President Signs Landmark Patent Reform Legislation

16 September 2011 Publication

The President signed into law today the Leahy-Smith America Invents Act. The Act makes the most significant changes to U.S. patent laws in the last 60 years. Some changes will be effective immediately. Others will take effect in either 12 or 18 months.

Although it will not take effect for 18 months, the most talked about change in the law is moving to a "first inventor to file" system. Under current law the "first to invent" is the rightful patentee, even if that person was not the "first to file." The patent will go to the "first inventor to file" if there are two or more inventors trying to patent the same invention. The change generally conforms U.S. law to "first to file" systems abroad. However, unlike most foreign patent systems, the new law allows the inventor to disclose his invention up to one year prior to filing an application for patent without losing rights to the patent. A similar system has been in effect in Canada. Those who derive the invention from the true inventor cannot apply for a patent. A derivation proceeding can be brought in the U.S. Patent and Trademark Office should an inventor believe that has occurred.

Another important change includes measures for increasing funding of the PTO. These measures allow the PTO to set its fees at levels necessary to recover costs and, subject to Congressional oversight, to keep the fees it collects.

The Act contains a large number of additional changes, the most notable of which are summarized below.

Immediate Changes

  • Fees Increase. It will cost more to apply for a patent. The Act authorizes the PTO to levy a 15 percent surcharge on existing patent-related fees starting 10 days from the date of enactment and continuing until the applicable fee is reset under the PTO's new fee setting authority. And, if you do not file patent applications electronically, it will cost an additional $400.
  • Prioritized Examination. Prioritized examination, which was to have taken effect in May but was postponed due to budget cuts, should become available shortly, possibly in 10 days. Requesting prioritized examination will cost $4,800.
  • Patents on Tax Strategies Likely Foreclosed. Tax avoidance strategies are, as of the date of enactment, deemed part of the "prior art." This change effectively means that obtaining patents on tax avoidance strategies, even if they are implemented on a computer, will be difficult, if not impossible. This change does not impact patents that have already been issued, but will apply to pending applications.
  • New Standard for Reexamination. It may be more difficult to initiate a new inter partes reexamination. Requesters will need to demonstrate in the request that at least one claim is likely not patentable. The prior standard required only a showing that a "substantial new question of patentability" exists. Although Congress expects this to make it harder for third parties to request inter partes reexamination, we do not expect it to substantially lower the 95% grant rate.
  • Limits on Number of Defendants. It will be harder to join a large number of defendants in a single patent infringement action in district court. Relief requested in any new actions must now relate to infringement arising from the same transaction, occurrence, or series of transactions or occurrences relating to the same accused product or process. This change will likely significantly curtail the common practice of so-called "non-practicing entities" filing a single suit naming numerous, often more than 50, unrelated defendants.
  • Virtual Marking. Marking of products with patent numbers is still a prerequisite for damages for infringement in the absence of notice to the infringer. However it may now be satisfied by posting an association of the patent number with the patented article on the Internet at an address that is freely accessible by the public without charge, and marking the articles with the word "patent" or the abbreviation "pat." and the address for the posting. Products for which marking was impractical or difficult should now be able to comply more easily.
  • Damages for False Patent Marking Limited. False patent marking cases under §292 may now only be filed by those who have "suffered a competitive injury." This will put an end to false marking suits brought by "false marking trolls," i.e. those not engaged in business affected by the alleged false marking.
  • Expansion of Prior User Rights. Although a use of an invention prior to patenting of the invention by a third party sometimes means that the patent is invalid, it does not always. The Patent Act's prior user right had been limited as a defense to a claim of infringement of so-called "business method" patents. The Act immediately expands rights of users who have commercially used an invention claimed in any patent granted on or after today. However, there are a number of limits on the right and carve outs. How useful the prior user right will be remains to be seen.
  • Supplemental Examination. Available for all patents starting today, this new proceeding is intended to allow patent owners to purge the patents of situations that could give rise to a claim of "inequitable conduct." A patent owner presents the additional or corrected information to the PTO. If the PTO determines that the new or corrected information raises a substantial new question of patentability, it may order an ex parte reexamination. Under new Subsection (c) of §257, which also comes into effect immediately, a patent cannot be held unenforceable, except in certain situations, on the basis of conduct relating to information considered, reconsidered or corrected during the supplemental examination.

Changes Starting 12 Months from Enactment

Inter partes reexamination will no longer be available in 12 months, though reexams initiated before that date will continue under the existing reexamination rules. Three new procedures in the PTO for third parties to invalidate patents, or narrow their scope, will come into play at that point.

  • Inter Partes Review. A new inter partes review procedure will replace the current reexamination process. A panel of administrative patent judges at the PTO will preside over the review and there is no internal appeal. All patents, whenever issued, are subject to review upon petition of a third party. Cancellation of a claim in a patent can only be sought on grounds that one or more printed publications and patents anticipate or render obvious the claim. The law requires a final decision by the panel within one year of filing.
  • Post-Grant Review. Post-grant review is similar to the new inter partes procedure except that it is only available for a period of nine months from patent issuance, and it is not limited to challenges for novelty and obviousness. It will be available for patents granted on applications having earliest effective filing dates 18 months from today.
  • Special Post-Grant Review for Business Methods. Anyone being sued for infringement of a so-called "business method" patent, regardless of when the patent was issued, may petition the PTO for review of the patent under the post-grant review procedure. A business method patent is one 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."

More Changes Coming

Many aspects of the new law require new rule making and revised procedures. The PTO is expected to publish, starting in the next month and continuing for over the next year or so, several rules packages for public comment. These rule packages will include substantial rewrites of many existing regulations and a significant number of new rules. We will keep you advised as the landscape of the revised Patent Act takes shape over the coming months.

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