America Invents Act (H.R. 1249): Patent Reform is Here!

On September 8, 2011, the Senate approved the Leahy-Smith America Invents Act (H.R. 1249). President Obama is expected to sign the bill into law any day now. This patent reform Act makes significant changes to United States patent law, including moving us closer to a first-to-file system. Some parts of the Leahy-Smith America Invents Act will be phased in a year from now, and other parts take effect immediately.  See an overview of Key Changes below.

As always, your comments, questions or constructive criticisms are most welcome.  We look forward to hearing from you.

Roy Craig

Key Changs to U.S. Patent Law under America Invents Act

1.  First to File.   The AIA will move the United States away from our current “first to invent” system toward a “first to file” system as used in most other countries.   This provision will not take effect until eighteen months after President Obama signs the AIA.   Under the current first-to-invent regime the USPTO awards patents to whoever can prove that they were the first to invent something.  So when two people claim to have invented the same thing the USPTO commences an elaborate administrative proceeding called an “Interference.”  Interferences give both sides a chance to prove who really invented it first.  The patent is awarded accordingly, regardless of who filed the first patent application.  Under a “first to file” system Interferences are no longer necessary and are eliminated.  The patent will be awarded to whoever files the patent application first.  This change will put more urgency into the prompt filing of patent applications.  We will continue to recommend an early provisional patent application as the best-practice solution.  However, many of our clients share the misconception that the AIA will allow the competition to steal your idea and patent it out from under you.  Not true.  Only actual “inventors” and their assigns can apply for patents and this excludes those who steal ideas rather than invent them.  Indeed, at the same time that we lose the interference proceeding we gain the “Derivation Proceeding.”  Derivation proceedings will be used to determine whether the “first-to-file” inventor really derived his patent application from someone else’s later-filed application.

2.   One Year Grace Period.   This provision will take effect eighteen months after President Obama signs the AIA.  Under current law (35 U.S.C. 102(b)) inventors that offer to sell their invention or who disclose it publicly still have a one year grace period to file a patent application before they lose the right to file.  The AIA keeps a one year grace period but redefines and narrows it.   Under the AIA, “a disclosure made 1 year or less before the [patent application] filing date shall not be prior art if it was made by the inventor(s) or by another who obtained the subject matter disclosed directly or indirectly from the inventor(s).

3.   False Patent Marking.   Back in 2010 the Federal Circuit construed the false patent marking statute at 35 U.S.C. § 292 as allowing a qui tam recovery of up to $500 per mismarked product, not per lawsuit as had been previously thought.  In effect, if the ACME widget company sold one thousand fifty-cent widgets their profit would only be about $250, but if they marked them with a false/expired patent number their liability exposure would be $500K. Not surprisingly, bounty hunters started suing commodity-product manufacturers for forgetting to remove old expired patent numbers from their products.  The AIA eliminates the private cause of action for false patent marking and about 500 pending false marking lawsuits will need to be dismissed as soon as the law is enacted.

4.   Best Mode Requirement under 35 U.S.C. 282(3).   Under current law, the Best Mode Requirement under 35 U.S.C. 282(3) requires patent applicants to describe the best way of carrying out their invention.  It is meant to prevent inventors from concealing the preferred embodiment of their inventions.  Under the AIA best mode remains a requirement for patentability, and Examiners will still examine applications accordingly.  However, the AIA (effective at enactment) eliminates the “Best Mode” requirement as a basis for invalidating a patent in court.  Defendants will simply use the similar “enablement requirement” under 35 U.S.C. 112, first paragraph, instead.

5.  Prior User Defense.   Under current law there is a narrow “prior user” infringement defense to an infringement lawsuit, but only for those who commercially used a patented “business method” before a patent issued.  The AIA (effective at enactment) expands the prior user infringement defense to exempt any person who in good faith used any process, machine, manufacture, or composition of matter patent in the United States at least one year before the filing date of a patent.  Sounds fair, but just as before the real trick is proving it.

6.   Increased Fees.   A 15% increase in USPTO fees will occur (effective 10 days from enactment).

7.   Priority ExaminationPay more to get your patent quicker.  Ten days after AIA enactment, the USPTO will implement its “Track I” program by which Applicants can pay for priority examination.  This should cut the examination process down to about a year (as opposed to the 2-3 year norm).  The filing fee will be $4,800 ($2400 small entity).  Get it while it is hot.  No more than ten thousand priority examinations will be allowed each year.

8.  Third Party Challenges to Patents.   Probably the most significant impact of the AIA will be the various ways that it makes patents easier to challenge.  We currently have post-issuance reexaminations (both Ex Parte and Inter Partes).  The AIA raises the standard for triggering a reexamination from “a substantial new question of patentability” to “a reasonable likelihood that the requestor will prevail” with respect to any one of the challenged claims (effective immediately).  Otherwise, reexaminations will continue to provide a way for third parties to attack an issued patent based on newfound prior art.

The AIA adds two new ways for a third party to challenge a patent newly-issued by the USPTO: 1) Ex Parte Post-Grant Review; and 2) Inter Partes Post Grant Review.  Specifically, under the Ex Parte Post-Grant Review (new §§321-329) anyone can challenge any newly-issued patent for any reason within nine months of its issuance. This is much more expansive than reexaminations.  Our patent application monitoring services have long been growing in popularity because they give the chance to attack a patent.  We expect many more clients to subscribe to patent monitoring so that they are aware of patents issuing in their airspace, and can take advantage of that nine month window.  Even after the nine months is up, third parties can still challenge the patent under the Ex Parte Post-Grant Review (new 35 U.S.C. §§ 311-319).  However these are more limited to attacks based on patents or printed publications after the window for post-grant review has passed.   The new review procedures will take effect immediately but will only apply to patents with a priority claim 18 months preceding the date of enactment.