Patent Law Reform Finally Passes in the U.S.|
At long last, the United States has passed patent law reform legislation. On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act. We wrote about prior versions of the legislation in March of 2011 and May of 2007. Not all of the issues that were addressed in these prior versions were included in the final legislation, however. (For example, the final legislation did not deal with damages for patent infringement.) This article summarizes the key aspects of the final bill.
As an initial matter, it is important to keep in mind that the America Invents Act does not change the standards for patentability. In order for an invention to be patentable, it must be useful, novel and nonobvious, and it must constitute patentable subject matter (for example, principles of nature are not patentable). As is discussed more fully below, the America Invents Act deals primarily with procedural issues, either in the context of patent examination or patent infringement litigation.
For most of our clients, the one aspect of the new legislation that will affect them most directly is the first-inventor-to-file rule. Under this rule, which takes effect March 16, 2013, the first inventor to file will be awarded a patent over another inventor who files second, and the relative dates of invention will be immaterial. Under current law, a second-to-file inventor would trump a first-to-file inventor if the second-to-file inventor could prove that he invented the invention first (i.e., before the first-to-file inventor). This is where inventors' notebooks came in - they provided a record of the date of invention. The new legislation renders the date of invention irrelevant. All that matters is that you have the earlier filing date and that you are an inventor. (It has never been legal to copy someone else's idea and patent it - you must be the actual inventor to file for a patent.) Thus, the U.S. is not a "first-to-file" jurisdiction but a "first-inventor-to-file" jurisdiction.
Another important area affected by the America Invents Act is the ability of third parties to challenge a patent either pre- or post-issuance. Under current law, a third party may file a protest before publication of a patent application or a Rule 99 submission after publication but prior to issuance. Once a patent issues, the options include reexamination (ex parte or inter partes) or federal court litigation. The new law expands the options available to third parties for challenging a patent. Interference proceedings, which deal with who invented something first, will be replaced by derivation proceedings, which will deal only with whether someone truly invented the invention at issue. Two new types of post-grant review will be available: post-grant review and inter partes review. Under the former, a third party may challenge a patent on any grounds for a nine-month period after issuance. Once this window closes, then the challenge (called inter partes review) must be based on patents or printed publications only (as is currently the case with Rule 99 submissions and reexaminations).
Inter partes reexamination is abolished effective September 16, 2012. Ex parte reexamination is still available and remains unchanged from prior law. The new standard for inter partes review is arguably more restrictive than the old standard for inter partes reexamination (although it remains to be seen how the Patent Trial and Appeal Board - formerly the Board of Patent Appeals and Interferences - will interpret and apply the new standard). Under the old standard, a third party had to show the existence of a "substantial new question of patentability" in order for the reexamination to move forward.
For inter partes review, the third party will need to show that there is a reasonable likelihood that it will prevail with respect to at least one claim. Under the old standard, it was not uncommon for the Board of Patent Appeals and Interferences to find that there was a substantial new question of patentability and then to uphold the validity of all claims. It seems to me that it will be more difficult for the Patent Trial and Appeal Board to allow an inter partes review to go forward (having found a reasonable likelihood that at least one claim would be invalidated) and then to uphold all claims as valid.
As for pre-issuance challenges, they may now include unpublished patent applications in addition to published patent applications, patents and other publications, and the party making the submission may comment on the references submitted (which was not the case for Rule 99 submissions). The pre-issuance challenge must be filed within six months of the publication date of the patent application (or before a first rejection, whichever is later). Under Rule 99, the submission had to be made within two months of publication. Thus, third parties now may not only comment on the references submitted, but they have a longer window in which to challenge a patent prior to issuance.
The America Invents Act allows prioritized examination for applications filed on or after September 26, 2011, but only for those technologies that are deemed important to the national economy or national competitiveness. The number of applications subject to prioritized examination will be limited to 10,000 per year, and final disposition of the application must be reached within 12 months (as compared to the current average of two to four years). A search report and written analysis are not required, but the request for prioritized examination will be subject to a fee (currently $4800 for large entities). The number of claims is limited, and no multiple dependent claims are allowed.
The America Invents Act also includes certain provisions that will affect patent infringement litigation. For example, a patent may no longer be invalidated on the grounds that the inventor did not disclose the "best mode" (i.e., preferred embodiment) in the patent application. This is still a requirement, however, in terms of patent examination (so applicants will still need to disclose their preferred embodiments if they want to get a patent). Litigation for false patent markings has been curtailed in that the party bringing a false patent markings suit must have suffered competitive injury, and virtual (online) patent markings are allowed.
One aspect of the new law that should affect patent troll litigation is the requirement that multiple parties may be joined in a single suit only if they are accused of making, using or selling the same product or process and there are questions of fact common to all defendants. (It remains to be seen how stringent these requirements will be in practice when applied by the courts.) In addition, the new law expands the prior user defense from business methods only to processes or inventions used in manufacturing or other commercial processes. (I suspect that there will be as much debate and litigation over what constitutes a "commercial process" as there was over what constituted a "business method.") For those business methods that involve data processing or other operations used in the practice, administration, or management of a financial product or service, the patent office is directed to issue regulations establishing a special post-grant review process for challenging the validity of such patents. This special review process will not apply to technological innovations.
Finally, the U.S. Patent and Trademark Office website has a section devoted to the America Invents Act. Go to www.uspto.gov/americainventsact for more information.