As of September 16, 2011, the rules of U.S. patent law have changed. Companies and entrepreneurs involved in invention and innovation need to change their patent strategies accordingly. Complaining about a new complex, costly, ambiguous law will not help. The law is in effect and phases in over the next 18 months, and the only thing to do now is prepare. So the question is, what should you do?
First, you need to understand the new law so that you can make the right decisions for your IP program. For a comprehensive analysis of the law and suggestions for how to comply with its obligations and how to take advantage of its opportunities, see Foley IP Partner Hal Wegner's analysis of the 2011 Patent Law1, available online at http://tinyurl.com/3arfeec.
The new law will make patents more expensive and more complex to obtain. You need to plan on increased patent costs or smaller patent portfolios.
Prepare for “first inventor to file.” How will you win the race to the USPTO? Consider using one or more provisional applications, but there are many other strategies that may be appropriate for your IP program. This provision takes effect March 13, 2013, but strategies must be developed now. You also may want to take steps to make sure pending applications continue to be processed under the “old” law.
Prepare for the inter partes review procedure. This new procedure is effective September 16, 2012, for any patent issued before, on, or after that date. Expect challenges under this procedure for your issued patents. You should begin formulating a plan on how you can leverage this tool against the patents of others.
How will you use supplemental examination to consider, reconsider, or correct information believed to be relevant to your issued patents and thus protect your patent portfolio from attack by third parties? This provision is effective September 16, 2012 and applies to all issued patents, whether the patent issued before, on, or after the effective date. It can be helpful for example in curing inequitable conduct or invalidity allegations.
Key Considerations of the Leahy-Smith America Invents Act
There Are Some Improvements
There are several provisions in the new law that will likely speed up and simplify the process for obtaining and litigating patents, including:
- Simplifying the inventor's oath and authorizing assignee filing
- Expanding opportunities for submission of information by third parties to the USPTO during the examination process
- Eliminating the proliferation of “false patent marking” suits
- Codifying that failure to obtain advice of counsel may not be used to prove willful infringement
- Limiting joinder of unrelated parties and issues in patent infringement suits
- Authorizing priority examination
Many of these helpful provisions either were already the law, or could have been implemented under the USPTO's rule-making authority. For example, rules for authorizing priority examination were proposed long ago, but never implemented.
Changing to a first inventor to file law to harmonize with the laws of almost every other country is good in principle. However, the provision in the new law introduces ambiguity and complexity not found in foreign counterparts. The winner of the race to the USPTO does not always get the patent. There are exceptions, such as for earlier publications by another who then files a patent application within one year of the publication or for the winner of a “derivation” proceeding.
Increased Cost and Complexity
Effective immediately, there is a 15 percent surcharge to most patent-related fees, including patent maintenance fees. Also, the law permits the USPTO to further increase patent fees. However, the additional money is not available to the USPTO to improve its programs or hire more people. While the new law creates a reserve fund in the U.S. Treasury for any revenues collected in excess of the USPTO congressional appropriations, the USPTO will only have access to the reserve fund if it receives authorization from Congress.
New procedures are adopted in the USPTO for challenging patents, including inter partes review, post-grant review, derivation proceedings, supplemental examination, and a special “transitional” post-grant review proceeding for business method patents. The existing ex parte reexamination also is retained. As discussed in more detail below, this will add more cost, delay, and uncertainty.
When he signed the new patent law, President Obama promised it will grow our economy, create new businesses and jobs, and speed up the patent process. However, the new law “…could very well strangle the system to the point that the current 1.2 million case backlog could increase while appellate backlogs may mushroom because of the need for the appeal judges to both handle their existing dockets of ex parte patent appeals and the pressure of the brand new Post Grant Review.”2
The new law significantly expands the information that can be used to reject a U.S. patent application. For example, commercialization of an invention or placing an invention on-sale in any country of the world can be used to reject a patent application, whereas under current law only such events in the United States can be used for rejections. Thus, there likely will be fewer patents. If there also are fewer applications, this may speed up the patent process.
Complex Review Procedures
In order to simplify patent litigation, the new law adds new complex USPTO review procedures that can delay a final USPTO decision for years. The patent review procedures create new legal standards and adversarial proceedings with which the USPTO has no or little experience in administering, This cure may be significantly worse than the problem it sets out to remedy.
A new post-grant review system is created. There is no comparable provision in current law.
This new system requires filing a request to review an issued patent within nine months from the date of the patent issues. Because of the various effective dates of the new law, this procedure will not be available for actual use until about 2015.
When effective, the post-grant review allows anyone to challenge the validity of an issued patent based upon any grounds for asserting invalidity in court. The post-grant review request will be granted if it is more likely than not that at least one of the claims challenged in the request is unpatentable or if the petition raises a novel or unsettled legal question. The request may rely on patents, printed publications, affidavits, or declarations of supporting evidence and opinions.
The post-grant review will be decided initially by the Patent Trial and Appeal Board, bypassing the patent examiner. There is no right to a trial de novo at the district court, but only a direct appeal to the Federal Circuit.
The purpose of the post-grant review is to have the validity of the patent decided by the USPTO, not the district court. After the Patent Trial and Appeal Board issues a final decision, the person requesting the review will be precluded from raising in a subsequent USPTO proceeding, in a civil action, or in an ITC proceeding, that a patent claim is invalid on any ground that the person raised or reasonably could have raised during the post-grant review.
A final decision must be issued within one year from the notice of grant of the review, with an extension of six months for good cause. Any party may appeal that decision to the Federal Circuit.
This is just the first level of review; there are more and this just will resolve only the issue of validity. The issue of patent infringement still must be litigated in the district courts if validity is upheld.
Inter Partes Review
Review proceeding number two is called inter partes review. It is similar to inter partes reexamination under the former patent law except that this review, like the post-grant review, will be decided initially by the Patent Trial and Appeal Board, not a patent examiner. The proceeding must be completed in 12 months, with an extension to 18 months available for complex cases. Similar to the post-grant review, there is no right to a trial de novo in the district courts. There is a direct appeal to the Court of Appeals for the Federal Circuit. There also is an opportunity for discovery, an area in which the USPTO has little significant experience. Unlike the post-grant review, the inter partes review is limited to a consideration of printed publications and patents.
An inter partes review can be requested nine months or more after issue of a patent or at the conclusion of a post-grant review. Thus, a patent owner prevailing in a post-grant review will not have time for a victory celebration before being thrust into an inter partes review.
The legal standard for initiating an inter partes review is that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the challenged claims. This is a different standard than that used for post-grant reviews (more likely than not that at least one of the claims challenged in the request is unpatentable or if the petition raises a novel or unsettled legal question).
Patent review proceeding number three is a supplemental examination. It is a new proceeding with some similarities to the reexamination proceeding of current law. It allows a patent owner to request a supplemental examination of a patent by the USPTO to consider, reconsider, or correct information believed to be relevant to the patent.
Supplemental examination introduces yet a third standard for determining whether to initiate a review of the patent — whether a substantial new question of patentability is raised by one or more items of information in the request. Thus, there are three post-grant review procedures all with different legal standards for initiating the review.
For the patent owner, this procedure allows the correction of errors or removal of issues that may be considered in a later court proceeding. A patent may not be held unenforceable, such as for inequitable conduct, by a court if the information being relied upon in court was considered, reconsidered, or corrected in a supplemental examination.
These three new procedures are in addition to derivation proceedings, which replace interference practice; citation of prior art and written statements; existing ex parte reexamination, which remains in the law; and existing reissue practice, which remains in the law. The new law also includes transitional post-grant review proceeding for review of certain business method patents. Do we really need all this review in the USPTO? And, after all this review, if validity is upheld there will still be litigation in the district courts.
Drafting ambiguities are strewn throughout the new law. “There are numerous cases of imprecise and even bizarre draftsmanship that permeate the America Invents Act.”3
In his book on constitutional interpretation, Harry Wellington, former Dean of Yale Law School, said there was a reason judges had to fill in the gaps left by legislative compromises. ''Let's understand one thing,'' he wrote. ''Purposeful ambiguity is to legislative drafting what the fastball is to major league baseball.'' There are lots of gaps to fill in the new patent law.
This brief summary could feasibly only discuss some of the provisions. Almost every paragraph in the 150 pages of the new law contains issues and ambiguities. It will take years to achieve the certainty the business community needs from the patent system. In the meantime, leverage the certainties, be aware of the major areas of uncertainty, and begin preparing for the road ahead.