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Patent Reform 101
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September 12, 2011
Patent reform became a reality in 2011. In March, the Senate passed the America Invents Act (S.23) by a vote of 95 to 5. In late June, the House passed a similar bill (H.R.1249) by the narrower margin of 304 to 117. While patterned on the Senate bill, the House bill included a number of amendments. Despite these amendments, the Senate adopted the House bill on September 8, 2011 by a vote of 89 to 9, and the President will likely sign the Act into law within the week.
The Act fundamentally alters the criteria for obtaining a U.S. patent and the processes for challenging its validity. In doing so, the Act significantly changes the operations of the United States Patent and Trademark Office (USPTO). Additionally, the Act addresses a number of diverse issues relating to patent prosecution and litigation.
The following is a summary of some of the noteworthy changes made by the Act. This summary is intended to be educational, and by its nature does not address every detail of the Act. Moreover, it should not be construed as legal advice, and readers should not act upon the information presented without first consulting legal counsel.
First-to-File
The new law changes the U.S. patent system from a first-to-invent system to a first-to-file system.
Under the old system, it was necessary to determine which party was first as between two or more parties claiming the same invention. The USPTO resolved such disputes in a contested proceeding known as an interference. Under the new system, the first party to file an application has the right to pursue patent protection, unless the first filer derived the invention from a later-filing party. The USPTO will resolve any such disputes in a derivation proceeding.
The Act does not eliminate the one year grace period during which certain acts that normally render an invention unpatentable will be excused. The new grace period focuses on disclosures of the inventor or others who obtained the subject matter from the inventor, however. In this regard, the U.S. grace period becomes more like the grace periods used in other jurisdictions.
These provisions of the Act will not become effective until 18 months after the enactment date, and even then will apply only to applications with effective filing dates after the Act's effective date. Applications with an effective filing date before the Act's effective date will be subject to the first-to-invent and existing grace period standards.
Patent Challenges
The new law also establishes a new post-grant validity challenge within the USPTO, and modifies existing post-grant challenge proceedings.
The USPTO has long permitted third parties to challenge a patent's validity in a post-grant proceeding referred to as a reexamination. Originally, reexamination was performed with limited challenger participation (ex parte reexamination). The Patent Act and USPTO rules were later amended to provide a contested procedure known as an inter partes reexamination.
The new law preserves ex parte reexamination while overhauling inter partes reexamination. The modified inter partes reexamination proceeding is referred to as inter partes review. In addition, the Act creates a new proceeding referred to as post-grant review.
The challenges differ as to the evidentiary basis for the challenge. Ex parte reexamination and inter partes review require that the validity challenge be based on printed publications and patents. In post-grant review, the challenger may rely on any ground that could be raised under the provisions of the Patent Act relating to invalidity, and thus on evidence other than simply printed publications and patents.
The challenges differ as to the standard required to initiate the challenge. For ex parte reexamination, the challenger must show a substantial new question of patentability. The inter partes review challenger must show a reasonable likelihood of prevailing as to at least one claim. The post-grant review challenger must show (i) that the information presented, if not rebutted, would demonstrate that it is more likely than not that at least one of the challenged claims is unpatentable, or (ii) that a novel or unsettled legal question has been raised.
The challenges also differ as to timing. A request for ex parte reexamination may be filed at any time after the grant of the patent or issuance of the reissue patent. A challenger seeking inter partes or post-grant review must file within nine months of the grant of a patent or issuance of a reissue patent or the challenge will be dismissed.
Most inter partes and post-grant review provisions do not become effective immediately. The USPTO will have one year to prepare, and then a reconstituted Board of Patent Appeals and Interferences (the "Patent Trial and Appeal Board") will have responsibility for post-grant and inter partes reviews. The Central Reexamination Unit will continue to handle ex parte reexaminations, as well as complete work on any existing inter partes reexaminations with those inter partes reexaminations filed after the effective date being handled under the new standard ("reasonable likelihood").
Other Provisions
Other significant changes include the following:
- Assignee as applicant — Previously, the inventor was required to execute a declaration. Now, the inventor may make the necessary statements in an assignment instead. Recordation of the executed assignment permits the assignee to obtain a patent without a separately executed declaration.
- Micro-entities — Fees are reduced by 75% for a new class of applicants, referred to as micro-entities. Micro-entities are essentially independent inventors that meet further qualifications as to the (i) number of applications filed and (ii) gross income or employment.
- Best mode — Failure to disclose best mode is no longer a defense to patent infringement, although best mode remains a requirement for a patent application.
- Prior use defense — Infringers may avoid liability if they commercially use the patented subject matter in good faith for at least one year prior to certain events related to the underlying application. The defense had been limited to cases where a business method claim was asserted. The defense is now available except where the patent is assigned or subject to an obligation of assignment to either an institution of higher education or an associated technology transfer organization, unless federal funding is involved.
- Supplemental examination — Applicants may submit to the USPTO any information omitted, inadequately considered or incorrectly submitted to avoid allegations of inequitable conduct, so long as the prior omission or action occurred without fraud on the Office. The USPTO may order a reexamination based on the information. Supplemental examination cannot be used relative to an allegation raised in a civil action, an ANDA notice, or an ITC proceeding.
- Opinions of counsel — A plaintiff may not use an alleged infringer's failure to obtain or to provide evidence of advice of counsel to prove willful infringement or inducement of infringement.
- False marking — To reverse a recent dramatic increase in the number of false marking lawsuits filed, only the United States will be allowed to sue for the statutory penalty for false marking, and only parties with a competitive injury will be allowed to sue for damages. This effectively cuts off the rights of non-competitors. In addition, marking of expired patents is explicitly excluded from the definition of false marking.
- Financial services and tax strategy patents — For a limited period of time after the enactment date, business method patents related to financial services are challengeable at any time in a post-grant proceeding if the challenging party is sued or charged with infringement. Tax strategy patents are per se unpatentable by virtue of the fact that such subject matter is deemed insufficient to differentiate the prior art.
Mr. Paul C. Craane can be reached via email or at 312.474.6623.
