200 Years of American Patent Law Tradition
– Gone!
An Overview of the 2011 America Invents Act
by Marin Cionca
Introduction
After several years of legislative
rollercoaster in Congress, which had to find a common denominator among the
fiercely defended interests of different interest groups, the Patent Reform
initiated during the previous administration, for better or worse, is here.
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| Cionca |
On September 16, 2011, the America Invents Act
was signed into law by the President. The America Invents Act (AIA) replaces a
two-century old American patent law rule, the first-to-invent rule, with an
“international” patent law rule, the first-to-file rule, which is
followed by almost all foreign countries. There are obviously plenty of
minutiae related to the new rule, which are mostly interesting and important to
patent attorneys. However, I will address here only some of the most important
changes to our patent system that I believe will benefit non-patent attorneys,
such as trademark, business or in-house counsel, who may tangentially come in
contact with patent issues.
With some exceptions, most provisions of the
new law will become effective 1 year or 18 months from enactment. Thus, most
provisions will be implemented in the fall of 2012 or in the spring of 2013.
The United States Patent and Trademark Office (USPTO) is making efforts to get
ready for the implementation of the new changes.
The New First-To-File Rule
Unlike in other countries, in the United
States, for more than two centuries, the inventor who invented the invention
first had the right to a patent even if another inventor applied for the same
patent first. An interference proceeding was generally declared by the USPTO
and the patent was granted to the first-to-invent inventor. Under the new law,
the first-to-invent inventor will lose her rights to a patent unless she can
show that the inventor who filed first actually derived the invention from her,
the first-to-invent inventor. The supporters of the new law argue, and
Congress agrees, “that converting the United States patent system from
‘first to invent’ to a system of ‘first inventor to
file’ will improve the United States patent system and promote harmonization
of the United States patent system with the patent systems commonly used in
nearly all other countries throughout the world...” Critics of the AIA
claim that the new law will favor financially potent and large companies and
will be an additional obstacle in securing patent protection for individual
inventors and small businesses. The battle was obviously won by the supporters
of the patent reform.
In my view, the law will not considerably
disfavor the small entity inventor such as an individual inventor or a
startup/small company. Under the previous first-to-invent system, there were
arguably also more benefits than costs for filing early. Furthermore, securing
an early filing date remains relatively inexpensive with the use of a
provisional application for patent. It is true, however, that the new
first-to-file rule translates in additional pressure or incentive to file
early, depending on how you look at it. Anyway, the new first-to-file system is
here, and filing early has to be more than ever an important variable in any
patent protection strategy.
The new first-to-file rule will become
effective 18 months after enactment, thus, by March 16, 2013.
Assignee as Applicant
Until now, in the United States, only the
inventor could be the applicant in an application for patent. Her assignee,
such as the company the inventor worked for, could not generally apply for a
patent. The new law changes that. Assignees of the entire interest or a person
to whom the inventor is under an obligation to assign the invention, such as
the inventor’s employer, may now apply for a patent. This may be
advantageous in, for example, situations when an employer wishes to obtain a
patent for an invention made by a former and uncooperative employee.
Prior Commercial Use Rights
The AIA has created a new defense to patent
infringement based on prior commercial use. If an accused infringer is able to
show that she actually used the invention commercially at least one year before
such events as the filing of the application or public disclosure by the inventor,
she may escape liability. This defense is a personal defense, meaning that it
may be asserted only by a person who engaged in, or directed performance of,
the claimed commercial use. Before the AIA, the patent law allowed for a
similar defense, but it was limited to defending against claims for
infringement of business method patents. The AIA includes patents directed to
all subject matters: process, machine, manufacture, or composition of matter.
Supporters of this change claim that it may encourage manufacturing in the
United States as opposed to foreign countries, which already provided a similar
defense. Critics argue that the expanded defense may be an incentive to
practice the invention in secrecy, which is in conflict with the public policy
of encouraging public disclosure of inventions, a policy that is embodied in
the patent system. It remains to be seen in the following years, based on the
developing data, which side is right here.
Post-Grant Review
The AIA has created two new procedures to attack
granted patents before the newly named Patent Trial and Appeal Board (PTAB),
while eliminating a previous procedure called Inter Partes Reexamination. The
first procedure is called post-grant review and may be instituted within
9 months from patent grant date, by any third party and based on any ground.
Examples of grounds for review include issues related to prior art (e.g.,
patents) and insufficiency of the disclosure of the patent application. A
petition for post-grant review will be granted if the petitioner will be able
to show that “it is more likely than not that at least one of the claims
challenged in the petition is unpatentable.”
The second patent challenging procedure is
called inter partes review and may be initiated at any time after the passage
of 9 months from patent grant date, or, if the post-grant review described
above was instituted, after the date such post-grant review has ended. Under
the inter partes review procedure, the grounds for challenging a patent are
limited to prior art consisting of patents or printed publications. A petition
for post-grant review will be granted if the petitioner will be able to show
“that there is a reasonable likelihood that the petitioner would prevail
with respect to at least one of the claims challenged in the petition.”
Overall, most observers seem to agree that
the new review procedures make it easier than before, for interested third
parties, such as competitors or accused infringers, to challenge issued
patents. The new review procedures are obviously much quicker and much less
expensive than litigation. The new procedures will arguably put more pressure
on applicants and their patent attorneys to prepare stronger applications for
patent, and will ultimately result in patents that are less susceptible to
validity challenges.
Business Method Review
The AIA also created a specific procedure
that can be used to challenge business method patents that were issued before
or after the effective date of this provision, which is 1 year after the enactment
of the AIA. This procedure will be available only to sued infringers and only
for a period of 8 years after the effective date of this procedure, September
16, 2012. The affected patents include the ones directed at “method or
corresponding apparatus for performing data processing or other operations used
in the practice, administration, or management of a financial product or
service, except that the term does not include patents for technological
inventions.” It is unclear at this point what the term “technological
inventions” means, and thus, what patents will be excluded from this type
of attack. More guidance is expected and needed from the USPTO and the cases
that will follow. It would also be interesting to see how the holdings from the Bilski case (Bilski v. Kappos, 130 S. Ct. 3218, 2010), a
cornerstone case implicating business method patents, will be used in disputes
under this new review procedure. Some suggest that the business method review
procedure is simply an unwarranted gift to banks and other financial
institutions who are usually the defendants in expensive litigation related to
business method patents. Others suggest that this procedure will allow the
USPTO to review these patents relatively quickly and inexpensively before the
parties engage in long and expensive litigation, and thus, to potentially
contribute to the saving of considerable economic resources.
Fee Setting Authority
The AIA has granted to USPTO the authority to
set or adjust the fees it charges. This authority was previously held by
Congress. On September 26, 2011, following the enactment of the AIA, the USPTO
increased most of its patent fees by 15%. The AIA also introduced a new
category of applicants, the micro entities, which will be entitled to a 75%
reduction of most fees. The small entity category, which entitles the applicant
to a 50% reduction of most fees, is maintained by the new act. A micro entity
applicant has to qualify as a small entity, has to not have been named as an
inventor on more than 4 previously filed patent applications, and has to have
had an income in the previous year that did not exceed 3 times the median
household income. As of the date of the writing of this article the micro
entity fee reduction was not implemented yet by the USPTO. It is clear,
however, that the new fee reduction will be a considerable help to many
individual inventors and small or underfunded start-up businesses.
Conclusion
The patent reform is here, whether we like it
or not. Its arguably radical changes, such as the first-to-file rules and the
post-grant review procedure, will have to be seriously considered when seeking
patent protection, asserting patent rights, defending against patent
infringement claims, and in many other patent related strategies.
Marin Cionca is a registered patent attorney
and principal of Cionca Law Group P.C. He is also the 2012 Co-Chair of the OCBA
Intellectual Property and Technology section. He can be reached at mcionca@patentattorneycionca.com.
EDITOR’S NOTE: This article first appeared in Orange County Lawyer magazine in the February issue, Vol. 54 No. 2 (pages 10-15). © Copyright 2012 Orange County Bar Association. The views expressed herein are those of the authors. They do not necessarily represent the views of the Orange County Lawyer magazine, the Orange County Bar Association or its staff. All legal and other issues should be independently researched.