The Leahy-Smith America Invents Act (AIA or "Act"), due to be signed into law by President Obama this week, significantly changes the Patent Act for the first time since 1952. The number and variety of changes presents both a challenge to navigate the new landscape and an opportunity to gain competitive advantages by doing so more effectively than others. Below, we summarize some of the significant changes, beginning with those that take effect upon enactment or shortly thereafter. In addition, we list certain practice notes to facilitate successful navigation of the new Patent Act.
In general, although a shift from a "first to invent" to a "first to file" patent system may be the most obvious change, there are a number of significant changes. For example, the expansion of the prior commercial use defense, additional and amended post-grant review procedures, fast-tracked patent prosecution, the new scope of prior art, statutory definitions of "invention" and "inventor," and the elimination of qui tam false marking suits.
Provisions effective upon enactment or shortly thereafter
I. Prior commercial use defense
Effective immediately and applicable to any patent issued on or after the date of enactment, the AIA expands the prior commercial use defense. Any entity that "commercially used the subject matter" of a patent in the United States more than one year prior to the filing date, or the date the inventor publically disclosed the invention, may assert a prior user defense. For purposes of this defense, commercial use includes premarket regulatory approval and nonprofit use intended to benefit the public. Regarding the latter, only continued nonprofit use is permitted.
In general, this defense may not be asserted if the invention was owned by a university at the time it was "made." However, it may be asserted against a university when the invention could not have been reduced to practice with the use of federal funds. Further, this is a personal defense and, thus, does not invalidate a patent.
II. False marking — dismissal of virtually all pending false marking suits and virtual marking
Section 292 of the Patent Act is amended to eliminate qui tam actions and clarify that marking with an expired patent is not a violation of the Act, assuming that the patent "covered the product" before it expired. Also, under the amended section, only the U.S. government may sue for statutory damages, although a person who has suffered a "competitive injury" may sue to recover damages "adequate to compensate for the injury." These amendments will be effective immediately and will apply to all pending proceedings. This will most likely result in the dismissal of the majority of pending false marking suits.
The AIA also allows for virtual marking, whereby a patentee may mark a product with the term "patent" or "pat." and include a website that lists the patent numbers covering the product.
III. Raising the bar for joining multiple, unrelated, defendants in a single suit
Applicable to any suit filed on or after the date of enactment, Section 299 states that accused infringers may be joined "only if any right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process and questions of fact common to all defendants will arise in the action," (emphasis added). The Section further clarifies that "accused infringers may not be joined in one action as defendants . . ., or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit."
On its face, this higher standard precludes a party from suing, in a single suit, multiple parties with different products based solely upon an allegation of infringement. This may raise the cost of litigation for non-practicing entities by requiring them to maintain separate lawsuits. In addition, it may strengthen transfer motions for parties sued in potentially unfriendly jurisdictions by preventing a plaintiff from joining unrelated defendants that have ties to the jurisdiction.
IV. Fast tracked prosecution for a price
Effective 10 days after enactment, the PTO is authorized to begin its program for fee-based prioritization of patent applications. Under this program, an applicant will be able to secure prioritized examination by paying a higher application fee (US$4,800 for large entities, in addition to the current statutory fees).
V. A higher bar for granting inter partes re-examination and ex parte review only by the Federal Circuit
The standard for granting an inter partes re-examination will change from a "substantial new question of patentability" to "a reasonable likelihood that the requester would prevail" regarding at least one of the challenged claims. We note that inter partes re-examination is replaced by the inter partes review procedure (described below) one year after enactment. Review of an ex parte re-examination decision will be limited to the Federal Circuit, removing the option, under 35 U.S.C. § 145, for review by the United States District Court for the District of Columbia. These changes apply to any re-examination pending on, or brought on or after, the date of enactment.
VI. No invalidity based upon the best mode requirement
Under amended Section 15 of the Act, a patent may no longer be invalidated for failing to comply with the best mode requirement of 35 U.S.C. § 112. Despite this, disclosure of the best mode will still be required during prosecution before the Patent Office. Examiners at the Patent Office rarely make rejections based on the failure to disclose a best mode and, for practical purposes, often do not have the tools or information to make such a determination. Therefore, these amendments effectivity gut the best mode requirement.
VII. Bar on patents directed to or encompassing a human organism
Section 33 of the Act provides that no patent may issue on a claim directed to or encompassing a human organism. This applies to any application that is pending on, or filed after, the date of enactment. Scholars have already expressed concern with the scope of the phrase "directed to or encompassing a human organism." Although it is clear that human organisms per se cannot be patented, it is less clear when a claim is "directed to" a human organism. For example, claims directed to treating human diseases may be directed to human organisms. It is unclear whether Congress intended to exclude these types of claims from the scope of patentable subject matter. Entities with inventions related to human organisms should keep this bar in mind when drafting applications and considering claim scope. VIII. Fee setting authority, fee increase, and fee diversion
Under the AIA, the PTO is given the authority to set all fees by rule, provided that they are commensurate with the estimated costs of the PTO. In addition, effective 10 days after enactment, a 15 percent surcharge will be added to all patent-related fees. Effective 60 days after enactment, there will be a US$400 fee for any application not filed electronically. Finally, any fees collected by the PTO in excess of its appropriation, will be held in a reserve fund and the PTO will be able to use these funds only if appropriated by Congress.
IX. Bar on tax strategy patents
Under Section 14 of the Act, patents will not be granted to "tax strategy patents." However, there are certain exemptions for inventions involving tax filing or preparation software. This section is effective upon enactment.
X. Micro-entity status
The Act directs the PTO to create a new micro-entity status upon the date of enactment. A micro-entity receives a 75 percent reduction in most patent fees. To obtain micro-entity status, an applicant must qualify as a small entity, must not have been named as an inventor on more than four previously filed, non-provisional U.S. patent applications, and must not have had a gross income, or assigned to an entity with a gross income, over three times the median household income for that calendar year. The statute also specifically includes institutes of higher education in the definition of micro-entities.
Provisions coming into effect at a later date
I. First inventor to file and related changes to prior art under Section 102
The shift to "first to file" brings the U.S. patent system into partial conformity with the vast majority of other industrialized nations. Harmonization is not complete because the Act maintains a one year grace period for public disclosures by the inventor, which is absent in many other jurisdictions. Specifically, under the AIA, an inventor may make certain public disclosures and, within the United States, these disclosures would only be prior art against third parties. However, we note that a public disclosure by an inventor could still be used against that inventor in many other jurisdictions, such as Europe.
The change to "first to file" necessitated the amendment of 35 U.S.C. § 102. Sections 102(c)-(g) were removed, and Sections 102(a)-(b) were amended to reflect the removal of the "first to invent" system. These changes will expand the scope of prior art by barring a patent if "the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention" (emphasis added). With this revised language, a party will not be entitled to a patent if the invention was in public use, or available to the public, anywhere in the world before the effective filing date. Previously, prior art based upon public use and sale was limited to use and sale within the United States.
Further, the Act defines an "inventor" as one who "invented or discovered the subject matter of the invention" (emphasis added). The term "claimed invention" is defined as "the subject matter defined by a claim in a patent or an application for a patent." It is unclear how these definitions will conflict with the current Federal Circuit definition of an inventor as one who contributes to the conception of the invention.
The transition to a first to file system will be effective 18 months after the enactment of the bill. II. Additional and amended post-grant review procedures
Section 6 of the Act provides two procedures for post-grant review of issued patents – post-grant review under newly created Chapter 32 of title 35, and inter partes review under Chapter 31, which replaces inter partes re-examination.
In a new post-grant review proceeding, a petitioner may challenge a patent on any ground by filing a petition for review within nine months of the patent grant or the issuance of a reissue patent. A petitioner must show that it is more likely than not that at least one of the claims challenged in the petition is unpatentable, or that the petition raises a novel or unsettled legal question "that is important to other patents or patent applications."
A post-grant review decision from the PTAB (see below) is due no later than one year after the institution of the review, unless good cause is shown, in which case the deadline may be extended for up to six months. In light of this, the Act requires the PTO to draft regulations that limit discovery "to evidence directly related to factual assertions advanced by either party in the proceeding." It remains to be seen how the implementing regulations will achieve this goal and the effect of the resulting burden on the PTAB.
As noted, a party may challenge validity under any ground including 35 U.S.C. 112. This was not previously available in a re-examination proceeding. This post-grant review proceeding will have estoppel effect before the PTO, a district court, and the ITC regarding any ground for invalidity that the petitioner raised or could have raised. This section of the Act goes into effect one year from the date of enactment.
Inter partes review
Patents may also be challenged under an inter partes review procedure, although the scope of the challenge is limited to patents or printed publications. Under this procedure, a petition is timely if it is filed after the nine month period for requesting post-grant review has expired or after any post-grant review is terminated. An inter partes review proceeding will have the same estoppel effects as a post-grant review.
As above, a decision is due no later than one year after the institution of the review, unless good cause is shown, in which case the deadline may be extended up to six months. This time constraint will be tested by the somewhat open-ended discovery process outlined in the Act. Specifically, the Act limits discovery to "the deposition of witnesses submitting affidavits or declarations and what is otherwise necessary in the interest of justice" (emphasis added). As such, if the interests of justice necessitate extensive discovery, an inter partes review proceeding may be quite burdensome on both the PTO and the parties.
The provisions of the Act related to inter partes review come into effect one year from the date of enactment. However, as noted above, the standard for granting an inter partes re-examination is amended as of the date of enactment.
III. Post-grant review of business method patents under a transitional procedure
Within one year from the date of enactment, Section 18 of the Act requires the Director of the PTO to issue regulations establishing and implementing a transitional post-grant review procedure for "covered business method patents." Before filing a petition under this transitional proceeding, an entity must have been sued for infringement or "charged" with infringement. The transitional proceeding employs a different, potentially broader definition of prior art thereby enabling the petitioner to rely on prior art that would not be applicable to non-business method patents.
The Act defines a "covered business method patent" 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." The PTO is directed to establish regulations defining a "technological invention."
Estoppel in a transitional proceeding is narrower than in the two post-grant review proceedings outlined above. Specifically, a party is only precluded from asserting that a claim is invalid on a ground that the petitioner actually raised in the transitional proceeding. This difference could be significant because it would enable a party to pursue one ground of invalidity before the PTO while pursuing another before the district court.
Whether to stay a civil action alleging infringement of the patent at issue is left to the discretion of the district court, within certain guidelines. However, a denial of a stay is immediately appealable to the Federal Circuit where the court "shall review the district courts decision" potentially de novo (emphasis added).
The effect of this transitional program will depend greatly upon the scope of a "covered business method," as modified by the PTO's definition of a technological invention. Because of the potentially broader scope of prior art and limited estoppel, this review procedure may be appealing to accused infringers. As such, if the scope of a "covered business method" is broad or unclear, this transitional program may be used often as an alternative to, or in conjunction with, litigation.
IV. Advice of counsel regarding willful infringement or intent to induce infringement
The Act clarifies that failure of a defendant to obtain advice of counsel is not usable to prove either willful infringement or induced infringement.
V. Derivation proceedings before the Patent Trial and Appeal Board and in district court
While interference proceedings are no longer necessary because of the transition to a first to file system, a new derivation proceeding is established. A derivation proceeding is necessary when a later filed applicant ("second applicant") alleges that an earlier filed invention was derived from the second applicant. A derivation petition must be filed within one year of the first publication of a claim to an invention that is the same, or substantially the same, as the earlier application's claim to the invention. The Patent Trial and Appeal Board (a reconstitution of the Board of Patent Appeals and Interferences) is charged with investigating and deciding these allegations. Similarly, a patent owner may file a derivation civil action against another patent owner in district court.
VI. Pre-issuance submissions of prior art by a third party during prosecution
Effective one year from enactment, 35 U.S.C. § 122(e) provides a means for third parties to submit prior art for consideration during prosecution. The submission must be made before the earlier of (1) a notice of allowance or (2) the later of (a) six months from publication or (b) the issuance of the first rejection. If the prior art is timely, it will be included in the official prosecution record. Thus, if a party is aware of a pending application it may wish to consider submitting prior art to potentially block the patent or limit its scope. This may be a more cost effective method of attacking a patent, compared to litigation, provided that the party is aware of the application in time.
VII. Supplemental review requested by the patent owner
Under a new supplemental review procedure, a patent owner may request consideration, reconsideration, or correction of information "believed to be relevant to the patent." This procedure takes effect one year after enactment.
VIII. Application by assignee
The AIA allows a patent application to be filed in the name of the assignee or in the name of an entity to which the inventor has an obligation to assign its patent rights. This will eliminate difficulties associated with inventors who are unwilling, or unable, to sign the oath and declaration that accompany a patent application. This change goes into effect one year after enactment and applies to application filed on or after that effective date.
In light of the number and variety of changes, we have listed some practice notes for your consideration. The date upon which the relevant change in the law comes into effect is also listed.
- Consider streamlining internal procedures such as invention reporting and application filing processes to avoid filing delays, which might result in loss of priority (18 months from enactment).
- Consider filing more provisional patent applications to preserve priority keeping mind the need for an application to fully enable the claimed invention (18 months from enactment).
- Consider risks and benefits of monitoring U.S. patent applications. This may enable submission of prior art for consideration during prosecution and ensure that the nine month window for post-grant review is not overlooked (1 year from enactment).
- Consider paying for faster prosecution for higher priority patent applications (upon enactment).
- Consider risks and benefits of monitoring a competitor's use of fast track prosecution. Such use may indicate that the application is related to a new product or to potential litigation (upon enactment).
- Consider the risks and benefits of not filing a patent application because, in certain contexts, secret commercial use will be a defense to infringement (upon enactment).
- Consider the risks and benefits of the new post-grant review procedures. For example, the limited window for filing a post-grant review, the reduced time to decision compared to litigation, the estoppel effects, and the scope of challenge allowed (1 year from enactment).
- Consider moving for dismissal of certain false marking suits (upon enactment).
- Consider instituting a virtual marking program (upon enactment).
- Note that there is no need to police products for marking with expired patents (upon enactment).
- Consider supplemental review to strengthen a patent against future prior art and inequitable conduct challenges (1 year from enactment).
- Consider misjoinder and transfer motions for suits involving unrelated defendants (any suit filed on or after enactment).
- If not already, file patent applications electronically to avoid additional charges (60 days after enactment).