President Obama has signed into law the Leahy-Smith America Invents Act (AIA) after more than six years of effort to achieve patent reform. The AIA — signed September 16, 2011, has two provisions that have attracted significant attention. First, under the new law, the U.S. patent system will become a “first inventor to file” system, replacing the former “first to invent” system. Most other countries in the world have a “first inventor to file” patent system. Second, the AIA allows third parties to challenge the validity of issued patents in the U.S. Patent Office in certain circumstances. There are many other changes being implemented by the AIA which have garnered far less attention.

All of these changes are likely to impact patent litigation as well as patent prosecution. While some of the AIA provisions are not effective until more than a year from now, it is prudent to formulate strategies to deal with these changes now.

Selected Provisions Having an Impact on Patent Litigation

Effective Immediately (September 16, 2011)

  • Qui Tam Marking Actions. Qui tam actions for false marking (including pending lawsuits) can only be brought by the U.S. government, which may sue for statutory damages, or private parties who can claim a “competitive injury,” may sue for compensatory damages only. Virtually all pending false marking suits will be dismissed. Also, marking with an expired patent is no longer a violation of the statute, and so called “virtual marking” (via a website) is effective marking.
  • Joinder. A patentee is not permitted to file a single infringement action against multiple, unrelated accused infringers. Separate actions must be filed.
  • Prior User Defense. An accused infringer’s commercial use of patented subject matter more than a year before the patent was filed avoids any patent infringement liability if the party satisfies the required conditions. This prior user defense applies to any patent granted on or after the date of enactment.
  • Best Mode. The AIA eliminates the best mode invalidity defense. Failure to disclose a best mode will not invalidate a patent for any lawsuit filed on or after the date of enactment. However, best mode remains a requirement to obtain a patent.
  • Failure to Obtain Advice of Counsel. Failure to obtain advice of counsel cannot be used to prove willful infringment or induced infringement.

Effective One Year from Enactment (September 16, 2012)

  • Business Method Patents. For lawsuits pending a year from the date of enactment, a new administrative proceeding in the U.S. Patent Office will allow invalidity challenges to "business method" patents that are in litigation. A lower “preponderance” evidentiary standard applies rather than the “clear and convincing” standard applicable in a court proceeding.
  • Supplemental Examination. A patentee can seek examination before the U.S. Patent Office to address a charge of inequitable conduct based on failure to submit prior art that is identified in later-filed litigation. However, Supplemental examination is not available after efforts to enforce the patent are undertaken.
  • Post-Grant Review. The AIA creates a new avenue for competitors to attack recently issued patents. Within nine months of a patent's grant, third parties can challenge patent on any statutory grounds in a U.S. Patent Office proceeding. The review request must show that the patent is more likely than not to be invalid. This applies to any patent granted on an application that claims priority to an application filed 18 months or more after the date of enactment. This could be a relatively low cost way to manage patent litigation risk if companies monitor recently issued patents and promptly seek review of questionable patents.

Selected Provisions Having an Impact on Patent Prosecution

Effective Immediately (September 16, 2011)

  • Tax Strategy Patents. Tax strategy patents are banned immediately. This applies to future applications and pending applications.
  • Human Organism Patents. Patents on human organisms are banned immediately. This applies to future applications and pending applications, but not issued patents.
  • Inter Partes Review. Requests will now require a showing of “reasonable likelihood requester will prevail” rather than the lower “substantial new question of patentability” standard.
  • Reexamination Appeals. Appeals are now limited to the Federal Circuit. Actions filed for review by a District Court are no longer permitted.
  • Pending Interference Proceedings. The U.S. Patent Office may dismiss a pending interference in favor of a postgrant review proceeding. 35 USC §§ 102(g), 135 and 291 will continue to apply to applications that are not affected by the first-to-file provisions (e.g., applications with priority dates prior to 18 months after the date of enactment).

Effective 10 Days After Enactment (September 26, 2011)

  • 15 Percent Surcharge. A 15 percent surcharge will be imposed on most patent office fees.
  • Micro Entities. This is a new category of application filer, and is entitled to a 75 percent reduction in most fees.

Effective 60 Days After Enactment (November 15, 2011)

  • Paper Patent Application Sur-charge. The U.S. Patent Office will impose a $400/$200 surcharge for patent applications not filed electronically.

Effective One Year from Enactment (September 16, 2012)

  • Inter Partes Review. Inter partes review can be requested only after the later of nine months from patent grant or after the termination of any existing post-grant review proceeding.

Effective 18 Months from Enactment (March 16, 2013)

  • First-to-File. The first-to-file provisions prohibit issuance of a patent if it was patented, described in a publication, public use, on sale, or otherwise available to the public before the effective filing date of the application, or if it was described in a U.S. Patent or a U.S. published application that names another inventor and has an effective filing date before the claimed invention. These provisions eliminate or at least limit the Section 102(b) grace period for application filing, which increases the importance of filing a patent application before making any public disclosure of the invention. While the first-to-file provisions apply only to applications with an effective filing date on or after 18 months from the date of enactment, and while inventors can still make certain public disclosures, safeguards against pre-filing disclosures should be implemented in the next six months.
  • Derivation Proceedings. A later applicant can bring an administrative proceeding to challenge an earlier application if the earlier inventor derived the invention from the later files. A petition must be filed within one year of the first publication of a relevant claim. These proceedings are applicable only to applications with an effective filing date on or after 18 months from the date of enactment.