By Nicholas T. Peters
UPDATE: As expected, President Barack Obama
signed the Leahy-Smith America Invents Act (the "Act") into law on
Friday, September 16, 2011. This legislation is a major rewrite of the
patent laws of the United States. The new law adjusts the landscape of
patent law in several ways, including changing the U.S. patent system
from a "first to invent" system to a "first to file" system and adding
new post-grant patent review processes, among other changes. The
following is a summary of some of these changes.
"First to File"
Effective for patent applications filed on or after March 16, 2013,
the definition of "prior art" will be adjusted to emphasize awarding
patents to the first inventor to file an application instead of being
awarded to the first inventor to invent the claimed subject matter. This
change is made to be more in accord with the patent laws of many other
countries throughout the world.
When these provisions take effect, public disclosures of subject
matter made prior to the filing of a patent application will be
considered to be prior art, with certain exceptions. Art disclosed after
a public disclosure by the inventor, where the inventor's public
disclosure is made one year or less before the filing of the patent
application, will not be considered prior art to that application. This
makes the U.S. approach to "first to file" different from most other
countries. Also, patents or patent applications disclosing subject
matter obtained from the current application's inventor will not be
considered prior art, nor will patents or applications co-owned with the
current application at the time of filing of the current application.
We note that publication of an inventor's disclosure prior to filing
may preclude later disclosures from being considered prior art in the
U.S., but such a disclosure could adversely affect foreign patent
rights. Accordingly, consultation with a patent professional is
necessary when deciding how best to protect and market innovations under
the new Act.
Effects on Practice Before the United States Patent and Trademark Office
The Act introduces several changes to the patent application process at the United States Patent and Trademark Office (USPTO):
Filing of a Patent Application
The Act sets out requirements for statements by the inventor to be
submitted with the patent application. A substitute statement can be
submitted if an inventor is not available to sign declaration papers or
is obligated to assign the application to another and refuses to sign
the declaration papers. Of considerable interest, the Act explicitly
authorizes combining the Declaration or Oath with an assignment of the
inventor's interest to another party. This provision will reduce the
number of papers that inventors need to file when filing a patent
Importantly, the law provides for a 15% increase in many USPTO fees
as of September 26, 2011. If there are matters to be filed in the short
term that will incur payment of USPTO fees, one should consider whether
to expedite those filings to avoid payment of the 15% surcharge.
The Act establishes a new "micro entity" status for patent
applicants. Applicants that qualify for this status will be entitled to a
75% discount on USPTO fees. The criteria for qualification are as
follows: 1) an applicant must qualify as a small entity under the
current standard; 2) the inventor must not be a named inventor on more
than four applications, excluding applications obliged to be assigned to
previous employers; 3) the applicant's gross income must be less than
three times the median U.S. household income for the previous year; and
4) the application cannot be subject to assignment to an entity that
fails these tests.
The Act provides for the optional payment of a $4,800 fee to have a
patent application's examination prioritized ahead of other
applications. Such applications can have no more than 4 independent
claims and 30 total claims.
As a side effect of the shift to a "first to file" system, patent
interference proceedings that settle disputes over which inventor was
the first to invent and thus entitled to a patent will be discontinued.
Instead, "derivation" proceedings will be instituted to handle disputes
over whether an earlier filed patent application was derived or stolen
from the actual inventor's subject matter. Also, the Board of Patent
Appeals and Interferences will be renamed as the "Patent Trial and
Satellite USPTO Offices
The Act authorizes the USPTO to open three or more satellite
offices throughout the country. We note that the USPTO had previously
announced intentions to open a satellite office in the Detroit area.
Tax Avoidance Strategies
Patent applications pending as of the enactment of the Act that
claim tax avoidance strategies will be considered in the prior art and
thus are not patentable. This provision explicitly does not apply to tax
return preparation or financial management strategies.
Patents on "Human Organisms"
The Act prohibits issuance of a patent claim "directed to or
encompassing a human organism." The Act does not appear to define the
expression "directed to."
The Act introduces one new defense to patent infringement and takes
one away. The Act also limits the ability to join multiple defendants in
a single patent infringement lawsuit.
Prior Use Defense to an Accusation of Patent Infringement
The Act creates a new defense to a charge of patent infringement.
Subject matter that is accused of infringing a patent is exempted from a
finding of infringement of the patent if the subject matter was "a
process, or consisting of a machine, manufacture, or composition of
matter used in a manufacturing or other commercial process" that was
used in good faith commercially in the U.S. at least one year before the
effective filing date of the patent or invention public disclosure on
which the patent is based. This defense is effective against any patent
issued after September 16, 2011.
The prior use defense cannot be assigned to another entity and cannot
be expanded beyond the original commercial use that was the basis for
the defense. The defense does extend, however, to customers through
application of the patent exhaustion doctrine.
Repeal of the Best Mode Defense
The Act removes the failure of a patent to disclose the best mode
to practice the claimed invention as a defense to a claim of patent
infringement. Disclosure of the best mode is still required, however, as
part of the patent application.
Under the Act, a patent owner may only join multiple parties in a
single patent infringement lawsuit if the defendants' acts arise out of
the same transaction or series of transactions and there are questions
of fact common to all the defendants. Infringement of a single patent is
not sufficient for joinder, although defendants can waive this joinder
restriction. The Act also prohibits a court from forcing a joinder in
these same regards.
The Act affirmatively states that failure to obtain an opinion of
counsel regarding patent non-infringement cannot be considered when
determining a finding of willful infringement.
The law dictates that providing an ATM location, in and of itself, is insufficient to establish venue against a defendant.
Post-Grant Patent Review Procedures at the USPTO
The Act authorizes a new post-grant review process for patents and
directs the USPTO to issue regulations for another post-grant review
specifically directed to business method patents. We note that "business
method patents" is not yet a precise expression and has, in the past,
meant different things to different observers.
First, the Act creates a process for third parties to petition for
review of a patent under any ground for invalidity within nine months of
the patent's issuance. The process is to be completed within one year
of the USPTO's determination that it is more likely than not that at
least one claim is unpatentable or that the petition for review raises a
novel or unsettled question of law. That one-year window can be
extended by the USPTO by another six months. The patent owner may
respond to the petition for review and will have one opportunity to
amend the claims, with additional opportunities to amend allowed claims
with consent of the requesting party.
The requesting party will not be able to raise again in a later
proceeding the issues that have already been raised or that could have
been raised during the post-grant review. The review can be stopped by
settlement of the parties and submission of the settlement agreement to
New Inter Partes Review
Second, the Act replaces the current inter partes patent reexamination process with a new "inter partes review"
process. A third party can request the review after nine months
following issuance of the patent based only on patent documents and
printed publications. The petition for review will be granted if the
USPTO determines that there is a "reasonable likelihood that the
petitioner would prevail with respect to at least 1 of the claims
challenged in the petition," which replaces the previous substantial
question of patentability standard for inter partes reexamination.
In nearly every other way, the inter partes review will be
handled identically to the post-grant review process. For instance, the
Patent Trial and Appeal Board will handle the inter partes review,
and the patent owner will have one opportunity to amend the claims,
with additional opportunities to amend allowed claims with consent of
the requesting party. Also, the USPTO is to issue a final decision on
the review within one year of granting the petition to review the
patent, with a six-month extension available, and estoppel applies to
the requesting party.
A patent owner can submit information for consideration by the
USPTO. If the USPTO determines within three months of the submission
that it raises a substantial new question of patentability, then the
USPTO will institute an ex parte reexamination proceeding. This
portion of the Act explicitly states that information submitted through
this process cannot be used as a basis for holding a patent
unenforceable in a later proceeding, although this process cannot cure
inequitable conduct based on fraud.
Business Method Patent Review
The Act requires the USPTO to issue within one year regulations for
conducting a post-grant review of business method patents. Third
parties will be able to request review by the USPTO of a patent they are
accused of infringing if the patent relates to business methods. There
will be an eight-year sunset on this procedure.
Third-Party Submissions to the USPTO
Third parties are allowed to submit information relevant to the
examination of a pending application. The information must include a
statement of the relevance of each submitted document to the application
and must be submitted, at the earliest, before a notice of allowance is
mailed or, at the latest, six months after publication or the date of
first rejection of the application.
The Act limits standing for filing lawsuits over false marking to
parties that suffer a competitive injury as a result of the alleged
false marking. The Act also authorizes a patentee to mark products with
the word "Patent" or "Pat." along with an Internet address that, when
accessed, provides a listing of the patents that cover the marked
The Act directs the USPTO to study various aspects of the Act and
other aspects of intellectual property law and provide various reports
to Congress on these studies.
It is expected that this new legislation will engender interpretive
disputes going forward. We encourage you to monitor the Fitch Even
website as the interpretation of the new statute develops. In the
meantime, if you have questions regarding the Leahy-Smith America
Invents Act, please contact Fitch Even partner Nicholas T. Peters, the author of this alert.
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