Will the America Invents Act Strengthen the U.S. Patent System?

Patrick J. Coyne, Partner of Finnegan, Henderson, Farabow, Garrett & Dunner, LLP,[Patent]

The America Invents Act (“Act”) is the most sweeping revision of U.S. patent law in 60 years and changes the patent system in several important ways. Overall, it will strengthen the patent system by making it easier to challenge weak patents and by simplifying enforcement proceedings through four basic changes. First, it changes the present “first-to-invent” system into a “first-inventor-to-file” system, bringing U.S. law into closer alignment with international patent systems.
Second, the Act adds four new types of Patent Office procedures that can be used to challenge, or strengthen, a patent. It will be harder to institute two of new challenge proceedings than it is to institute existing reissue and reexamination proceedings. The Act also provides for “supplemental examination” to enable the Patent Office to consider information it did not consider when it initially granted the patent.
Third, the Act expands certain defenses, and eliminates or weakens several other defenses to a patent infringement claim, to simplify and streamline the enforcement of a patent.
Fourth, the Act includes several miscellaneous provisions that specify that patents are no longer available for certain types of controversial subject matter and gives the Patent Office greater control over its operations.
I. The Act Establishes a “First-Inventor-to-File” System
For more than a century, the United States has been the most striking holdout in retaining its “first-to-invent” system. Under this “first-to-invent” system, the first inventor is entitled to a patent, even if the first inventor is not the first-to-file. U.S. patents have been granted, only to have an applicant who filed years later take away the patent.
The Act achieves this change by redefining “prior art.” The current patent law contains seven separate conditions for patentability in Section 102. These have been eliminated in favor of two conditions, along with exceptions to each.
Under the old “first-to-invent” system, if:
a. the invention was known by others (102 (a));
b. the invention was patented or described in a printed publication (102(b));
c. the inventor abandoned his invention (102 (c));
d. an application for patent was filed anywhere more than a year before the U.S. application is filed (102 (d));
e. the invention was described in part prior patents or published applications of others (102 (e));
f. the inventor derived the invention from someone else (102 (f)); or
g. the inventor was not the first to invent (102 (g)),
the inventor is not entitled to a patent. This bewildering array of defenses makes it extremely difficult to determine who was entitled to a patent. In many instances, the information is not publicly available and might be discovered only years later, after the parties are involved in expensive and protracted litigation and had commercialized the technology. Some of these provisions (a, e, and g), are determined from the date of invention, while others are determined from the filing date of the U.S. application (b and d). This system stands in stark contrast to the system used in the rest of the world, in which priority is based on the “first-to-file.”
The United States, however, has not adopted a “first-to-file” system. Instead, it is moving to a “first-inventor-to-file” system, based on public disclosure of the invention through publication or commercialization. The Act sets forth two categories of prior art under new section 102 (a). The first is that 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 application.” The second is that the claimed invention was “described in a patent issued under section 151, or in an application for patent published or deemed published under section 122 (b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed application.”
Each of these types of prior art is subject to a “grace period” exception. Disclosures made less than one year before the effective filing date can be removed as prior art. Under Section 102 (a) (1), they are removed if they are made by an inventor or someone who obtained the information from the inventor, or if the invention was previously disclosed publicly by an inventor or someone who obtained it from the inventor. Similarly, disclosures under Section 102 (a) (2) can be removed as prior art if they were obtained from an inventor, if the subject matter was disclosed publicly by an inventor before filing by an inventor or someone who obtained it from inventor, or if the subject matter of the alleged prior art and the claimed invention were owned by the same person by the effective filing date.
Although still complex, these provisions are much simpler. They also expand what can be considered prior art. Further, the applicant cannot remove them as prior art by claiming he or she invented first. It will no longer matter whether the prior art reference falls before the date of invention or more than a year before the effective filing date of the application. All “prior art” is now measured from the effective filing date.
The touchstone of this redefinition of prior art is public disclosure of the invention. This can be by publication or by selling the invention. The Act incentivizes public disclosure and, in particular, the prompt filing of patent applications. If an inventor delays filing, and another independent inventor either files first, publishes the invention, or sells the invention, the first inventor loses their right to a patent. The patent will go to the first-inventor-to-file.
II. Five New Proceedings May Strengthen Patents
The Act includes five new procedures intended to strengthen the patents that the U.S. Patent and Trademark Office (PTO) issues.
The first, Derivation Proceedings, are integral to the grace period exceptions. Under the old “first-to-invent” system, interference proceedings were used to determine who was the first-to-invent. Determining who got the patent depended on resolving a series of factual questions, including who conceived first, were they diligent in making the invention or filing their application, and when did they make or file. Interference proceedings, however, have become cumbersome and expensive, rivaling the cost and delay of civil litigation.
The Act replaces interference proceedings with this new Derivation Proceeding. The Patent Office will consider when the invention was conceived and whether it was communicated to another who filed without the inventor’s authorization. Thus, the Act institutes not a true “first-to-file” system but, rather, a “first-inventor-to-file” system. A Derivation Proceeding may only be instituted by an inventor who has filed a patent application. The Derivation Proceeding must be filed in the name of the applicant within a year of the publication of the first-filed application. Moreover, the party instituting the Derivation Proceeding will be required to prove that the first filer derived the invention from them and was not authorized to file.
The Act leaves substantial discretion with the Director of the PTO whether or not to institute these Derivation Proceedings, and the Director’s decision is final and not appealable. In addition, the Director may determine whether to continue or dismiss any interferences that were commenced up to a year after the passage of the Act.
The Act also implements three new procedures to challenge the issuance of a patent and one additional procedure for a patentee to have the Patent Office consider additional prior art that it did not consider during the initial grant of the patent. Congress recognized that high-quality patents promote innovation and economic growth and that low-quality patents may hinder development and investment. Congress instituted these three new procedures to make challenging a patent more efficient and less expensive.
The second procedure is Preissuance Submissions. Currently, a third party can submit prior art to the PTO in connection with a patent application but cannot provide any explanation. The submission is also limited currently to 10 documents. The new Preissuance Submission procedure instead requires a description of the relevance of each document, and there is no limit on the number of documents that can be submitted. The submission may be made only during the first six months after publication or before the first rejection, whichever is later. This procedure cannot be used after the application has been allowed.
The Preissuance Submission procedure can significantly impact prosecution. The requester can remain anonymous. The cost is low, and the requester is not required to meet any threshold for the significance of the material being submitted. Most important, the requestor is not precluded from later challenging the patent if it is allowed. Nonetheless, the requestor cannot otherwise participate and, if a patent is granted, it will be presumed valid over the material submitted.
The third new procedure, Post-Grant Review allows a challenge within nine months of the patent grant. Unlike existing reexamination and reissue proceedings, which are limited to patents and printed publications, Post-Grant Review can be based on any ground for invalidity of a patent under the Act: prior art; lack of utility; improper subject matter; as well as lack of written description and enablement, and indefiniteness. A Post-Grant Review challenge cannot be based on best mode or inventorship. The claims are given their broadest reasonable interpretation and the challenger need establish invalidity only by a mere preponderance of the evidence.
These Post-Grant review procedures are phased in based on the type of application and when it was filed. Business method patents can be challenged under Post-Grant Review beginning one year after enactment, as can any pending interferences that are transferred by the Board of Patent Appeals and Interferences. The Board itself will be renamed the Patent Trial and Appeal Board. The Patent Office must make a decision on the request within three months, and must render a decision within a year of deciding whether to review the patent. Beginning one year after enactment, only patents in the “first-inventor-to-file” system will be eligible for Post-Grant Review.
There will be a substantial transition period to the new system. The Patent Office and the courts must consider whether a particular patent is subject to the “first-to-invent” rules or the “first-inventor-to-file” rules. The “first-to-invent” rules apply only if every claim in the application is entitled to an effective filing date prior to September 16th , 2011. If any claim in the application is not entitled to an effective date before September 16th , 2011, even if that claim is later withdrawn, the entire application is subject to the new rules.
The fourth new procedure is Inter Partes Review (Inter partes review is when a new trial proceeding is conducted or sought at the Board for review of the patentability of one or more claims). Where Post-Grant Review can be filed only within nine months after the patent is granted, Inter Partes Review can be filed only after the later of: nine months after the patent is granted; any Post-Grant Review is terminated; or one year after an alleged infringer is sued for infringement. Inter Partes Review is expected eventually to replace the current reexamination procedures.
Unlike Post-Grant Review, Inter Partes Review applies to all patents issued, whether before or after the effective date of the Act. As was the case with the old reexamination procedures, however, it is limited to patents and printed publications. Other prior art and defenses that may be considered in Post-Grant Review cannot be considered during Inter Partes Review.
As was the case with Post-Grant Review, a threshold requirement must be met for Inter Parties Review. And, as was the case with Post-Grant Review, this threshold requirement is higher than the old “substantial new question of patentability” standard for reexamination. Inter Partes Review will be granted only if the requester shows a reasonable likelihood that they would prevail on one or more of the claims. As was the case with Post-Grant Review, the Patent Office must decide within three months whether or not to proceed with Inter Partes Review and must render its decision within a year of deciding to proceed. Unlike Post-Grant review, Inter Partes Review is available for any patents, whether issued before or after implementation of the Act.
In both Post-Grant Review and Inter Partes Review, the burden of proof on the challenger is lower than in litigation. Similar proof is required in each proceeding. It is anticipated that both proceedings will cost less than civil litigation and may be decided more quickly, namely within about a year to year and a half.
Both, however, entail certain disadvantages. Both have a higher standard to institute the proceedings than current reexamination procedures. Both must identify the real party in interest. In addition, Inter Partes Review is available for more limited grounds than is Post-Grant Review. Finally, and most important, the challenger will be precluded from relitigating any defense that they did or could have raised in either Post-Grant Review or Inter Partes Review proceedings. Thus, both must be viewed as alternatives to civil litigation.
The fifth new proceeding is Supplemental Examination. One common defense to a patent infringement action is that the patent was acquired through fraud or inequitable conduct. If successful, the patent is unenforceable. These defenses, however, are complex and time-consuming and many courts consider them a “plague” on the system.
Yet, the Patent Office is not often aware of every reference that is available. The Act offers a new procedure for the patentee to have the Patent Office consider innocently withheld or misrepresented information. This Supplemental Examination procedure is available beginning September 16th, 2012. If the information is considered, reconsidered, or corrected during a Supplemental Examination, it cannot be the basis for a fraud or inequitable conduct claim.
III. The Act Modifies Certain Defenses to Patent Infringement
The Act also modifies some of the defenses to a patent infringement claim. On one hand, it broadens some defenses that were previously available only for business method patents. On the other hand, it eliminates some defenses that had been perceived as adding substantial cost and expense without offering substantial benefits to the public.
Formerly, only business method patents could be challenged on the grounds that the method was in prior commercial use a year before the effective filing date. The Act makes this defense available against all patents.
Congress also perceived problems with the joinder of multiple defendants in a single action. This practice became very common in districts, such as the Eastern District of Texas, where dozens of defendants are frequently joined, complicating the case and, in the opinion of many defendants, prejudicing each defendant's ability to receive a fair trial. The Act now permits defendants to be joined for trial only if the accused infringing products or methods are essentially the same.
Another defense that was considered skeptically by some is the “best mode” defense. An applicant is required to disclose the best way they know how to practice the invention at the time of filing. This requirement is highly subjective, typically requires extensive discovery, and is rarely successful. Although applicants are still required to disclose their best mode, it is no longer a basis for invalidity.
IV. The Act Eliminates Patent Protection for Certain Controversial Inventions and Severely Limits False Marking Claims
Congress also determined that certain types of inventions should not be patentable. For example, strategies to reduce, avoid, or defer tax liability, and inventions that embrace a human being are no longer patentable.
For many years, the patent statute prohibited false patent marking. This provision could be enforced by the Government or by a qui tam action (an action used to protect “whistle blowers” who reveal what they believe to be violations of law or regulations) brought by a private party on behalf of the Government. The Government, however, rarely enforced these provisions. The plaintiff’s tort bar, however, filed hundreds of false marking actions. The Act severely restricts these claims, limiting damages to the actual commercial damages suffered by the claimant.
The Act makes a number of other administrative changes as well. For example, the current Statutory Invention Registration system allows a filer to create prior art using the patent system. These provisions are repealed. The filer will now need to file a non-provisional patent application and allow it to be published.
The PTO has also gained the authority to set its own fees. This may lead to significant fee increases as the Patent Office uses its fee structure to manage applicant behavior.
In addition, the Act permits the Patent Office to establish rules for Priority Examination. Based on the filing of an additional fee, the applicant can request expedited examination for a wider range of technologies that was previously available.
V. Timing
Some of the Act’s provisions became effective upon enactment, September 16th, 2011. Others do not become effective until a year later. Some are not effective until March 16th, 2013, when the Act becomes fully effective. Unless a provision has another date specified in the Act, the effective date of all of the provisions of the Act is September 16th, 2012.
The provisions that became effective immediately are: the higher threshold to enter Inter Partes Reexamination; elimination of the best mode requirement; elimination of tax strategies and inventions that embrace a human being; lower fees for “micro” entities; restriction of false marking liability; and enhanced PTO fee-setting authority.
A number of other provisions become effective a year after enactment. Preissuance Submissions, Supplemental Examination, and Reissue amendments, all become effective on September 16th, 2012.
Other provisions become effective 18 months after enactment. The “first-to-file” provisions, and the Statutory Invention Registration provisions become effective on March 16th, 2013.
The changes effected by the Act will require substantial additional regulatory action by the U.S. Patent and Trademark Office in order to implement them. The PTO has already begun this process and appears to be following its published schedule to accomplish this goal. Once the “first–inventor–to–file” system has been fully implemented, the system should provide greater certainty and improve the quality of U.S. patents. This will benefit all users of the U.S. patent system as well as the public.

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