Significant and Far Reaching Changes in US Patent Law

On September 16, 2011 President Obama signed into Law the Leahy-Smith America Invents Act (“AIA”). The AIA is the most significant reform of US patent law¹ in almost 60 years. Among the changes is a switch from a first-to-invent system into a “first inventor to file” one, introduction of post grant opposition procedures, changes relating to prior user rights, amendment of the false marking provisions, revision of the “best mode” system, increased USPTO fee autonomy and a 15% fee increase, and others. Many of the changes will harmonize the patent law of the US with those of other countries. Some of the revisions will come into immediate effect while others will come into effect in the future.

After several years of debate, the most significant reform of the US patent law since the enactment of the 1952 Patent Act came into life after the bill that was passed by the US Senate on September 8 was signed into law by President Obama on September 16. The revisions will have a highly significant impact on the patent realm in the United States, including patent filing strategy, the manner in which patent applications are drafted, the manner in which patent battles are fought and many others. Some of the AIA revisions will come into effect immediately while others will come into effect over a time period of 10 days to 18 months from the date the law was signed. 

Some of the main patent law revisions under the AIA:

• Switch from a “first-to-invent” system to a “first inventor to file” system.
• Assignees rights to file patent applications.
• Introduction of a post-grant review procedure (‘opposition’).
• Extended period for prior art submission by third parties.
• Failure to disclose best mode may not be used to invalidate a patent.
• Supplemental examination.
• Introduction of “prior commercial use” defense for patent infringement.
• Limited rights to file suit for false marking to only those affected thereby.
• Provisions relating to business methods.
• Prioritized examination for a fee.
• USPTO autonomy for fee adjustment and fee increase.

These revisions will be briefly discussed. 

1. First-Inventor-to-File System

Among the most significant features of the US patent law that set it apart from patent laws in other countries was the so called “first-to-invent” principle, which stipulated that the patent would be given to the inventor who was the first to make the invention². Under the AIA priority will now be given to the “first-inventor-to-file”³, bringing the US patent system in par with the world-wide “first-to-file” standard. In line with this major revision the sections stipulating the patentability requirements⁴ were revised as well. Namely, the anticipation and obviousness standards for patentability will be determined based on whether any prior art was available prior to the application’s filing date. The 1-year grace period for certain publications was maintained, however it is now more limited, in line with the abolishment of the “first-to-invent” regime, and it now applies only to publications that were made by the inventor(s), with the inventor’s consent or direct or indirect involvement. It is noteworthy that a publication made by a third party after an inventor’s publication, will not be applicable under the grace provisions.The “first inventor to file” provisions will come into effect 18-months after the enactment of the AIA, namely on 16 March, 2013.

2. Assignee May File Patent Applications

Hitherto, patent applications in the US could have been filed by and patent granted to the inventors⁵. The law included provisions⁶ for circumstances where the inventor refuses to sign the application papers. Hitherto, the patent would have nonetheless been issued to the inventor. The AIA replaces § 118 with a new one permitting the entity with “sufficient proprietary interest” to serve as an agent for the inventor. The patent will then be issued to the “real party of interest” with a notice to the inventor.

These provisions will come into effect in 1-year (namely on 16 September, 2012).

3. Post-Grant Review (‘Opposition’)

New post grant review provisions, similar in some respects to a post grant opposition in Europe and many other jurisdictions, have been introduced replacing the current inter partes reexamination procedure.  

This includes replacing the current inter partes reexamination provisions⁷ with inter partes reviewprovisions (revised Chapter 31, including Sections 311-319) applicable to all patents⁸; and introduction of new post grant review provisions (new Chapter 32, Sections 321-329) applicable to patents⁹ which issue under the new “first inventor to file” provisions, which can only issue on applications filed after 16 March, 2013. Both will come into effect in 1 year (namely on 16 September, 2012).

An important difference between the current inter partes reexamination, in existing Chapter 31, and the new inter partes review, under new Chapter 31, is that the current “substantial new question of patentability” standard for instituting inter partes reexamination is replaced by the lower, “a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request“, standard.  The challenge to a patent under the new inter partes review is limited to prior art that creates grounds for unpatentability. A petition for inter partesreview may be filed after the expiry of 9-months from the issuance of the patent (including a reissue patent). In the interim, until this revision comes into force, Chapter 31 in its current (pre-AIA) version, continues to control inter partes reexaminations.

The new post grant review provisions of Chapter 32 set a time limit of 9-months post issuance of a patent for filing a petition. The standard for instituting the post grant review is “that it is more likely than not that at least 1 of the claims challenged in the petition is unpatantable“, appears to be even lower than that under Chapter 31. The basis of a post grant review under Chapter 32, is not limited to prior art and may be any ground of patent invalidity.

Generally, the new post grant review and a civil action challenging validity will not be allowed to proceed in parallel; the first one submitted will continue and the other will be stayed. It should be noted that once a post grant review is finally decided, it creates an estoppels fro asserting invalidity claims that have been rejected in such a review.

4. Expanded Opportunity for Third-Party Prior Art Submissions

The ability for third parties to submit prior art during examination existed previously but this right is now extended under the AIA. The AIA’s provisions regarding third-party submissions now give third parties an expanded period to submit prior art for consideration during prosecution of the application. 

While under the existing rules the time period for submitting prior art by a third party was only two months from the date of publication, this was now considerably extended to a period expiring on the earlier to occur of (i) the date of the notice of allowance or (ii) the later of six months after publication of the application or the date of a first office action. These provisions will come into effect in 1-year (namely on 16 September, 2012).

5. Best Mode Requirement

§ 112 sets out the written description requirements of a patent specification. Among these is the requirement that the specification “shall set forth the best mode contemplated by the inventor of carrying out his invention“^[1]0. Failure to disclose the best mode was a ground of patent invalidity.

Section 15 of the AIA amends § 282 of the law, such that the failure to disclose the best mode is removed from the grounds for patent invalidity. Furthermore, failure to disclose the best mode will not affect the right to claim priority from an earlier application.

This revision will come into immediate effect and will apply to all proceeding commenced on or after 16 September, 2011.

6. Supplemental Examination

The AIA adds a new § 257 that creates a procedure by which a patentee can request that the USPTO will review additional information relevant to its issued patent which was not considered during the initial examination of the application.  

This includes publications or other information that the patentee should have but omitted to include in an IDS¹¹. The new section states that omitted information will not be a ground of unenforceability where it was reconsidered during a supplemental examination¹². This will provide the patentee with an opportunity to correct IDS omissions and thereby avoid the risk for charges of inequitable conduct and consequent patent unenforceability.

These provisions will come into effect in 1-year (namely on 16 September, 2012).

7. Prior Use Defense

Up to now, in the US, unlike most other jurisdictions, an entity making use of a certain invention prior to the effective date of a patent could have been enjoined for continued use by the patent. In other words, prior user defense, usually available to some extent in most countries was not available to such entities in the US. The only exemption related to business methods. This is now significantly revised by the AIA.

Under the AIA, commercial use by an entity of a process or an article used in manufacture or a commercial process for at least 1-year prior to the effective filing date of a patent would exempt such entity from patent infringement. The AIA also establishes other prior uses that would be exempted from patent infringement, including premarketing regulatory review, non-profit laboratory use and some others. This will come into effect immediately and apply to all patents issued on or after 16 September, 2012. 

8. Patent Marking of Products

The Act also addresses widespread concerns regarding the recent surge of actions alleging false patent marking¹³ Under the AIA revision, only the U.S. government or a competitor with proof of actual “competitive injury” will be entitled to file a false patent marking claim. The AIA also permits “virtual marking,” which allows articles to be marked with an internet address leading to a website with information associating the article with its patent number.

This provision will take immediate effect and will apply to all cases “without exception” that are pending on or will be submitted after 16 September 2011. This is expected to result in the dismissal of the majority of actions alleging false patent marking and limit the number of such actions henceforth. 

9. Business Methods

The AIA establishes an 8-year transitional post-grant review proceeding for reviewing the validity of business methods patents. Under this transitional proceedings any party charged with infringement of a business method patent (or claim in a patent) may apply for a post-grant review of the kind discussed under 3 above. This may have an overall impact of reduction in the amount of litigation involving such patents. The potential impact may be the ability of financial institution to more easily challenge the validity of business method patents asserted against them.

The AIA also sets specific provisions relating to patents concerning “tax strategies“. Such inventions, “whether known or unknown“, are regarded categorically as “insufficient to differentiate a claimed invention from the prior art“. This provision may mark the end of many business method patents. 

10. Prioritized Examination

Prioritized examination will now be available for a fee of US$ 4,800 (50% for a small entity). It will be limited to 10,000 applications on a first-come-first-served basis.

11. USPTO Fees

Under the AIA the USPTO will have increased authority to set fees for the purpose of recovering its costs. The net effect is that the USPTO will be able to hire more examiners, thereby process applications at a faster pace and improve its services to the applicant and patentees.

Within 10 days, namely by 26 September, the USPTO fees including filing fees will be subject to a 15% increase.

Conclusion

The AIA introduces far-reaching changes that are overall aimed to better the US patent system and to harmonize it in some material aspects with the rest of the world. The breadth of the changes makes it, however, difficult to predict the effect it will have on the patent landscape. It will probably take many years (and perhaps tens of years) of litigation and Court of Appeals for the Federal Circuit (CAFC) precedent-setting decisions until the law and its effects are clarified.

¹ 35 U.S.C
² This was limited, of course, only to those inventors who filed a patent application. An inventor who failed to file a patent application had no rights, whatsoever, to his invention even if he/she was the first to invent. Related to this, in some respect, is the issue of hitherto lack of prior user defense, now made available under the AIA – see below. While, in theory, the first-to-invent system is fair and equitable system, the determination of who was the first to invent was an extremely complex and costly undertaking and thus this system, as a whole, proved impractical.
³ This is the title of Section 3 of the AIA.
⁴ §102. Conditions for patentability; novelty and §103. onditions for patentability; non-obvious subject matter
⁵ The inventors were the formal “applicants” and the formal “patentees”, respectively. The entity having the commercial interest or the proprietary rights in the invention were recorded as “assignees”.
⁶ § 118
⁷ Current Chapter 31, Sections 311-318
⁸ Including reissue patents, although
⁹ Applies also to reissue patents, provided than in the case the reissue patent has claims of the same or narrower scope that those granted in the original patent, it may be filed only of the 9-month time limit post grant of the original patent has not expired.
¹⁰ § 112, first paragraph.
¹¹ Information Disclosure Statement. According to US law the applicant is required to submit to the USPTO all material known to him which may be relevant to the examination of patentability. This is done within the framework of an IDS. Under current U.S. patent law and jurisprudence, failure to submit relevant information to the USPTO during an examination is regarded as an inequitable conduct that cannot be remedied in reexamination procedures and is a ground for rendering the patent unenforceable. 
¹² A patent shall not be held unenforceable on the basis of conduct relating to information that had not been considered, was inadequately considered, or was incorrect in a prior examination of the patent if the information was considered, reconsidered, or corrected during a supplemental examination of the patent. The making of a request under subsection (a), or the absence thereof, shall not be relevant to enforceability of the patent under section 282.
¹³ See our newsletter of August, 2010 entitled “Liability for False Marking of Patent Information in the USA”.