By Laura Anne Kowal, Jennifer L. Miller and Estelle J. Tsevdos
Reconciliation between the patent reform legislation passed by the
U.S. House on June 23, 2011, and the earlier bill approved by the Senate
is expected, enabling the Leahy-Smith America Invents Act to move to
the President for signing by year's end.
H.R. 1249 passed the House comfortably, 304-117. The Senate approved S. 23 by a solid 95-5 vote on March 8, 2011. Both bills would do the following:
The most significant reform in both versions of the bill would
change U.S. patent laws from a first-to-invent to a first-to-file
system, consistent with most patent systems in the rest of the world.
Both bills would also allow the U.S. Patent and Trademark Office to set
its own fees. Both bills deny state court jurisdiction over claims
relating to patents, plant variety protection, and copyrights.
One of the most significant and controversial differences between
the bills is the treatment of fees collected by the PTO. Currently,
fees the PTO collects in excess of its annual budget are returned to the
general fund, a process known as diversion. Although Congress returns
some funds to the PTO, hundreds of millions of dollars are diverted
The Senate bill would allow the PTO to keep all of its collected
fees. The House bill would create a "Patent and Trademark Fee Reserve
Fund" to hold any excess fees. Congress would maintain oversight of the
fund, releasing money to the PTO upon petition by the PTO. Critics argue
that it is not clear how the PTO would access the funds and, therefore,
funding of the PTO could be inadequate.
Each bill addresses "false marking" lawsuits. Currently, any
individual is allowed to bring a claim alleging that an unpatented
product is falsely marked as patented. The proposed reform would limit
the right to file a false marking claim to individuals who have
"suffered a competitive injury." This change would apply to cases that
are already filed and all future cases. In addition, both bills would
allow only the government to sue to recover civil penalties for false
Revisions to the procedure for challenging patents appear in both
bills. "Inter Partes re-examination," the process whereby a person may
challenge the validity of a patent based on published prior art, becomes
"Inter Partes review"(IPR) in both the House and Senate versions. The
procedures for IPR may be instituted either after the PTO grants a
patent or after a post-grant review.
Both bills require that in order for an IPR to be granted, the
PTO Director must make a determination that there is a reasonable
likelihood that the petitioner would prevail. However, certain
differences in the IPR procedures outlined in the two bills must be
reconciled. The bills also provide for post-grant review of a patent as
long as a petition is filed within nine months of the grant of a patent
or the issuance of a reissued patent. Petitions for post-grant review
will be authorized only if the Director determines that it is more
likely than not, if the information in the petition is not rebutted,
that at least one of the claims challenged is non-patentable. Both IPR
and post-grant review are barred if the petitioner has filed a civil
action challenging the validity of the patent. In addition, both bills
call for the Director to promulgate regulations regarding the post-grant
review of business methods patents.
The legislation also would benefit universities and certain
patent applicants under a new fee structure for "micro entities."
Although small entities currently receive a 50 percent fee reduction,
micro entities in both patent reform bills would receive an additional
50 percent reduction in filing fees (overall, a 75 percent fee
The House version defines a micro entity as a small entity that
has not been named as an inventor on more than four previously filed
patent applications, does not have an annual income more than three
times the median U.S. household income, and has not conveyed or
contractually promised to convey rights to an entity that makes more
than three times the median U.S. household income. In the House version,
a micro entity may include someone who certifies that his employer is
an institution of higher learning. The Senate bill includes only
employees of state institutions of higher learning to be considered
micro entities and the applicant may not have been a named an inventor
on five previously filed applications.
Much of the debate surrounding the patent reform bills has
centered on whether they favor large or small businesses. In an attempt
to address this issue, the House bill Manager's Amendment contained
several provisions for small businesses, including a "sense of Congress"
statement regarding the importance of protecting small businesses from
predatory behavior involving innovation, a study on assisting small
businesses in obtaining and enforcing foreign patents, a study of
diversity of patent applicants, and additional requirements for the
satellite office location process. Both bills provide for a small
The House and Senate must now resolve the differences between
their versions in conference committee. If the bills are reconciled,
final legislation would be ready for review by the President, who has
indicated that he would sign the final bill into law.
Many industry leaders, including the American Intellectual
Property Association, the Intellectual Property Owners Association, and
Pennsylvania Bio, have supported the legislation, and Pennsylvania Bio
has committed to working with Congress to reconcile the two bills. But
some industry leaders have criticized the bills, asserting that the
complex nature of the new procedures for challenging patents could not
be financially born by individual inventors and academia and that the
new procedures are duplicative and difficult to understand.
If you have questions or concerns about this legislation or how
it might affect your patent portfolio, patent litigation, or other
intellectual property practices, please contact Jennifer L. Miller,
co-partner-in-charge of Ballard Spahr's Life Sciences/Technology Group,
at 215.864.8619 or firstname.lastname@example.org; Estelle J. Tsevdos at
215.864.8377 or email@example.com; or Laura Anne Kowal at
215.864.8472 or firstname.lastname@example.org.
Copyright © 2011 by Ballard Spahr LLP.
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