By Michael Cronin, Whyte Hirschboeck Dudek, S.C., Madison

Sept. 21, 2011 – President Obama on Sept. 16 signed the Leahy-Smith America Invents Act (AIA) into law, just days after the U.S. Patent and Trademark Office (USPTO) issued its eight millionth patent. The AIA represents the biggest change to the U.S. patent system since the 1950s and affects multiple provisions of the U.S. patent law.

Below is a summary of several key provisions of the AIA, including provisions that create a first-to-file system, change the way parties challenge patents or defend against patent infringement, and other provisions that will impact clients and attorneys with regard to patent procedures.

First-to-file (effective March 16, 2013)

The AIA transitions the U.S. from a “first-to-invent” to a “first-to-file” patent system.  Any third party printed publication, public use, or sale before the effective filing date of the patent application can be used by a patent examiner to reject the application.  However, the first-to-file provision maintains the one-year grace period for disclosures by the inventor or disclosures that were derived from the inventor.

Currently, the U.S. patent system is based on a unique first-to-invent doctrine, which means that the inventor who first conceived of the invention is considered the first inventor and is entitled to patent protection. 

Other countries, almost exclusively, have patent systems based on the first-to-file doctrine, in which the patent is granted to the inventor who is the first to file a patent application, regardless of the date of invention.

The first-to-file provision of the AIA attempts to harmonize U.S. patent law with the rest of the world. Much of the criticism directed toward the AIA originates from the first-to-file provision.

Opponents of the first-to-file system argue it places independent inventors and small corporations at a disadvantage and favors large corporations with the financial means and know-how to race to the patent office. While the above arguments may have merit, individuals interested in international patent protection are accustomed to working under a first-to-file system. The new provision simply provides a unified system.

In addition, Mr. David Kappos, director of the USPTO, testified before the U.S. House of Representatives that from the three million patent applications filed in the past seven years, only twenty-five patents were granted to small entities that were the second inventor to file but the first to invent.  Only one patent of those twenty-five was granted to an individual inventor. Thus, according to Mr. Kappos, in the last seven years only one independent inventor in nearly three million patent filings would have received a different outcome under the first-to-file system. 

Post-grant review proceedings (effective Sept. 16, 2012)

While the AIA implements a variety of changes regarding patent prosecution, it also creates new procedures for parties to oppose a patent before the USPTO.

One of the most sweeping changes of the AIA is the establishment of a “post-grant review” procedure to review the validity of patents. In contrast to other procedures that are limited to challenges based on prior art, a post-grant review can be based on almost any ground of invalidity, including prior art, prior public use, lack of enablement, lack of written description, and lack of utility.

A petition for post-grant review must be filed within nine months after the grant or reissuance of the patent. Importantly, the AIA directs the USPTO to decide post-grant proceedings within a year, or if there is good cause, within eighteen months.

The AIA also sets forth two additional procedures to challenge the patentability of an issued patent. First, the AIA establishes an eight-year transitional post-grant review proceeding for review of the validity of business method patents for financial products or services by defendants accused of infringement. Second, the AIA establishes a new Supplemental Examination (SE) procedure.

The new SE proceedings provide a mechanism by which a patent owner can request that the USPTO consider, reconsider or correct “information believed to be relevant to the patent.” The SE proceedings provide patent owners with a way to clear the record with respect to potential claims of inequitable conduct.

Prior use defense (effective Sept. 16, 2011)

Under the old U.S. patent law, 35 U.S.C. § 273 set forth a limited “prior user rights” as a defense to patent infringement. The prior user rights applied only to methods of doing or conducting business.

Under the AIA, prior user rights can be a defense to an allegation of infringement based on prior commercial use of any subject matter in any technical field. Two parameters need to be satisfied to establish prior user rights: (1) reduction to practice and commercial use; and (2) the commercial use occurs at least one year before the effective filing date of the claimed invention. The new prior user rights applies to any patent issued on or after Sept. 16, 2011.

False marking claims (effective Sept. 16, 2011)

Falsely marking a product with a patent number will still be an actionable offense under amended 35 U.S.C. § 292. Unlike previous provisions, however, not just “any person” can sue for the penalty of $500 per offense. Now, only the U.S. government or a party proving a competitive injury will be able to bring suit.

The new law also provides that marking with an expired patent is not a violation of the statute. This change applies to any case pending on or after the date of enactment.

USPTO Funding and Fees

One of the contested provisions between the U.S. House of Representatives and the U.S. Senate relates to diversion of fees received by the USPTO.

One major issue with the patent process is the delay between filing a patent application and receiving a final determination on the merits. Increased funding to the USPTO would allow additional patent examiners to be hired, which, in theory, should increase the speed of the patent process.

While the provision prohibiting fee diversion was removed by the U.S. House of Representatives, several significant funding provisions remain in the AIA, and include:

• providing the director of the USPTO with fee and service setting authority;
• establishing a program of prioritized examination, wherein for a fee of $4,800 ($2,400 for small entities) an applicant can file a request and have their application essentially moved to head of the line, effective Sept. 26, 2011;
• a new 15 percent surcharge to certain fees starting Sept. 26, 2011;
• providing “micro-entities” with a 75 percent reduction in fees. 

Conclusion

Like almost any act of Congress, there are proponents and critics of the AIA. As discussed above, the effects of the change to the first-inventor-to-file system has been heavily debated.

While certain data indicate that the first-inventor-to-file system should have minimal impact on the patent system, only time will reveal all the positive and negative consequences.

In fact, the internal workings of many of these new procedures have yet to be finalized. For instance, the procedures for post-grant review have not yet been established, and the USPTO has until Sept. 16, 2012 to set forth these rules. Post-grant review significantly expands the ground by which a patent can be challenged. However, without the specific rules on how to bring these challenges, it is difficult to speculate on how successful the post-grant review process will be. Stay tuned for future reports on the inner workings of the AIA.

About the author

Michael Cronin is an associate in the Madison office of Whyte Hirschboeck Dudek S.C. and a member of the firm’s Intellectual Property Practice Group. He holds a Ph.D in biochemistry and molecular biology. Mr. Cronin practices in the area of intellectual property, especially patent issues relating to biotechnology, medical, pharmaceutical and chemical technology.