President Obama will sign into law on Friday, September 16, the America Invents Act, significantly altering the nation’s patent laws. This new legislation, six years in the making, is intended to simplify the patent process, strengthen the quality of issued patents, and improve efficiency in both the U.S. Patent and Trademark Office (PTO) and the courts.

An analysis of all the provisions of the America Invents Act is beyond the scope of this alert, but some key highlights are discussed below.

FIRST INVENTOR-TO-FILE

One of the most significant and highly publicized changes will be the move from our current first-to-invent system to a first-inventor-to-file system, thereby promoting the harmonization of our patent laws with the laws in foreign jurisdictions. The U.S. will maintain a one-year grace period, but only for disclosures made by the inventor or by someone else who obtained the subject matter from the inventor. The first-inventor-to-file and related provisions discussed below will not take effect until 18 months after enactment, and will apply to patent applications and patents issued from applications filed on or after that date.

The move to a first-to-file system will mean the eventual end of interference proceedings, to be replaced by so-called derivation proceedings (although the current interference proceeding will remain available for certain legacy patents and applications). In the derivation proceedings, a newly-formed Patent Trial and Appeal Board (which will replace the existing Board of Appeals and Interferences) will determine if an inventor named in an earlier application derived the claimed invention from an inventor in a later-filed application.

The parameters of what constitutes prior art under 35 U.S.C. §102 will also change. Under the existing law, a prior public use or sale constitutes prior art only if it took place in the U.S., but under the new laws, a prior public use or sale in a foreign country will be prior art as well. In addition, the critical date for the statutory bar will be the effective filing date of a patent, and not one year prior to the U.S. filing date (except, as noted above, in the case of disclosures made by the inventor or another who obtained the subject matter from the inventor). And, the prior art status of a U.S. patent or patent application claiming foreign priority will now be determined from the foreign priority date of the document, rather than the U.S. filing date, as is the case under the current law.

As to obviousness, under new §103, it will now be analyzed as of the effective filing date of the application and not at the time the invention was made.

THIRD-PARTY CHALLENGES TO PATENTS AND APPLICATIONS

With hopes of improving the quality of issued patents, there will be more opportunities for third parties to participate during both examination of a patent application and after the patent issues. During examination, new 35 U.S.C. §122 will allow a third party to submit relevant prior art along with a concise description of its relevance. These provisions shall take effect one year after the enactment of the legislation, and shall apply to any patent application filed before, on, or after that date.

The new legislation will also provide for two new post-issuance proceedings to be conducted by the Patent Trial and Appeal Board: Post-grant Review and Inter Partes Review. Post-grant Review will be a brand new type of proceeding, while Inter Partes Review will replace the current Inter Partes Reexamination proceeding (the current Ex Parte Reexamination proceeding will remain intact). Both types of new proceedings will be inter partes, may include, among other things, limited discovery and an oral hearing, and are subject to appeal by either party to the Federal Circuit. And, in the case of both proceedings, the petitioner will be estopped from raising invalidity arguments in subsequent PTO or litigation proceedings that were raised or reasonably could have been raised.

A petition for a Post-grant Review must be filed within nine months of patent issuance, and may be based upon any number of grounds, including anticipation or obviousness based upon any prior art as well as a failure to satisfy the requirements of 35 U.S.C. §112 (other than best mode). The petitioner must show that it is “more likely than not” that at least one claim is unpatentable. A petition for Inter Partes Review cannot be filed until the later of nine months after the patent issues or, if a Post-Grant Review has been instituted, after that proceeding has been terminated. An Inter Partes Review can only raise issues of anticipation or obviousness based upon patents and printed publications, with the standard being a “reasonable likelihood” of prevailing (raising the bar from the current “substantial new question of patentability” standard).

Both Post-grant Review and Inter Partes Review will not be permitted if the third party first files a civil action challenging the validity of a claim or, in the case of Inter Partes Review, waits more than one year after the date on which the third party is served with a complaint alleging infringement. Inter Partes Review takes effect one year after enactment, and applies to any patent issued before, on, or after that effective date, although the new “reasonable likelihood” standard takes effect immediately upon enactment. Post-grant Review takes effect one year after enactment and applies to patents filed after the 18 month period from enactment.

The Act also provides for an additional Post-grant Review process for challenging business method patents that is less restrictive in certain procedural aspects and in its estoppel effects. This transitional program will be available only to those charged with infringement, will exist for only 8 years, beginning one year after enactment, and will apply to business method patents issued before, on, or after that one year date.

LITIGATION-RELATED PROVISIONS

Under the new law, the best mode requirement can no longer be used as a basis for invalidation in an infringement action (although the PTO will still be expected to consider the best mode). This change will take effect upon enactment of the act and apply to all proceedings commenced on or after that date.

False marking claims will be restricted, so that only the U.S. government will be permitted to sue for penalties, so that only those who can show a “competitive injury” may sue for compensatory damages, and so that marking with expired patent numbers shall not constitute a violation. The new law will also provide for so-called virtual marking, that is the marking of a product with the word ‘patent’ or ‘pat.’ and an internet address that associates the patented article with particular patents. The new marking provisions apply to any case that is pending on, or commenced on or after, the date of enactment.

Prior user rights will no longer be limited to business method patents, but will be expanded to cover all types of patents. This expansion of prior user rights will apply to any patent issued on or after the date of enactment.

Under the new laws, the failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement.

The requirements for joinder of defendants in infringement actions will also become more restrictive, so that parties may be joined only if 1) any right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same actions, and 2) questions of fact common to all defendants will arise. Notably, defendants may not be joined based solely on allegations that they have each infringed. These changes apply to any civil action commenced on or after the date of enactment.

FEES, FUNDING AND OTHER PTO PROVISIONS

The Act allows the PTO to set its own fees necessary for recovering the costs of doing business, with a 15% increase to take effect 10 days after enactment. At that same time, prioritized examination will be available for a fee of $4,800, and on the date of enactment a new ‘micro’ entity fee will be established that allows for a 75% reduction of most PTO fees. Additionally, a ‘reserve fund’ of excess fees will be created and the PTO will need to seek congressional approval to access this money.