Yesterday, the Senate passed a new patent statute and it is expected to be promptly signed into law. Known as the “Leahy-Smith America Invents Act” (Act), it is the most significant amendment to United States patent law since recodification under the Patent Act of 1952. With exceptions, the provisions of the Act take effect one year after enactment. Major changes are being made to almost every facet of United States patent law, from fees charged by the Patent Office to new avenues for third parties to impact patent prosecution and to challenge newly issued patents.

Among the most significant changes is adoption of a patent system based on the “first-to-file” a patent application instead of the first person to invent. This provision will go into effect eighteen months after enactment. As a consequence, interference proceedings, which determine priority between inventors, will be phased out after a transition period that still allows interferences to be declared within two years of enactment of the Act. “Derivation Proceedings” will replace interferences. A “Patent Trial and Appeal Board” replaces the Board of Patent Appeals and Interferences, and will determine whether an applicant who first-filed an application derived the claimed invention from an applicant claiming substantially the same invention in a later-filed application.

Other significant changes broaden the scope of prior art that is available to challenge patentability of an invention. For example, effective eighteen months after enactment of the Act, foreign published applications or issued patents to which granted United States patents claim priority will be prior art that is effective as of their filing dates for purposes of both novelty and obviousness. Similarly, certain activities that defeat patentability when conducted in the United States, such as prior use and placement of products “on sale,” will now defeat patentability when conducted in foreign countries. Patentability can also be defeated where, before the filing date of the patent application, the claimed invention is “otherwise available to the public.” The Act also expands “prior user rights,” previously limited to business method patents, to commercial use in the United States of any subject matter.

Third parties may introduce obstacles both during prosecution and after the patent issues under the new law. For example, patents and printed publications that qualify as prior art, as well as certain statements by a patent owner before a Federal Court or the Patent Office, may be entered by the public during patent prosecution. There will be significant changes to reexamination of issued patents. A “supplemental examination” will enable a patent owner to address issues that might relate to allegations of inequitable conduct. If a threshold of a “substantial new question of patentability is met,” an ex parte reexamination will be ordered. The Patent Office is eliminating inter partes reexamination, and will now offer two new proceedings, “post-grant review” and “inter partes review,” which will be available by request of a third party. Post-grant review will be available within nine months after issuance of a patent for consideration of any ground of invalidity, such as lack of enablement, lack of novelty and obviousness of the claimed invention. Inter partes review, by way of contrast, will be available starting nine months after patent issuance or reissuance, and will be limited to consideration of novelty or non-obviousness relative to patents and printed publications. The threshold for each type of review is also different. Post-grant review will require that information presented demonstrate that it is “more likely than not that at least 1 of the claims challenged” will be unpatentable or “raises a novel or unsettled legal question that is important to other patents or patent applications.” Inter partes review, on the other hand, will require “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged.…”

Several newly-introduced provisions affect litigation in particular. For example, the requirement that the patent application disclose an enabling description of what the applicant considers to be the best mode of practicing the invention at time of filing has been minimized by removing that requirement as a basis for invalidating the patent. Also, willful infringement cannot be established by showing that an alleged infringer failed to obtain the advice of counsel. The Act also restricts joinder of defendants in an infringement action.

The Patent Office will add a fifteen percent surcharge to most fees ten days after enactment of the Act. However, in an extension of the program reducing most fees for small entities by fifty percent, “micro entities,” which would include applicants employed by institutions of higher education, will be able to obtain a reduction of fees of seventy-five percent. The Patent Office is also establishing a fee of $4,800 for prioritized examination, a procedure that was initiated earlier this year and is designed to reach final disposition of an application within twelve months.

The ability of the Patent Office to retain fees that it collects, a controversial issue, was resolved with a compromise solution that is not what the Patent Office advocated. Although the Patent Office will have a qualified authority to set its own fees, many commentators are concerned that funding will be insufficient and that the quality of its product will significantly diminish, especially in view of the added administrative burdens of the new procedures introduced pursuant to the new Act.

The Act is complicated and leaves many questions to be resolved by the courts, but there is one message that stands clear: FILE FIRST!