentable subject matter.

Working Around Missing or Obstinate Inventors

Unless assigned to an employer or other entity, U.S. patents are issued to inventors. All inventors must sign and submit a Declaration or Oath of inventorship with the patent application, unless that inventor is deceased, cannot be found or refuses to cooperate. The process for working around an uncooperative inventor (typically, a disgruntled former employee) was awkward and expensive, requiring the filing of a separate petition and supporting documentation. The America Invents Act simplifies the solution to the “obstinate inventor” problem. The employer (or other party to whom the inventor has an obligation to assign) may sign the Declaration/Oath on behalf of the inventor. Also, the required statements that were part of the inventor’s Declaration/Oath may be incorporated into the Patent Assignment, a further simplification of the filing process.[9]

Your clients can take advantage of this change by creating/updating internal invention ownership documents that it asks its employees to sign.

Prioritized Examination of Patent Applications

Businesses and inventors have long complained about delays they experience in the examination of their patent applications. In some technology areas, waiting periods of three or more years are not uncommon. The act provides a new “prioritized examination” process that may change this for those willing to pay a little more for faster service.[10] Until the PTO adopts rules that explain the process, all we know now is that the fee for requesting prioritized examination has been set at $4,800, there is a limit (30) on the number of patent claims that will be examined, and there is a limit (10,000) on the number of applications that can receive prioritized examination in any fiscal year.[11]

The takeaway for your clients is that if long waits in the PTO have discouraged them from seeking patent protection on their novel technology, relief may be at hand.

Simplified Patent Marking

U.S. patent law encourages the marking of products with applicable U.S. patent numbers by restricting infringement remedies when there is a failure to mark.[12] Conversely, falsely marking products with non-applicable (or expired) patent numbers is prohibited.[13] An entire industry of qui tam false marking claims has grown from this.

The America Invents Act makes it easier for businesses to comply with the marking requirement and to avoid false marking liability. Section 287 of the U.S. Patent Act has been amended to allow “virtual marking.” Patent owners may mark their products with “Patent” or “Pat.” and a reference to public web address that lists the patent number(s) applicable to that product. Amended Section 292 now permits only the government to sue for false marking civil penalties. Only a competitor that suffers actual damages may sue for false marking damages. Moreover, a safe harbor for listing expired patents is now available.[14]

Your clients who manufacture patented products can take advantage of these changes by transitioning to an online patent marking system. This should lower the cost of patent marking compliance.

Enhanced Opportunities for Pre- and Post-Patent Grant Challenges

Most businesses that confront a competitor’s patent express indignant surprise and dismay that the patent was even granted. They are convinced that the patented technology is old. The problem is that once the patent is granted, the burden of proving invalidity escalates to a “clear and convincing” evidentiary standard.

The America Invents Act creates and expands opportunities for early intervention by third-parties to prevent or challenge the granting of a patent. For example, Section 301 of the U.S. Patent Act is amended to allow third-parties to submit written statements made by patent owners in litigation or a PTO proceeding related to the scope of patent claims, and relevant prior art with commentary. An expanded inter partes patent re-examination process is created in new Sections 316-319 to render the process more adjudicative, including use of deposition testimony. New Sections 321-329 of the U.S. Patent Act now allow a third-party to initiate a review of patent claims within nine months of patent grant. The evidentiary burden is lower than what would be required to challenge patent validity in litigation.

Your clients can lower their patent liability risks by: (a) becoming more vigilant in monitoring competitive patent activity; and (b) using their acquired knowledge to proactively exploit one or more of these new and expanded patent challenge processes.

Some clients view the U.S. patent system as a business obstacle. Other clients use the system to capture and maintain market share. In either case, the America Invents Act makes important changes to U.S. Patent law that may change minds and business strategies.

Notes

  1. H.R. 1249.
  2. H.R. 1249 Section 3.
  3. H.R. 1249 Section 5.
  4. H.R. 1249 Section 11.
  5. H.R. 1249 Section 10.
  6. H.R. 1249 Section 14.
  7. H.R. 1249 Section 33.
  8. H.R. 1249 Section 14.
  9. H.R. Section 115.
  10. H.R. Section 25.
  11. H.R. Section 11.
  12. 35 U.S.C. § 287.
  13. 35 U.S.C. § 292.
  14. H.R. Section 16.

MARK J. PATTERSON MARK J. PATTERSON is a shareholder with Waddey & Patterson PC in Nashville. He received his law degree, with honors, from Florida State University College of Law in 1980 where he was elected to the Order of the Coif. His primary practice involves the writing and prosecution of patent applications in the electrical, electronic and computer software arts including business methods; patent, trademark and copyright counseling, including preparing validity and infringement opinions; licensing; and litigation in all areas of intellectual property law. He has assisted clients in obtaining more than 200 U.S. patents.

 

 

 

MARK A. PITCHFORD

MARK A. PITCHFORD is an associate with Waddey & Patterson PC in Nashville. He received his law degree from the University of Kentucky College of Law in 2005. His practice focuses on the preparation and prosecution of U.S., foreign and international patent applications in the electrical, software, and mechanical arts. He also advises in the licensing of trademarks and copyrights, intellectual property portfolio management and due diligence. His practice includes appealing USPTO actions to the Board of Patent Appeals and Interferences as well as preparing claim construction briefs for Markman hearings.