By Kevin O’Scannlain

After six years of contentious debate, Congress has passed comprehensive patent reform legislation, signed into law by President Barack Obama on September 16, 2011.  The Leahy-Smith America Invents Act (H.R. 1249; P.L. 112-29) represents the first substantive overhaul of the patent system since 1952.

The most significant changes to patent law include switching to a “first-to-file” system, enhancing post-grant opposition and abolishing interference proceedings.  Notably omitted were damages reform – which some believe has been adequately addressed by several court decisions made during the debate on the legislation – and “forum shopping” reform, dropped from earlier drafts of the bill.

Though the impact of many provisions in the Act will be apparent immediately, others will not be clearly felt until the USPTO fully implements them.  Practitioners should closely follow these implementations by checking the USPTO website.

A summary of some of the Act’s modifications follows.

FIRST INVENTOR TO FILE

Beginning with patent applications filed after March 16, 2013, the patent system will change from the current “first-to-invent” to a “first-to-file” system.  The one-year grace period for disclosure by inventors remains.  Applicants that do not publish their inventions prior to filing do not receive the benefit of the grace period.  Priority is now based solely on filing date, so interference proceedings are eliminated.  The law also creates a new “derivation proceeding” that would operate only when an original inventor alleges that a patent applicant derived the invention from the original inventor’s work.  It is now clear how the law will treat a dispute between an unfiled invention, created prior to this change, and an application filed after the change.

POST-GRANT REVIEW PROCEEDINGS

The Act creates a new post-grant review proceeding, during which a third party can petition for cancellation of a patent claim based on invalidity.  Hearings will be conducted by a new Patent Trial and Appeal Board, replacing the Board of Patent Appeals and Interferences.  A petition must be filed within nine months after issuance of the patent.  The threshold showing to proceed is “more likely than not” that at least one of the claims is invalid.  Post-grant review proceedings become effective one year after enactment and apply to patents issued before, on or after that effective date.

The law also establishes a new inter partes review, replacing the former options inter partes reexamination, to be conducted by a new Patent Trial and Appeal Board within one year of the date the review is instituted.  This review is available for the life of the patent; the threshold showing to proceed is a “reasonable likelihood” that the petitioner will prevail.

Neither post-grant review nor inter partes review are available if the petitioner previously filed a declaratory judgment action alleging invalidity.

USPTO FUNDING

Under the Act, the USPTO Director will bear fee-setting authority in order to cover operating and administrative costs.  This authority is subject to a seven-year sunset clause.  Fees in excess of appropriated amounts still require authorization.

SUPPLEMENTAL EXAMINATION

The Act allows a patent owner to request a supplemental examination of a patent to consider, reconsider or correct information relevant to a patent.  An ex parte examination may be ordered upon a threshold finding of “substantial new question of patentability.”

INFRINGEMENT DEFENSES

Failure to disclose best mode for carrying out an invention is eliminated as a defense to infringement, beginning on the date of enactment (September 16, 2011).  The Act also expands the prior commercial use defense to all areas of technology and to affiliates.

FALSE MARKING

The Act establishes virtual marking by posting patent information on the Internet, applicable to all pending and future cases.  Civil suits concerning false marking are limited to persons who suffer a competitive injury.  Only the US may sue for the statutory penalty.  Importantly, the false marking provision is retroactive and became effective upon the enactment of the Act, inspiring at least a few district courts to dismiss false marking cases sua sponte.[1]

TRANSITIONAL PROCEEDINGS

Under the Act, persons who have been sued for infringement of a covered business method patent (relating to data processing or other operations concerning financial products) may challenge the validity of the patent under a new transitional proceeding at the USPTO.  This proceeding will likely be less expensive than challenging validity in a district court.  Patents for technological inventions are not covered by this provision.  These proceedings will become effective one year after enactment of the law, and apply to patents issued before, on or after that date.  Notably, this provision sunsets eight years after enactment.

PRIORITY EXAMINATION

Under the Act, the USPTO may prioritize examination of patent applications that are deemed important to the national economy or national competitiveness.

PATENT EXTENSION FILING DEADLINE

The Act amends the Hatch-Waxman Act to begin the calculation of the 60-day patent term extension application period as the next business day after permission for such a filing is granted, if such permission was transmitted after 4:30 pm EST.  Interestingly, a vote to strike this controversial provision from the bill failed by 47-51.

The USPTO’s summary of all 37 sections of the law can be found here:  www.uspto.gov/AmericaInventsAct.

The USPTO’s webpage dedicated to implementation information can be found here:  www.uspto.gov/aia_implementation/index.jsp.

 

Kevin O’Scannlain, based in Washington, DC, represents clients on public policy and compliance matters.  You may reach him at kevin.oscannlain@dlapiper.com


 [1] See, e.g., Kilts Resources LLC v. Uniden Direct, Inc., Civ. No. 2:10-cv-517-TJW (E.D. Tex. Sept. 19, 2011) and GHJ Holdings, LLC v. WMS Gaming, Inc., 2-11-CV-02761 (C.D. Cal. Sept. 27, 2011).