With the clock ticking down on the possibility of financial meltdown in two weeks, one can only hope that Congress will come to its senses and address the debt limit. Assuming sanity prevails, there is a high probability that Congress can get back to its business of making laws in August and the most comprehensive patent reforms since 1952 can become a reality by the end of this summer.
These days, every bill has to have a moniker. So they coined the term the “America Invents Act” and attached it this year’s patent reform bill, which is largely a recapitulation of reform measures that have died previously in the last three sessions of Congress. Maybe a catchy name does make a difference. This year patent reform legislation sailed through both houses of Congress. The Senate passed Bill S. 23 by a vote of 95-5 on March 8, 2011 and the House of Representatives passed Bill HR 1249 by a vote of 304 - 117 on June 23, 2011.
Reconciliation of the two bills seems to be a foregone conclusion because they are so similar and President Obama has indicated a willingness to sign the legislation. Accordingly, this seems to be a good time to review what reforms have been agreed upon – and what has been left on the cutting room floor.
Post Grant Review
Finally, we appear poised to join the rest of the civilized world and have an administrative process to challenge newly issued patents without having to go to federal district court and spending three years and perhaps a million dollars to invalidate patents that have been issued by “mistake.”
Both the House and Senate bills provide for petitions to review newly issued patents. Review must be sought within nine months after the grant or re-issue of a patent. Unlike federal district court litigation (where the patent is “presumed” valid), a challenger need only prove invalidity by a preponderance of the evidence.
Unlike the current re-examination process, some discovery will also be permitted. Additional, an oral hearing can be requested. The scope of discovery will be defined by rules yet to be promulgated by the USPTO. Nonetheless, the ability to conduct discovery and present oral arguments should go a long way towards leveling the playing field between the challenger and the patentee.
In addition to the new Post Grant Review, the traditional routes for reexamining patents (with all their flaws) will remain available to challengers. However, inter-partes re-examination will be renamed inter-partes review. The AIA also tweaks the standard for initiating review. The new threshold question will be: “does the request show that there is a reasonable likelihood that the requester would prevail with respect to” at least one claim. Inter-partes review will only be available after the period for instituting post grant review proceedings expires.
Forgiveness of Sins by Supplemental Examination
Patent owners will be able to request supplemental examination “to consider, reconsider, or correct information believed to be relevant to the patent.” One purpose of this provision appears to cleanse patents that might otherwise be unenforceable due to alleged “inequitable conduct” during prosecution. The bills provide that, subject to certain exceptions, “a patent shall not be held unenforceable under section 282 on the basis of conduct relating to information that had not been considered, was inadequately considered or was incorrect in a prior examination of the patent if the information was considered, reconsidered or corrected during a supplemental examination of the patent.”
First to File
In a roundabout way, the America Invents Act (“AIA”) provides that a patent will be issued to the first inventor to file a patent application. Both the House and Senate bills redefine prior art to include any earlier filed patent application by another, thereby ensuring that the second to file will be unable to get a patent. But both bills also provide for “derivation proceedings” before a Patent Trial and Appeal Board (which will replace current Interference proceedings) to determine whether a prior applicant had derived the subject matter in question from a later patent applicant.
One area where the House and Senate bills differ is in the rights afforded prior users of an invention, who chose not to seek patent protection. Currently, US patent laws provide a “first inventor” defense to an action for infringement – but only for business method patents.
The Senate bill retains the defense only for business method patents but would make a minor change to this to extend the protection to others who practiced the claimed subject matter at the direction of the first inventor but would not allow the transfer or license of the first inventor’s “prior use” rights.
The House provision goes much further and would create a more general prior user right for those who used the “subject matter” on which they are being sued for infringement commercially more than one year prior to the earlier of the effective filing date of the application giving rise to the patent.
Fee Setting Authority (and an End of Fee Diversion?)
Currently, the USPTO submits a budget each year to Congress and proposes fees that will cover the cost of running the patent and trademark operations. Congress routinely approves the fees but only gives the USPTO part of the revenue. The rest of the money get spirited away and spend by Congress for sundry projects. Any wonder why the USPTO has a huge backlog of unexamined patent applications?
The Senate bill would allow the USPTO to set fees and retain all of its fee revenue. The House bill would allow fees to be set aside in a special fund that could be accessed by the USPTO based on congressional approval. Given the financial turmoil over the federal debt, things seem to be tilting toward the House provision and less autonomy for the PTO.
Prior Art Citation
Both bills expand the rights of third parties to submit prior art. Such submissions have to be considered by the examiner so long as they are submitted before allowance and no more than six months after publication.
After issuance, both bills also permit submissions of written statements made by the patent owner in federal court or USPTO proceedings as to the position taken by the patent owner as to the meaning of one or more claims. Such statements can be used for claim interpretation in re-examination, inter-partes review or post grant review proceedings.
Best Mode Requirement
In a nod towards international harmonization, both bills disable the unique requirement of the US patent laws that applicants must disclose the “best mode” of practicing their inventions. Both bills remove failure to disclose the best mode from the list of invalidity defenses to an infringement action by providing that this is “not a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable.”
Direct Filing by an Assignee Rather Than the Inventor
Both bills provide for filing in the name of an assignee or one to whom the inventor is under an obligation to assign the invention. A person who otherwise shows “sufficient proprietary interest in the matter” may make an application “on behalf of and as agent for the inventor,” and the patent will issue to the real party in interest. The AIA thus paves the way for corporations to file directly and dispenses with the quaint notion that patent applications must be file by individuals and only after filing can they be assigned to a corporate employer. For a while it looked like a few strict constitutional constructionists in Congress would derail this provision but it’s still in both bills. Even if this provision doesn’t get cut, look for someone to challenge “assignee filings” on constitutional grounds since Article 1, section 8 of the Constitution provides that Congress may grant patents to “inventors.”
Virtual Marking and an End to Marking Trolls
Both bills permit “constructive notice” (for seeking damages) to be met by notifying consumers that the product is patented and directing the public to an internet site that provides a current list of patents covering the product. Both patent reform bills also put an end to so-called “false marking” actions whereby enterprising plaintiffs (“marking trolls”) have sought damages as private attorneys general for incorrect identification of patents covering products. Henceforth, only the US Government will be able to sue for false marking and collect statutory penalties. Entities that have suffered “competitive injury” will also be able to sue for actual economic damages but marking trolls will be out of luck.
Satellite Offices
“Subject to available resources” the USPTO is directed to open two more satellite offices (in addition to one in Detroit currently being planned) within three years of enactment. Several criteria for selecting the locations of these satellite offices are set out, including geographic diversity, origin of patent filers and the availability of technically trained personnel for hiring as examiners.
The Cutting Room Floor
A number of patent reforms that had been proposed in the prior unsuccessful House or Senate bills have been scraped to make the package of patent reforms less controversial. These include all of the prior attempts to legislate changes in the way damages are awarded in infringement action, e.g., calculation of compensatory damages as well as new definitions for willful infringement and calculation of enhanced damages upon a finding of willful infringement. Changes in the law on inequitable conduct were also abandoned (apart from new supplemental examination process discussed above). A requirement for 18 month publication of all applications was also nixed as were rules relating to venue and provisions for interlocutory appeals after a district court had completed claim construction but prior to final disposition of a case.
- Tom Engellenner
- Tom Engellenner
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