Troutman Sanders LLP: Patent Reform Awaits President’s Signature

Troutman Sanders LLP: Patent Reform Awaits President’s Signature

By Douglas "Doug" D. Salyers, James Moore Bollinger, Jeffrey C. Morgan, James "Jim" E. Schutz, Trenton A. Ward, Robert A. Madayag, and Dustin B. Weeks

Yesterday, September 8, 2011, Congress approved the Leahy-Smith America Invents Act (AIA), a bill that introduces some of the most sweeping statutory changes to U.S. patent law in decades. This advisory highlights some of the most significant changes in the law - which awaits President Obama's expected signature - and when those changes take effect over the next 18 months.

  • First-to-File: The AIA implements a first to file system in the U.S., where priority is given to an applicant that is the first to file a patent application rather than the first to invent. The change to first-to-file is the most significant change to the law and was originally intended to harmonize U.S. patent law with the majority of the world.  However, the numerous additional caveats in this new statute may essentially create what has been described as a "first-to-publicize" system, which is substantially different from the traditional first-to-file systems of other countries. This change will apply to applications with priority claims that begin 18 months after the date of enactment.
  • Changed Reexamination Standard:  The burden for granting an inter partes patent reexamination will change from a "substantial new question of patentability" to a "reasonable likelihood that the requester would prevail." This change will take place upon enactment.
  • Post-Grant Review:  A new chapter in the statute, Chapter 32, will create a nine-month window for Post-Grant Review (PGR) challenging a patent on any ground, including challenges based on written description (which was previously not possible in reexam). PGR will take effect in one year for some patents, but otherwise will apply only to applications with priority claims that fall 18 months after the date of enactment. PGR will be granted upon a showing by the challenger that it is more likely than not that  at least one of the challenged claims is unpatentable.
  • Post-Grant Review of Business-Method Patents:  The bill requires the PTO to issue regulations establishing a post-grant review process allowing those accused of infringement to challenge the validity of certain business method patents, presumably including challenges to the eligibility of the claimed subject matter. This new process will take effect one year after enactment.
  • Third-Party Submissions:  The AIA gives third parties the right to submit prior art to the patent office for consideration and inclusion in the record for a limited time during the pendency of an application. The prior art must be submitted before a notice of allowance and the later of (1) six months after publication or (2) the date of the first rejection by the examiner. This provision takes effect one year after enactment and applies to all patent applications filed before, on, or after that effective date.
  • Supplemental Examination:  Beginning on the one-year anniversary of the AIA's enactment, new Section 257 permits a patent owner to request supplemental examination of its patent to consider, reconsider, or correct information believed to be relevant to the patent. If the PTO determines that the patent owner's request raises a substantial new question of patentability, a reexamination will be ordered. This provision provides, in effect, an opportunity for the patent owner to preemptively avoid allegations of inequitable conduct based on withheld or mischaracterized information. But in order to take advantage of this potential avoidance of inequitable conduct, the supplemental examination: (a) must be requested before an allegation of inequitable conduct is pled with particularity in a civil action; or (b) must be completed before the institution of a Section 337 action in the International Trade Commission. The submission of a supplemental examination request is not without its risks to the patent owner, however.  In addition to exposing the patent to potential invalidity, the provision permits the PTO to refer matters involving fraud discovered during the course of the supplemental examination to the Attorney General for possible prosecution.
  • Micro Entity:  Micro entities will be entitled to pay 25% of the total fee amount (50% of the small entity fee). A micro entity is defined as an entity that meets a number of requirements, including qualifying as a small entity, not being named as inventor on more than 4 previously filed patents, and not having gross income exceeding 3 times the median household income for the preceding calendar year. This change is effective upon enactment.
  • Increased Fees:  All surcharge fees will be increased by 15% and many other statutory fees will be increased, including a $400 fee for documents which are not filed electronically. These take place either upon enactment, 10 days after enactment, or 60 days after enactment.
  • Marking:  The AIA effectively ends current and future qui tam actions of false patent marking brought by anyone other than the United States or a person who has actually suffered a competitive injury. Only the United States may recover statutory damages for false marking. A competitor may recover only those damages adequate to compensate them for their injury.  The revisions also make clear that marking a product with an expired patent that once covered the product is not actionable. The AIA also permits Virtual Marking. In lieu of physically marking products with patent numbers, the patent owner can "virtually" mark their product with the word "patent" or abbreviation "pat," along with a publicly accessible website address that associates the product with the patents covering the product. The change will take place on enactment. With regards to qui tam actions, the change will apply to any False Marking case that is pending on, or commenced on or after, the date of enactment.
  • Prior Commercial Use Defense: The AIA creates a defense to patent infringement if the alleged infringer can prove a good faith commercial use of the infringing device/method more than one year prior to the earlier of (a) the effective date (filing date of earliest application to which priority is claimed) of the patent or (b) the date the subject matter of the patent was publicly disclosed by the inventor. This provision applies to all patents issued on or after the date of enactment.
  • Best Mode Defense Eliminated:  The best mode defense has been eliminated and is no longer included in the list of invalidity defenses. While no longer a defense, the best mode requirement remains in 35. U.S.C. 112, and thus theoretically could be used by a patent examiner to reject an application. This change is effective upon enactment.
  • Tax Strategy Patents or Patents With Claims Encompassing Human Organisms Eliminated:  Patents with claims regarding "reducing, avoiding, or deferring tax liability" will no longer be granted. These exclusions will not apply to certain inventions relating to particular types of tax preparation software and financial management software. Additionally, patents may no longer issue "on a claim directed to or encompassing a human organism." These changes are effective upon enactment.

In addition to those changes briefly outlined above, the 37 sections of the AIA include numerous additional provisions that will have far-reaching changes in the U.S. Patent law system. Please feel free to contact us for a detailed discussion of how the changes will affect you.

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