IP Update, Vol. 9, No. 4 (15 September 2011)

Editors: Marc S. Weiner, Esq. and Nicholas P. Godici

Enactment of Patent Reform Bill Brings Many Significant Changes to U.S. Patent Laws

Introduction

With the signing by president Obama of the “America Invents Act” on September 16, 2011, significant changes to U.S. patent laws will be enacted. Among the most significant changes is the move from the present “first to invent” system to a “first inventor to file” system in accord with the patent systems employed by essentially other industrialized countries in the world. In addition, a type of “opposition” proceeding called a “Post-Grant Review” is introduced together with other proceedings including a “Supplemental Examination” that may be filed by patent owners and a “Preissuance Submission” that may be filed by third parties. Other changes, including USPTO fee increases, will also be enacted. Below is a more detailed description of the various changes that will be enacted.

Significant Fee Increases

Most USPTO fees, such a filing fees, issue fees, extension fees, etc. will increase 15% ten days after enactment of the new law, i.e. on September 26, 2011.  Therefore, it may be wise to take advantage of the lower fees by filing patent applications and paying issue fees by this date.

“First Inventor to File” System

In setting up the “first inventor to file” system, the definitions in 35 USC §§ 100, 102 and 103, among other sections, are revised. The revised sections define the “effective filing date” of a claimed invention as the earliest of the actual filing date of the patent or application in the USPTO or the earlier foreign or PCT priority filing date for a priority application that provides disclosure support for a particular patent claim.  All patents and applications having a patent claim within an effective filing date that is later than 18 months after the law enactment date (Sept. 16, 2011) will be subject to the “first inventor to file” system.  All other patents and applications having a claim with an earlier effective filing date will continue to receive the benefit of the “first to invent” system presently in place which allows for establishment of an earlier invention date to remove a prior art reference effective before the earliest effective filing date, as well as participation in “interference” proceedings.  As time moves on past the 18 month date, more patents and applications will be subject to the “first inventor to file” system, while the patents under the “first to invent” system will begin decreasing as patent terms begin to expire.  In any case, the relevance of the “first to invent” system will be felt a good number of years into the future and one should keep this in mind.

“Derivation Proceedings” will replace interference proceedings for patents and applications subject to the “first inventor to file” system.  A later filing inventor/applicant may petition the USPTO showing that the earlier filed application claiming the same invention was “derived” from the inventor/applicant.  A one year deadline applies, such that the inventor/applicant in the later application must file a petition within one year of the first publication of a claim in the later filed application that is the same or substantially the same as the earlier application's claim to the invention. Appeal from a USPTO final decision can then be taken to a District Court or directly to the Court of Appeals for the Federal Circuit (CAFC).

The changes to 35 USC 102 perhaps best summarize the “first inventor to file” system under the new law. New sections 102(a), 102(b) and 102(d) essentially replace previous sections 102(a)-(f), with 102(g) being eliminated. New section 102(a)(1) defines prior art to include, in addition to patents and printed publications, “public use,” “sale,” and other public availability of the claimed invention in and outside the U.S., so as to expand the previous limitation that such acts take place within the U.S.  This section reads as follows:

35 USC 102(a)(1) – “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.”

New section 102(a)(2) includes as prior art any patent or published application with a different inventive entity and an earlier effective filing date.

35 USC 102(a)(2) - -“the claimed invention was described in a patent issued under section 151, or in an application for patent published… under section 122(b), in which the patent or application…names another inventor and was effectively filed before the effective filing date of the claimed invention.”

New Section 102(b) re-defines the parameters of the “grace period” under U.S. patent law, as well as allowing for common ownership provisions.  The newly defined grace period provides that subject matter “disclosed” by the inventor (or by another who derived from the inventor) is not prior art if disclosed within the year preceding the effective filing date of the application.  Note that the previous “grace period” definition specifically allowed for “public use” or “sale” of the claimed invention within one year of the USPTO filing date of the application, but this language is now absent, replaced by the (arguably less clear) "disclosure."  Section 102(b) also states that a disclosure in a patent or published U.S. application is not prior art if the subject matter was obtained directly or indirectly from the inventor (or joint inventor) or if the subject matter was commonly owned by the patentee or applicant.

New Section 102(c) allows for common ownership of subject matter under joint research agreements (JRAs) provided that the JRA was in effect before the effective filing date of the patent claim which claims an invention resulting from JRA activities, as long as the patent application is amended to name the JRA parties.

New Section 102(d) essentially removes the “Hilmer Doctrine” by providing that if a U.S. patent or published application includes a relevant disclosure of subject matter and makes a priority claim to a foreign priority application or international PCT application, then if the relevant disclosure is present in such a priority application it is effective prior art as of the filing date of such a priority application regardless of the language.

New Section 35 USC 103 replaces previous sections 103(a)-(c), with the relevant change to the language being: …would have been obvious at the time the invention was made before the effective filing date of the claimed invention to a person having ordinary skill in the art…”.  Sections 103(b) – “biotechnological processes” is eliminated, as is 103(c) (JRA common ownership) (compare new 102(a)(c)).

In view of the above, it is evident that a “first to file” race to the USPTO will occur from time to time between competitors in the same technological areas.  In this regard, it is important to note that one must strike a balance between achieving an earlier filing date and satisfying the various disclosure requirements with respect to enablement, written description, etc. since these various disclosure requirements still apply and can be used as bases for attacking the validity of an ultimately granted patent.  One must also take into account the new definitions of prior art when assessing the validity of patents that are subject to the new law.  For example, sales, public uses or public availability of a claimed invention anywhere in the world could qualify as prior art.

Changes to Post-Grant Review Proceedings

Some new Post-Grant proceedings have been added while other existing proceedings have been changed. Reissue application and Ex Parte Reexamination practice remains essentially unchanged.  The present “Inter Partes Reexamination” procedure remains for a time, but immediately upon enactment of the new law the standard for granting a request for this procedure is changed from requiring the requester to raise “a substantial new question of patentability affecting any claim” to requiring the requester to provide information showing that “there is a reasonable likelihood that the requester would prevail with respect to at least [one claim].” This increases the burden on the requester, but it remains to be seen how much of an increase will exist as this likely depends upon new rules to be implemented by the USPTO.  The law will provide for new “Post-Grant Review” and “Inter Partes Review” proceedings. These new proceedings while be conducted by three-member units of a “Patent Trial Appeal Board” (PTAB) which will eventually replace the current Board of Patent Appeals and Interferences.

Post-Grant Review

A post-grant review (PGR) may be filed only by a third party within nine months after the patent grant date, or within nine months after the reissue patent grant date so long as the PGR petition does not request cancelation of a claim in the reissue patent that is the same as or narrower than a claim present in the original patent.  The third party must identify the “all real parties in interest” and cannot have previously filed a civil action in court, such as a declaratory judgment, challenging validity of the patent.  If a court action is later filed by the third party, it is automatically stayed under limited conditions.  The PTAB is expected to grant or deny a PGR within three months and issue a final determination within one year (extendable up to six additional months).  However, it is interesting to note that there are no enforcement mechanisms in the new law to guarantee that the USPTO meets these deadlines.  The PGR allows for any ground of unpatentability to be raised such that it is not limited to prior art issues. The threshold standard for granting a PGR is whether it is “more likely than not” that at least one claim is unpatentable. The evidentiary standard which applies to a PGR is a “preponderance of evidence”.  Discovery is limited to evidence directly related to factual assertions made by either party.  Appeal from a PGR decision may be made directly the CAFC.

PGR includes estoppel provisions which prevent the petitioner from participating in any USPTO proceeding, against the same claim, which asserts that a claim in the patent is invalid “on any ground that the petitioner raised or reasonably could have raised” during the completed PGR.  Similarly, the PGR petitioner cannot later file a court action against the patent “on any ground that the petitioner raised or reasonably could have raised” during the PGR.

Settlement is allowed for a PGR if both parties agree, and the PGR will be terminated with no estoppel consequences.  If no petitioner remains in the PGR, the USPTO may terminate or proceed to a final written decision.  The USPTO may limit the number of PGRs in each of the first four years of its existence.  It will be interesting to see how the USPTO goes about this.

The PGR essentially corresponds to the U.S. version of an “opposition” proceeding which will provide a significant avenue for third party competitors to attack patent in a forum that is much less expensive than a U.S. federal court and allows for a lower burden of proof (preponderance of evidence) that require in court (“clear and convincing” standard with the patent being entitled to a “presumption of validity”).  In order to take advantage of the new PGR proceeding within its nine month window after grant, competitors within the same technological area should consider monitoring the emergence of competing published U.S. patent applications and granted.  The high threshold (i.e. more likely than not a claim is unpatentable) will likely require that the PGR petition be thoroughly researched and include all necessary evidence to provide the highest chance of having the PGR granted by the USPTO.

Inter Partes Review

Inter Partes Review (IPR) essentially corresponds to the present Inter Partes Reexamination procedure with a few differences. As in Reexamination proceedings, IPR is limited to “anticipation” “novelty” and “obviousness” (inventive step) based on patents and publications with the threshold for granting an IPR being a “reasonable likelihood that the petitioner would prevail with respect to at least [one claim],” just as with the revised standard enacted for Inter Partes Reexaminations.  The IPR, like a PGR, will be conducted before the PTAB.

A petitioner cannot file the IPR until later of nine months from patent grant or after termination of a PGR, whichever is later.  As with the PGR, the USPTO should grant or deny the IPR within three months and issue a final decision within one year, extendable up to six months, but with no enforcement mechanisms to guarantee such deadlines.  Similar to a PGR, the IPR may be used against any patent beginning one year after enactment of the new law. The patent owner has one chance to amend the claims in the IPR. With respect to discovery, witnesses that submit affidavits or declarations may be deposed, with additional limited discovery being allowed if it is “necessary in the interest of justice”.  The evidentiary standard is a “preponderance of evidence” just as with the PGR. The estoppel provisions and settlement provisions are also essentially the same as described above for the PGR. In addition, appeal may be taken directly to the CAFC.

Supplemental Examination

Patent owners may take advantage of a new “Supplemental Examination” procedure. The patent owner may request the USPTO to consider, reconsider or correct information believed to be relevant to the granted patent. Use of this procedure may prevent a patent from being held enforceable on the basis of conduct relating to information that had not be considered, was inadequately considered, or was incorrect, if the information is submitted or corrected during Supplemental Examination. Thus, the patent owner may be able to limit attacks based on charges of inequitable conduct in certain circumstances. The USPTO is to determine whether a “substantial new question of patentability” (SNQ) is raised within three months of the date that the patent owner files the Supplemental Examination. Upon concluding the supplemental examination the USPTO will issue a certificate indicating whether an SNQ exists.  If an SNQ exists, an Ex Parte Reexamination is ordered.  However, if the USPTO becomes aware during the Supplemental Examination (or subsequent Reexamination) that “a material fraud on the [USPTO] may have been committed”, the USPTO shall also refer the matter to the Attorney General for further action as deemed appropriate. 

Pre-Issuance Submissions

A third party may submit any patent or published application of potential relevance to the USPTO Examiner for a patent application under the Pre-Issuance Submission procedure. The third party must make the submission before the Notice of Allowance issues or by the later date of six months from publication of the application or the date of the first substantive rejection issued by the Examiner. The third party must also provide a concise description of each submitted document.

Prior User Rights

The “prior user rights” law under 35 USC 273 is revised so as to no longer be limited to “business methods,” but rather is expanded to all types of patented subject matter. Thus, it becomes a defense to infringement if the alleged infringer can prove that he commercially used the subject matter in the United States and the commercial use occurred at least one year before the earlier of either the effective filing date of the claimed invention or the date on which the claimed invention was disclosed to the public in a manner that qualified as an exception from prior art.

Transitional Post-Grant Validity Review of Financial Business Method Patents

A transitional type post-grant validity review of certain business method patents involving the practice, administration or management of a financial product or service also becomes available under the new law. Individuals whom are sued or charged with infringement may file this type of review procedure. The procedure includes a “sunset” provision which repeals the procedure after eight years.

Patent Marking

Patent Marking is also addressed by the new law. As of the date of enactment, patent owners are allowed to employ “virtual marking” in which markings that direct the public to a website including the appropriate patent number can be used.  With respect to “false marking,” only persons that have suffered competitive injury can sue for damages to compensate for the injury, as opposed to the present law (qui tam) which allows anyone to sue on behalf of the government without having suffered a competitive injury under certain circumstances.  Marking with an expired patent is no longer a violation of the statute.

Best Mode

The new law prohibits the “best mode” requirement of 35 USC 112(a) (formerly "first paragraph") from being used as a basis to invalidate a patent. The best mode requirement is also no longer required with respect to obtaining the benefit of priority from an earlier filed U.S. application, or foreign or international PCT application.  However, disclosure of the best mode remains a requirement for patentability under 35 USC 112, i.e. before the USPTO.  Thus, it appears that one may attack a patent for failing to satisfy the best mode requirement in a Post-Grant Review, but not in a federal court action.

Prioritized Examination

Passage of the bill allows the USPTO to proceed with the implementation of "Track 1" prioritized examination.  A $4,800 additional fee for prioritized examination will go into effect on September 26, 2011.  Track 1 was originally to go into effect on May 4, 2011, but was postponed due to uncertainties about funding.  Track 1 prioritized examination permits applicants to expedite examination by filing a request with an original utility or plant application filed under 35 U.S.C. 111(a), with the goal of reaching final disposition within twelve months.  Details of the program as it was previously set to be implemented are available at 76 FR 18399.  It is likely that these details will change only with respect to the fee amount (previously $4,000) and the availability of reduced fees for small/micro entities.

Additionally, prioritized examination regarding "important technologies" will go into effect one year after enactment – i.e., September 16, 2012.  See new 35 U.S.C. 2(b)(2)(G).  Such technologies may be determined and adjusted by the USPTO.

Advice of Counsel

The new law codifies the case decision Knorr Bremse v. Dana Corp., 72 USPQ2d 1560 (Fed. Cir. 2004)(en banc). Specifically, the failure of an infringer to obtain advice of counsel with respect to the infringed patent (e.g. an infringement opinion), or the failure of the infringer to present such advice to the court, cannot be used to prove “willful infringement” in which treble damages may be awarded to the patent owner.

Oath and Declaration

Changes to the law simplify oath and declaration requirements of 35 U.S.C. 115. The requirement of identifying citizenship is eliminated, and new language ("authorized to be made by") is inserted regarding Oath or Declaration by a non-inventor.  Alternative to an Oath or Declaration by an inventor, a "substitute statement" permits a non-inventor applicant (e.g., assignee) to submit statements in lieu of an Oath or Declaration when an inventor is unable or, if obligated to assign, refuses to execute the Oath or Declaration.  For now, it is not clear what, if any, "additional information" the Director of the USPTO may require as a showing of such inability/refusal.  An individual under obligation of assignment may make the required statements in an assignment instead of in a separate Oath or Declaration document.  A new Oath or Declaration, substitute statement or qualifying assignment need not be filed in continuation applications.  Anyone making the requirement statement may withdraw, replace, or otherwise correct the statement at any time (including after issue of the patent – a patent cannot be held invalid or unenforceable based on failure to comply with a requirement under 35 U.S.C. 115).

New Limitations on Joinder of Accused Infringers

The new law adds 35 U.S.C. 299 which requires that a patent owner establish “joint liability” for all parties accused of patent infringement in a single court action against multiple defendants such that the infringement issues relate to a common transaction and questions of fact common to all defendants.  Accused infringers may not be joined in one action as defendants based solely on allegations that they have each infringed the patent before the court.  Consequently, patent owners attempting to enforce a patent against multiple companies, or an entire industry, will be forced to file multiple separate court actions rather than simply filing one court action against a long list of defendants.  This would appear to significantly affect patent “trolls”.

Miscellaneous Provisions

The new law also includes a number of other miscellaneous provisions. Any strategy for reducing, avoiding or deferring tax liability is deemed to be within the prior art. A $400 additional fee will be required for applications that are not electronically filed.  The new law provides for “micro” entities that have greater fee reductions than “small entities”. Three U.S. satellite offices for the USPTO including one in Detroit, will be established. CAFC judges will be allowed to live more than 50 miles from Washington D.C.

Summary of Enactment Dates

Below is a summary of the various enactment dates for the provisions of the new law:

Upon Enactment (September 16, 2011)

  • threshold standard for Inter Partes Reexamination (reasonable likelihood that requester would prevail)
  • best mode no longer required for establishing priority or attacking validity in court
  • prior user rights defense expanded to all patents under 35 U.S.C. 273
  • virtual marking acceptable and no qui tam
  • no tax strategy or human organism patents
  • 75% discount for “micro-entities”

10 Days after Enactment (September 26, 2011)

  • 15% surcharge on most USPTO fees
  • prioritized examination option (Track 1)

60 Days after Enactment

  • $400 surcharge for non-electronic filing of application

12 Months after Enactment

  • Post-Grant Review, Inter Partes Review, Supplemental Examination, Pre-Issuance Submissions
  • filing declaration/oath by assignee

18 Months after Enactment

  • “first inventor to file” system applies to all patent claims with this effective filing date or later
  • derivation proceedings

Conclusions

The changes in the new law are perhaps the largest changes in more than 150 years and move the United States closer to alignment with the “first to file” systems around the world.  One must consider exactly how the scope of the prior art has been redefined and what possible new strategies can be used to take advantage this new definition.  With the creation of a Post-Grant Review opposition-type procedure, competitors must weigh the potential advantages of attacking U.S. patents in the USPTO forum as opposed to a federal court which imposes greater evidentiary burdens, as well as greater discovery and attorney costs.  The other new procedures and standards described above will provide for new strategies in defending and attacking U.S. patents.

Summary provided by Andrew D. Meikle and James C. Larsen

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