International Business Aspects of the New U.S. Patent Law

The 2011 Leahy-Smith America Invents Act (“AIA”) was signed into law by United States (“U.S.”) President Obama on September 16, 2011, making major changes to the patent laws in the U.S.  Perhaps the most significant change is the move from a first-to-invent system to a first-inventor-to-file system.  This modification and others in the AIA bring U.S. patent law more closely in line with the laws in foreign jurisdictions and, along with the 1995 changes resulting from ratification of the GATT treaty in the U.S., simplify global patenting strategies.

First-Inventor-to-File

The first-inventor-to-file system sets the filing date of an application as the priority date.  Inventors can no longer “swear behind” publications or an earlier-filed application.  One approach to dealing with this system will be to file provisional applications early and often.  Subsequent applications can be filed as an invention is refined and developed.  An inventor’s disclosure up to one year before the filing of an application will not be considered to be prior art, and any disclosure of the same subject matter subsequent to the inventor’s disclosure will also be disregarded.

Under the first-inventor-to-file system, interference proceedings to determine priority of invention will end.  Instead, an applicant may institute a derivation proceeding to determine whether an earlier-filed application or a resulting patent was derived from a later-filed applicant.  Derivation proceedings may be filed either in U.S. District Courts for issued patents or the United States Patent and Trademark Office (“USPTO”) for applications.  The USPTO proceedings must be filed within one year after an earlier-filed application is published, and the civil action must be filed within one year after a patent issues from the earlier-filed application.  This one-year limitation on filing means that companies will need to diligently monitor U.S. publications and patents.

Pre-Issuance Submissions by Third Parties

The new law allows a third party to submit references to the USPTO along with a brief statement of the relevance.  Pre-issuance submission of art will be less costly than a post-grant review.  These submissions, however, need to be made by the later of six months after the application is published or before the first rejection of any claim by the USPTO. 

Post-Grant Review Proceedings

The new post-grant review process is analogous to a European opposition.  Once a patent issues, a request for post-grant review may be filed for the next nine months and the validity of the patent claims may be attacked on any grounds.  The other, likely more expensive, option is to file a declaratory judgment of invalidity in a U.S. court.  Once a declaratory judgment action has been filed, however, a petitioner is barred from requesting a post-grant review.  If a post-grant review is filed, all potential invalidity grounds should be included.  When the USPTO issues a final written decision on the request, the post-grant review proceeding estops the requester from instituting any other proceeding attempting to invalidate the claims on any invalidity grounds that were raised or reasonably could have been raised in the post-grant review.  This includes actions at the USPTO, in a filed civil action, or any filing in the United States International Trade Commission (“ITC”).

In addition to the post-grant review process, the new statute creates an inter partes review process.  The inter partes review process can only be filed after the post-grant review period is closed, or more than nine months after a patent issues or after a reissue patent is granted.  The inter partes review request must be filed not more than one year after a suit alleging infringement has been filed.  Additionally, no inter partes review will be granted if the petitioner filed a declaratory judgment action challenging the validity of the patent prior to the inter partes review request.  Unlike a post-grant review, the scope of an inter partes review request is limited to invalidity for either anticipation or obviousness based on prior art references.  The petitioner must show that there is a reasonable likelihood of unpatentability of at least one of the patent claims.  As with the post-grant review, if a final determination is made with respect to the inter partes review, the petitioner will be estopped from raising these claims in any other USPTO action for invalidity or cancellation of the claims, or in a civil action or an ITC proceeding.  An adverse inter partes review decision may be appealed to the Court of Appeals for the Federal Circuit.

Business Method Patents

The new statute sets up a transitional program that allows for post-grant review of business method patents that the owner has alleged are infringed.  The program does not have the same estoppel effect as the normal post-grant review, and is not limited to first-inventor-to-file patents.  It will take effect on September 16, 2012, and will expire eight years later.  Additionally, patentable subject matter for business method patents has been restricted.  The USPTO will not grant any business method patents for reducing, avoiding, or deferring tax liability.  This, however, does not apply to financial management methods if the methods are distinct from tax liability or methods for preparing a tax filing. 

Prior User Rights

Another significant development is the prior user rights provision.  Prior user rights are a defense to a charge of patent infringement for manufacturing or commercial process patents.  This provision may decrease the number of applications filed that are directed to manufacturing or commercial processes, and may increase the enforcement of trade secrets in this area.  Historically, enforcement of patents for commercial processes was difficult.  Even if infringement of the process could have been shown, competitors could move manufacturing processes offshore to avoid enforcement of the patent.  The prior user rights provision not only allows corporations to avoid paying for defensive patents, but avoids potential infringement of any future patents on these processes. 

Prioritized Examination

The new law provides a prioritized examination track for 10,000 applications per year.  For an additional fee, applications with a limited number of claims can be filed under the prioritized examination track.  The USPTO goal for final disposition of these applications is one year. 

Best Mode

The statute continues to require the disclosure of the best mode, but the best mode requirement is no longer a way to invalidate a patent or claim. 

Filing by Other than Inventor

If an inventor has assigned or is under an obligation to assign an invention, a corporation may now file an application for patent as the real party in interest.  Additionally, if an inventor is under an obligation to assign but has refused to sign the necessary oath or declaration, the real party in interest may provide a substitute statement. 

Joinder

The statute does not allow for joinder of defendants in an infringement action solely because both defendants have allegedly infringed the patent.  In order to join multiple defendants, the patentee will have to show that there are questions of fact in common with the defendants.

Conclusion

Between increased filing of provisional applications and increased search and monitoring of patents and publications, the AIA may increase costs for businesses.  But harmonization of the U.S. system with international patent systems may make it easier and less expensive for corporations to obtain patents in multiple jurisdictions.

Steven E. Warner is a partner of Fitzpatrick, Cella, Harper & Scinto (Fitzpatrick).  Mr. Warner routinely lectures on intellectual property law matters for professional organizations such as the District of Columbia Bar, is chair of the firm's industrial equipment and manufacturing group and is a member of the firm's consumer goods, energy and semiconductor technology groups.  Prior to joining the firm, Mr. Warner was a Primary Examiner at the U.S. Patent and Trademark Office.  Steven can be contacted on +1 202 721 5433 or by email at swarner@fchs.com.

Kristina M. Mahoney is an associate of Fitzpatrick.  Her practice focuses on pharmaceutical and chemical patent litigation.  Ms. Mahoney served as the Associate Editor on the Tulane Law Review while in law school.  Kristina can be contacted at +1 202 721 5422 or by email at Kmahoney@fchs.com