Changes to the U.S. patent system have been both long sought and hotly debated across the widest set of stakeholders imaginable, from innovators in the technology and health care fields to those in manufacturing, agribusiness, financial services, research institutions and elsewhere. The America Invents Act (AIA), versions of which have now passed both the Senate and House of Representatives, contains numerous provisions intended to update and streamline the way the U.S. Patent & Trademark Office (USPTO) evaluates patent applications, awards them for qualifying inventions and manages disputes over patents' claims and quality.

In this month's Emerging Trends Q&A, Pillsbury Intellectual Property partner Patrick A. Doody, a long time IP advisor and former USPTO patent examiner, describes some of the AIA's key provisions, such as a switch to rewarding inventors based on "first to file." He explains how patent rule changes will affect industries increasingly focused on innovation and securing patent protections.

Q: The America Invents Act is fundamentally about changing the way patents are sought and awarded – what are some of the major changes both IP managers and executives need to understand?

Doody: While the final version of the legislation is subject to change pending reconciliation before sending it to President Obama to sign, it's already clear that, if implemented, the AIA will literally rewrite not only the rules for obtaining patents, but also shake up IP strategies on which companies have long relied. For example, switching to a "first to file" system from the current "first to invent" test will have dramatic impact.

Today – as it has for generations - the USPTO looks to ascertain who first invented the subject of a patent application, not when that application is submitted. This has traditionally provided peace of mind to inventors who know they can carefully document the date of their inventing something, even if some time elapses before they apply for a patent.

This all goes out the window under the "first to file" approach. Common among other nations, "first to file" means that the first applicant who files a patent application for an invention gets the patent, not necessarily the first person who invented it. Timing will be everything under the AIA, and that obviously is going to affect every industry and inventor across the board.

Q. How will "first to file" affect the frequency and volume of patent applications?

Doody: Large companies and independent inventors alike will have to think on their feet and stay a step ahead of competitors' applications. For years, we have counseled IP portfolio managers, for example, to periodically perform a methodical review of projects in their R&D divisions and carefully consider which inventions might merit patent applications, and which should be set aside for later study, publication, or trade secret protection.

"First to file" will force companies to be more agile when it comes to portfolio management. Clients will need to assess their portfolios more frequently, and inventors will no longer have the luxury of time in deciding whether something should enter the patent queue. Expect an increase in applications across the board, particularly initially, because inventors will be very sensitive to the rule change, and especially expect a large increase in provisional patent application filings. The policy intent behind "first to file" was to streamline the application process by making it more a matter of comparing application dates, rather than researching the history of "who" invented something, a complex question that places huge demands on USPTO staff, though few applications ever go through this procedure. Another policy intent was to harmonize our patent laws and bring them in line with the rest of the world.

Remember that the typical business constraints on patent portfolios will remain. Prosecuting and maintaining patents requires money, time and other resources – costs inventors and owners have to weigh against patents' value as business instruments. The AIA will alter this equation by adding time pressures and opportunity costs: inventors will have to quickly calculate what they stand to lose if they do not file first.

Q: How will "first to file" affect the quality of patent applications, and of the invention itself?

Doody: Frankly, there's concern that as more applications are submitted to the USPTO faster the relative quality of submissions might suffer. Crafting applications and claims is a blend of art and science; you are simultaneously trying to explicitly define a singular, tangible invention, yet position your claims as broadly as possible in order to prevent a competitor from effectively marketing and selling the same thing with trivial differences in appearance or materials, for example.

Today - knowing they can rely on the existing "first to invent" test - inventors and their lawyers work very methodically in this process, which takes time. Once we switch to "first to file," inventors and R&D chiefs will arguably have to strike more of a balance between the notion of a "perfect" application that takes more time to assemble and one that is both effective - and can be filed first.

On the quality issue, the AIA's changes could conceivably open the door to a new variety of malpractice claims, if an attorney, for example, is accused of turning in a deficient application that allegedly ended up being a rush job and cost someone a patent due to "first to file" pressures. Worse still, lawyers could face a malpractice claim if they took too long to prepare and file an application and a competitor filed first. Lawyers are certainly among the stakeholders here as well.

Q: What about the AIA's creation of a post-grant review period for patents after they are awarded – how will this affect patents headed for the marketplace?

Doody: The House and Senate versions of the AIA establish a 9 month period where patents are publicly posted for objections and critique once they have been granted. The policy objective here was to address complaints that, under the current system, "questionable" patents are allegedly being awarded – a very subjective critique. Final details are pending, but it is quite likely that this post-grant review period will enable companies to watch what is being awarded, and exercise their right to object, if they wish, and, for the first time, challenge certain patents' validity immediately at the USPTO.

Post-grant reviews warrant caution for stakeholders because they could cut both ways for inventors and observers. For example, if "Company A" raises a major complaint about a certain patent, or patents, awarded to "Company B", then "Company A" would presumably be tipping its hand significantly about the kind of IP it values, perhaps inadvertently revealing its own patent strategy, or revealing the types of products it currently has in development. Smart observers will carefully note and analyze objections, as you can imagine.

This is a very interesting provision of the AIA, but needs to be weighed carefully. When is the IP business risk worth the publicity of a protest? Of course, bitter rivals in many industries – who already know who their IP adversaries are - could simply elect to oppose their rivals' latest patents as a matter of course. However, filing a post-grant review simply to harass a competitor is not permitted under the rules.

Q: Does the AIA implement any other steps aimed at assuring the validity of patents?

Doody: AIA also calls for creating a separate post-grant review channel for business method patents, which have been receiving a lot of attention recently. Business method patents have become more popular as companies, particularly financial services institutions and consultancies, for example, look to seize available IP around different methodologies they have honed over time for, say, performing risk assessments, detecting fraud, intercepting suspicious bank transactions, and so forth.

Whether business method patents are a slippery slope toward letting abstract ideas become patent-eligible – not "inventions," in the traditional sense, as some have argued - has sparked lively debate. Several court cases have challenged the validity of business method patents, and last year, in Bilski v. Kappos, the U.S. Supreme Court recognized their legitimacy as a type of patent. This decision soothed many business method patent holders, but theoretically still leaves doors open to individual challenges.

The policy aim of this provision is to allow business method patents to receive appropriate scrutiny, and those making it through the gauntlet will be presumed to be sound. For affected parties building their portfolios with business method patents, this will be a crucial space to watch.

Q: Will the AIA spur any trends in patent litigation and licensing?

Doody: It's hard to say at present. Patents will continue to determine success or failure in the market for many businesses, which means infringement litigation will continue, particularly as companies transitioning to new markets and business models increasingly look to wring as much as they can from their legacy patent portfolios. No doubt companies will continue to sue newer businesses they feel tread on their IP.

Courtrooms tend to be expensive, time-consuming and uncertain venues to resolve disputes, however. Some kinds of disputes might benefit from another entity the AIA calls for establishing: a Patent Trial & Appeal Board at the USPTO. Until we know who its members are and how they are selected, forecasting the impact of this board is difficult. But in theory, such a board could hear and resolve certain kinds of disputes more quickly and perhaps at lower cost to the parties, compared to going the litigation route. It is important to keep in mind that the AIA places time constraints on when post-grant reviews may be filed by parties facing a patent infringement charge, so the decision must be made early in the litigation.

The AIA's impact on patent licensing will be interesting to follow. Licensing is both a business model for many entities acquiring patents and a modern necessity in industries like technology, where companies innovate by incorporating many different patented inventions into a totally new invention. The post-grant review procedures in the AIA should provide a potential licensee, who believes a patent is invalid, with a less expensive forum to challenge the validity of the patent. The AIA therefore will have some impact on patent licensing strategy.