INTELLECTUAL PROPERTY AND TECHNOLOGY ALERT

Robert Benson

Today President Barack Obama signed into law the America Invents Act, marking the first time in nearly 60 years that US patent legislation has been reformed.

The US does not often update its patent law. The most recent set of federal patent laws was signed by President Harry Truman in 1952, which itself was the first major revision of US patent law since the Patent Act of 1836.

The most fundamental change implemented by the America Invents Act is the transition from a “first to invent” patent system to a “first inventor to file” system.  This change, effective 18 months after enactment, awards priority to the first inventor to file a patent application and eliminates the ability of a patentee to antedate prior art references by establishing an earlier invention date.  The new system incentivizes filing patent applications as quickly as possible and harmonizes the US patent system with the patent laws of other nations.

 

However, a variety of exceptions will continue to make the US system unique.  For example, a public disclosure less than a year before filing will not be considered prior art if it was made by the inventor or someone who obtained the subject matter from the inventor.  Moreover, a previously filed patent application will not present a bar to patentability if the inventor made an earlier public disclosure and filed within a year thereafter.  These and similar exceptions to the first-to-file rule will still enable the patentee to get behind previously filed applications and prior publications in limited circumstances.

 

Under the new system, interference proceedings will be replaced by “derivation proceedings” that will determine whether a first-to-file applicant derived the claimed invention from a subsequent applicant.  Derivation proceedings can be initiated in the PTO, if at least one application remains pending, or in the district court if both patents have issued, but can only be commenced within specified time periods.  

 

The new law also expands the scope of relevant prior art.  Consistent with the new first-to-file system, prior art now includes references that merely predate the effective filing date of the patent.  Invalidity based on prior public use or sale is no longer limited to the US, but includes public use and commercial activities anywhere in the world.  And a new catch-all category includes as prior art any inventions “otherwise available to the public.”  

 

Of particular interest to foreign companies is the elimination of former §102(e) and the Hillmer doctrine.  Previously, a US patent’s earlier foreign filing date could not be relied upon to predate a subsequent patent application for prior art purposes, and a foreign application was not effective prior art under §102(e) because it was not filed in the US.  Under the new law, a US patent can rely on its foreign filing date for prior art purposes and to defeat subsequently-filed applications, which may significantly impact the filing strategies of foreign inventors.  

 

A new landscape for challenging validity before the PTO 

 

A variety of new provisions taking effect in one year will enhance the role of the PTO as an alternative forum to district courts for determining the validity of issued patents.  While ex parte reexamination was left untouched, the new law eliminates inter partes reexamination and replaces it with post-grant review, which can be sought during the first nine months after a patent issues, and inter partes review, which may be sought thereafter.  Both types of proceedings are only available to third parties, are supposed to reach a final determination within one year, and are expected to implement discovery procedures such as depositions.  Using the post-grant review process, the validity of a patent will be subject to challenge onany basis, including prior public use or sale and invalidity under §112, whereas inter partes review will be limited to invalidity under §§102 and 103 based on prior art patents and printed publications.  The standard for granting inter partes review will be higher than for post-grant review, i.e., “a reasonable likelihood that the petitioner would prevail,” and this heightened standard will also be applied to new requests for inter partesreexamination beginning immediately.  

 

A range of new provisions also govern the interplay between PTO proceedings and district court litigation.  For example, if a company is sued for infringement, it can only request inter partes review of the patent within one year after being sued.  The new law is also designed to force parties to make an election of forums:  if a party has already filed a declaratory judgment action challenging the validity of a patent, the same party cannot seek post-grant or inter partes review, and a later-filed declaratory judgment action may be subject to an automatic stay.  These same restrictions do not apply, however, if the petitioner has only challenged the validity of the patent by way of filing a counterclaim in an infringement action.  These and other provisions make it essential that a company consult with patent counsel to formulate the best strategy for challenging the validity of an issued patent under the new legislation.

 

Two other procedures will also be available to address the validity of a patent before the PTO.  During prosecution of a patent application, there are narrow windows in which third parties can submit prior art to the PTO for consideration, together with a concise description of the asserted relevance.  Another new procedure, supplemental examination, can be used by a patent owner to submit prior art not previously considered.  This may inoculate the patent from being found unenforceable due to a prior failure to disclose the information – but only if the patent owner sought supplemental examination before inequitable conduct was pled in litigation.  

 

The changing face of litigation for patent infringement

 

The America Invents Act also impacts patent infringement litigation in a variety of other respects.  Joinder of unrelated parties will be greatly restricted in newly filed infringement actions.  For example, defendants who sell competing products cannot be joined in a single case solely on the basis that they are accused of infringing the same patent.  As a practical matter, cases filed in the same court can still be consolidated for pre-trial proceedings, but unrelated defendants will be entitled to separate trials.  This may deter some plaintiffs from suing a large number of defendants, particularly those who have very few sales.  Moreover, the proliferation of separate cases will cause a significant increase in a court’s docket, which may result in some judges being more willing to consider dispositive motions and motions to transfer based on facts unique to individual defendants. 

 

The new law also provides for a new defense against infringement where the defendant used the patented machine or process for commercial purposes in the US more than one year before the effective filing date of the patent.  Among the many limitations to this new defense, however, is that it cannot be transferred, it only applies to certain improvements, and is limited in scope if the commercial use has been abandoned.  But if the defense is asserted without “a reasonable basis,” the statute explicitly provides that the case may be deemed “exceptional,” leading to an award of attorneys’ fees against the accused infringer.

 

Several other changes will also have a significant impact on patent litigation:

 

  • Standing to bring a false marking case will be limited to the US government or those who suffered a “competitive injury.”  This change is effective immediately and should result in most false marking cases being dismissed or subject to summary judgment.
  • A patentee will be able to satisfy the marking requirement by fixing an Internet address to the product, where the website identifies the applicable patents.
  • A failure to disclose the best mode will no longer be available as an invalidity defense in litigation in newly filed cases.
  • And the new law explicitly provides that a failure to obtain the advice of counsel cannot be used to prove either willful infringement or intent to induce infringement.

 

These are the high points of a rich and complex set of reforms.  For more information about the America Invents Act and its ramifications for your business, please contact:

 

John Allcock

Robert Benson

Dan Christenbury