On September 16, 2011, President Obama signed the America Invents Act (AIA) into law. The Act, formerly known as H.R. 1249, is the most significant patent reform legislation since the Patent Act of 1952. Previously, on March 8, 2011, the Senate passed S. 23, a somewhat different version of the AIA, by a vote of 95-5, and in June, the U.S. House of Representatives passed its own “patent reform” bill, H.R. 1249, by a similarly wide margin, 304-117. Rather than proceed to committee to reconcile the differences in the two bills, on September 6, 2011, the U.S. Senate invoked cloture on a motion to proceed with the House’s version. The following summarizes several of the more prominent provisions of the AIA and provides a brief discussion of their immediate and long-term impact.
First-to-File. The AIA converts the present “first-person-to-invent” system to a system in which the first inventor to file a patent application on the invention would have priority. This system would define novelty based on whether the claimed invention was disclosed in a prior art reference before the effective filing date of the application, thus eliminating the one-year “grace period” for prior art references currently available under 35 U.S.C. § 102(b). There is an exception, however, if the disclosure is made one year or less before the effective filing date and the disclosure originated from the inventor or a joint inventor. Given that the timeframe for implementation of this provision is 18 months after the enactment of the AIA, it is expected that the U.S. Patent and Trademark Office will see a flurry of patent applications prior to that date.
Patent Office Funding. This was one of the more controversial provisions and presented one of the more debated differences between the House and Senate bills. Previously, a significant portion of fees paid to the Patent and Trademark Office (PTO) by patent applicants was diverted by Congress to other government programs. Under the Senate’s version, the practice of fee diversion would have been eliminated. The House’s version, now the AIA, creates a separate fund into which all fees collected in excess of the amount appropriated for the Patent Office will be deposited. Those funds are to be appropriated subsequently for use by the Patent Office only. The ability of the PTO to use these funds is intended to lead to an increase in hiring of patent examiners and thus a decrease in patent application pendency.
False Marking. The AIA alters false patent marking law such that only the federal government can bring a lawsuit for the false marking penalty provided by 35 U.S.C. § 292(a) and adds a provision under which only entities actually harmed by another’s false marking may bring suit for recovery. Specifically, former subsection 292(b) (which provided that “any person may sue for the [false marking] penalty ...”) would be stricken and replaced with the following: “Any person who has suffered a competitive injury as a result of a violation of this section may file a civil action in a district court of the United States for recovery of damages adequate to compensate for the injury.” This is expected to greatly curb, or eliminate, the increasing number of false marking cases filed in view of the 2009 decision of the Court of Appeals for the Federal Circuit in Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009) (which determined that the maximum fine for violation of the false marking statute should be applied for each article sold with false marking). Unlike most other provisions of H.R. 1249, this provision is effective immediately upon enactment, and is applicable not only to future false marking cases, but to all currently pending false marking cases.
Preissuance Submission by Third Parties. The AIA permits third parties to submit any patent, published patent application or other printed publication of potential relevance to the examination of an application for patent if the submission follows certain criteria. While the third party would not be able to argue in front of the examiner, preissuance submissions would present a useful opportunity for third parties to narrow or eliminate pending patent claims, rather than wait until the application fails on its own or issues as a patent. In comparison to the current procedure under Rule 1.99, which prohibits any explanation or other commentary regarding a submitted reference, the new procedure enhances a third party’s ability to attack pending patent claims by requiring preissuance submissions to be accompanied by description of the relevance of each submitted patent or publication. In addition, the period for submission is lengthened from two months after publication to the earlier of (i) the issuance of a Notice of Allowance or (ii) six months after publication or the issuance of a first Office Action on the merits, whichever is later. This provision would not take effect until one year after the date of enactment of the AIA.
Post-Grant Proceedings. The AIA shakes up the current post-grant proceedings framework. Ex Parte reexamination will continue with the same substantial new question threshold, but Inter Partes reexamination will be abolished one year after enactment of the AIA. The AIA adds procedures for “post-grant review,” “Inter Partes review” and “supplemental examination,” which are discussed below:
- Post-Grant Review. One year after enactment of the AIA, post-grant review may be requested within nine months of grant or reissue. The PTO will consider any ground of invalidity with the thresholds being (1) more likely than not that at least one challenged claim is unpatentable, or (2) the petition raises a novel or unsettled legal question that is important to other patents or applications. The review process is to be completed within one year with an option of an extension of up to six months with good cause. Petitioners must take care when considering whether to file for a post-grant review, as the petitioner is estopped from raising with courts, the International Trade Commission (ITC) or the PTO “any ground that petitioner raised or reasonably could have raised during the review.”
- Inter Partes Review. Inter Partes review may be requested after nine months from grant or reissue or after post-grant review is completed and prior art submissions are limited to patents and printed publications. The threshold inquiry for Inter Partes review is whether there is a reasonable likelihood that the petitioner would prevail on at least one claim. Completion timeframe, estoppel and implementation considerations are all the same as for post-grant review.
- Supplemental Examination. The AIA permits parties to attempt to avoid or purge potential inequitable conduct claims by utilizing the Supplemental Examination procedure described in new 35 U.S.C. § 257, with two exceptions. First, Supplemental Examination is not available to purge allegations pled with particularity against the patentee before the request for Supplemental Examination. Second, the purging of inequitable conduct is not applicable to defenses raised in actions brought before the conclusion of the Supplemental Examination. In the event “material fraud” before the PTO is found during Supplemental Examination, however, the case is to be referred to the Attorney General.
Review of Business Method Patents. The AIA establishes, within one year of enactment, a transitional post-grant review proceeding for review of the validity of covered business method patents. The term “covered business method patent” is defined as “a patent that claims a 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.” A person may file a petition if that person or his real party in interest has been sued for infringement of the business method patent or has been charged with infringement of the business method patent. If this review fails, the petitioner will not be able to assert in a civil action or before the ITC that a claim is invalid on any ground raised during a transitional proceeding that resulted in a final written decision.
Best Mode. The AIA eliminates an accused infringer’s ability to argue that a patent is invalid because the patentee did not identify the best mode for enablement in the specification. This provision is effective upon enactment and is purported to reduce litigation issues involving intent. Patent applications, however, must still disclose the best mode, although it seems the examiner has no practical method to determine the patentee’s compliance.
Advice of Counsel. Effective one year after enactment, the AIA codifies prior case law holding that a failure to obtain advice of counsel with respect to any allegedly infringed patent, or failure to present such evidence, may not be used to prove willful infringement of the patent or to prove that the infringer intended to induce infringement of the patent.
Joinder of Parties. For civil actions commenced on or after the date of enactment of the AIA, accused infringers may be joined in one action, or have their actions consolidated for trial, only if (1) a right to relief is asserted with respect to the same transaction or occurrence relating to the same accused product or process and (2) questions of fact common to all accused infringers will arise in the action. Accused infringers may not be joined in one action nor have their actions consolidated for trial based solely on allegation that they each have infringed the patent in suit. It is expected that this provision will make it more difficult for patent owners to include a broad range of competing companies in a single lawsuit.
Prior User Rights. The AIA expands the prior user defense in 35 U.S.C. § 273 by eliminating the current restriction to methods, to cover commercial use of the subject matter of a patent in the United States.
Tax Strategies. The AIA provides that any strategy for reducing, avoiding or deferring tax liability, whether known or unknown at the time of invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art.