ELECTRONIC NEWSLETTER

Abelman, Frayne, &Schwab

SUMMARY OF CHANGES TO BE IMPLEMENTED IN THE NEW PATENT ACT[1]

    Congress has recently passed the America Invents Act, which revises the current U.S. patent laws (1) to transform from a first to invent system to a first inventor to file system; (2) to impose an absolute novelty bar with respect to third party activities; and (3) to provide post-grant opposition proceedings.  At present, it is unclear whether the first inventor to file provisions will be found to be constitutional by the Courts.  The Constitution empowers Congress to pass laws to issue patents to "inventors."  For over 200 years, Congress and the Courts have construed the term "inventor" as the "first and true inventor," not the first inventor to file a patent application. Whether the new law will be upheld is beyond the scope of this summary.

    What follows is a summary of the principal new provisions or changes:

I.          FIRST TO FILE

II.        DEFENSE TO INFRINGEMENT BASED ON PRIOR COMMERCIAL USE

III.       POST-ISSUANCE REVIEW

IV.       PRE-ISSUANCE/POST-ISSUANCE SUBMISSIONS

V.        PATENTS DERIVED FROM ANOTHER INVENTOR

VI.       FALSE MARKING/VIRTUAL MARKING

VII.     BEST MODE

VIII.    FILING REQUIREMENTS: INVENTORSHIP DECLARATION

IX.       SUPPLEMENTAL EXAMINATION

X.        ADVICE OF COUNSEL

XI.       HUMAN ORGANISMS/TAX STRATEGIES

XII.     NEW FEE SCHEDULE

I.     FIRST TO FILE

    The new patent statute converts the US patent system from a "first to invent" system to a "first inventor to file" system.  Under the first to file provisions, prior art includes any published U.S. application by another inventor filed prior to the application being examined.  The new provisions will apply to applications filed after March 16, 2013. 

    The new statute also imposes an absolute novelty requirement with respect to prior art activities of third parties.  More particularly, when the new act takes effect, prior art which may be considered to determine patentability will include any third party patent, printed publication, public use, offer for sale, or other information available to the public prior to the U.S. filing date. 

    In the case of disclosures made, either directly or indirectly, by the inventors or assignee, there is a one year grace period in which to file a patent. In sum:

• There is NO statutory grace period for activities by others, whether such activities are in the form of publications, public use or an offer for sale.
• Prior art will now include a public use or offer for sale anywhere in the world, not just within the United States, prior to the application filing date.
• The one year grace period for disclosures made by the inventors or assignee applies to printed publications, but may not apply to public uses or offers for sale by the inventor or assignee.
• An applicant can no longer establish an earlier invention date to avoid a prior art reference or defeat an "interfering" patent.
• A US patent or published application which claims priority on a foreign application is prior art against other U.S. applications as of its foreign priority date, not merely its U.S. filing date. 

II.     DEFENSE TO INFRINGEMENT BASED ON PRIOR COMMERCIAL USE

    The law establishes a prior user defense.  Previously the law permitted a limited "business method patent prior user defense" under specified conditions.  The new law has expanded that defense to cover non-public commercial use of any invention, certain non-profit uses and pre-marketing regulatory review of certain drugs and medical devices.

     If asserted, the defense must be proven by clear and convincing evidence.  The defense is limited to the person or company that directed the performance of the prior use and the defense is only assignable as part of a transfer of that line of business (or the entire business).

III.     POST-ISSUANCE REVIEW OF PATENTS

     The new law allows for two types of post-issuance review proceedings to challenge the validity of an issued patent: (1) a Post-Grant Review (PGR); and (2) an Inter Partes Review.  Such proceedings can be initiated by any third party by filing a Petition in the PTO.  The principal differences in the two review proceedings are as follows:

     The Petition must set forth the evidence relied upon, and may include expert declarations.  The Patentee may, but is not required to, submit an initial response to the Petition.

    The Petition is thereafter reviewed by the PTO Director, who may institute the review proceeding only if the Petition meets the applicable standard.  The Director's determination is final and not subject to appeal.

    If a Petition to institute a review is granted, the review proceedings will be conducted before the Patent Trial and Appeal Board (which was previously called the Board of Patent Appeals and Interferences).  Limited discovery is permitted, including depositions of witnesses who have submitted declarations.  The Patentee is permitted to amend the claims, but only once.  The scope of the claims cannot be enlarged.

     If the Patent Trial and Appeals Board makes a final determination which is unfavorable to the Petitioner (and such decision is upheld on appeal), in any future litigation involving the subject patent, the Petitioner may not assert any grounds of invalidity which could reasonably have been raised in the review proceeding.

     The Patentee and Petitioner may agree to settle the dispute at any time prior to the PTO final determination, in which case the review proceeding will be terminated.  Such settlement must be in writing and be submitted to the PTO.  In such a case, the estoppel provisions described above do not apply.

IV.     PRE-ISSUANCE/POST-ISSUANCE PRIOR ART SUBMISSIONS

     The new law will permit third parties to submit printed publications that are potentially relevant to pending patent applications.  Such submissions must be made prior to a Notice of Allowance and prior to the later of six (6) months after publication of the application or the date of the first rejection.  The submission must include a concise description of the alleged relevance of the submitted items.

    This right to provide pre-issuance submission will take effect on September 17, 2012.

    Note that, in the case of an issued patent, the act permits third parties to submit to the PTO relevant information, such as prior art or admissions by the patentee, at any time.

V.        PATENTS DERIVED FROM ANOTHER INVENTOR

            A.    Owner of a Patent

           Under the new law, the owner of a U.S. patent may sue in Federal Court the owner of a U.S. patent with an earlier filing date if the invention claimed in the earlier-filed patent was "derived" from an inventor in the later-filed patent.  Such lawsuit must be filed within one year of the issue date of the earlier-filed patent. 

            B.   Owner of a Patent Application

           The owner of a pending U.S. patent application who discovers an earlier-filed, third party patent application or issued patent derived from the inventors of the later-filed pending U.S. application, may file a Petition in the PTO to institute a "Derivation Proceeding." Such Petition must be made under oath or by declaration and must be filed within one year of the publication of a claim to an invention that is at least substantially the same as a claim in the earlier application.  The Petition must be supported by "substantial evidence."

           The USPTO Director "may" institute a Derivation Proceeding if the Petition "demonstrates that the standards for instituting a derivation proceeding are met."  Once initiated, further proceedings are conducted before the Patent Trial and Appeal Board, which has authority to correct the naming of the inventor in any application or patent involved in the proceeding.

           The parties may agree to a Settlement of the Proceeding, in which case the proceeding will normally be terminated.  The Settlement agreement must be submitted to the PTO.  Also, the parties to a derivation proceeding may agree to settle the dispute by arbitration.  If so, the arbitration award is binding.

VI.       FALSE MARKING/VIRTUAL MARKING

     Falsely marking an article with a U.S. patent number, when such article is not patented or where the patent is owned by an unrelated party, remains an offense punishable by a fine. Under the new law, however, only the United States government can sue to recover fines.  Other parties may sue for false marking only if they have suffered a "competitive injury."  Such parties can bring a civil action for damages "adequate to compensate for the injury."

     The new law specifically provides that marking an article with an expired patent number is no longer a violation of the statute.  While not addressed in the new statute, marking an article with the number of a patent after the courts have found the patent (or at least all of the claims which apply to the product) to be invalid, or where the PTO has cancelled all claims which apply to the product marked in a post-issuance review proceeding, may constitute a false marking violation.

     Under the law, a patentee who fails to mark a patented article with the patent number may lose the right to collect certain damages for past infringement.  The new law permits "virtual marking" of a patented article in which, in place of a patent number, an internet address is provided which associates the patented article with the patent number.

VII.     BEST MODE

    The law still requires an application for a patent to describe the best mode contemplated by the inventor for carrying out the invention.  Under the new law, however, the failure to describe the best mode is no longer a basis for invalidating an issued patent.  The best mode requirement still applies only to pending patent application proceedings, and the failure to comply can form a basis for the PTO refusing to grant a patent.  Once the patent is granted, however, such patent can no longer be challenged on the grounds that it fails to disclose the best mode.

VIII.    FILING REQUIREMENTS: INVENTORSHIP DECLARATION

     The new Act requires certain new statements to be included in the Inventorship Declaration.  A revised Declaration/Power of Attorney will be provided on our website by clicking on the "Information" tab.  We are recommending the immediate use of the revised forms for any newly filed applications going forward.   

In the event that one or more inventors is unable to sign, or refuses to sign, the Inventorship Declaration, the owner of the invention rights may file a “Substitute Statementâ€� in lieu of the inventorship declaration.  Such Substitute Statement must explain the reasons why the inventor’s signature could not be obtained (e.g., the inventor is deceased or cannot be located “after diligent effort").

The above changes shall take effect upon the expiration of the 1-year period beginning on the date of the enactment of this Act and shall apply to any patent application that is filed on or after that effective date.  We will be closely monitoring the USPTO's implementation of the Act's “substitute statementâ€� provisions and will provide further information on this option as forms and information become available.

IX.   SUPPLEMENTAL EXAMINATION

     A patent owner has the right to request Supplemental Examination to permit the PTO to consider, reconsider, or correct information believed to be relevant.  If the PTO Director concludes that a substantial new question of patentability has been raised, the Director may order reexamination of the patent.

X.        ADVICE OF COUNSEL

            The failure of an infringer to obtain advice of counsel or to present such advice to a court may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of a patent.

XI.       HUMAN ORGANISMS/TAX STRATEGIES

            Under the new statute, "no patent may issue on a claim directed to or encompassing a human organism."  Patents may also not be obtained with claims directed to strategies for reducing, avoiding, or deferring tax liability.

XII.     NEW FEE SCHEDULE

            One significant change in the operations of the PTO is that the Director of the PTO has been granted authority to revise fees.  Previously, increases in PTO fees could be authorized only by Congress.  However, the new act establishes certain initial fee increases.

The act also imposes a $400.00 surcharge on applications which are not filed electronically.  This firm already files all patent applications electronically, and thus the surcharge will not increase filing costs of applications filed here.  The new act also establishes an accelerated examination program.  The initial fee for requesting accelerated examination is $4,800 for a large entity.

Finally of note, the Act expands the current fee categories, which presently include "large entities" and "small entities," to include "micro entities."  Micro entities will be entitled to fee reductions greater than small entities.

Any questions or inquiries concerning the new act may be directed to Jeffrey Schwab, Thomas Spath, Robert Smith, or any of the other patent attorneys listed at the front of this article.