Five Changes to Patent Law Every C-Level Decision Maker Should Consider
On September 16, 2012, the Leahy-Smith America Invents Act (AIA) was signed into law, ushering in a wave of reforms to the current U.S. patent system. It is important to understand how changes to both patent prosecution and litigation may affect business operations going forward.
1. The U.S. has changed from “First to Invent” to “First Inventor to File” patent system.
The U.S. currently follows a “First to Invent” system in which rights to an invention belong to the first person to conceive of the idea and diligently reduce it to practice. Even if somebody else subsequently came up with the same idea and filed a patent application prior to the first inventor, the first inventor still is still entitled to invention rights. However, the U.S. will apply a new “First Inventor to File” system to patent applications filed on or after March 16, 2013. Under the new system, rights belong to the first person not only to conceive of an invention and diligently reduce it to practice, but also to file a corresponding application with the Patent Office.
The new system encourages inventors to disclose their inventions to the public sooner, lest they lose out in a ‘race to the patent office.’ Companies may be wise to consider patenting earlier in the development phase rather than waiting for production when feasible.
2. The new patent statute redefined what is considered “prior” art, heightening the need to file patent applications quicker.
The AIA expands the definition of prior art to include public use, sales, publications, and other disclosures available to the public worldwide, not just in the U.S., as of the filing date. Further changes expand the prior art definition to include foreign offers for sale and public uses. Notably, publications by the inventor made within one year of filing are excluded as prior art.
The change to a ‘First Inventor to File’ system dramatically increases the urgency to get patent applications on file. The expanded definition of what is considered invalidating prior art puts an onus on patentees to file their applications as soon as possible. It also provides broader defenses to companies accused of infringement.
3. Companies are empowered to make third-party submissions to the Patent Office to fend off potentially meritless patent applications.
In the past, third parties were limited to sending a “have you seen” letter to a patent applicant, hoping to trigger the applicant’s duty to disclose the enclosed materials to the Patent Office for consideration. Under the AIA, third parties are now permitted to submit materials and a concise explanation of how they affect the patent application directly to the Examiner. Submissions may address issues beyond novelty and obviousness including definiteness, enablement, and new matter. The mechanism is relatively inexpensive as well, as the first 3 references submitted are free, and submission of up to 10 references costs just $180.
The catch is third-party submissions must be made in a narrow window – before the first office action is mailed, or no later than 6 months after publication of the application.
Third-party submissions provide a potentially powerful yet inexpensive way to participate in the prosecution of a competitor’s patent application, but to have maximum value, it is important to be vigilant in developing procedures to timely monitor to act within the limited window of opportunity to make submissions.
4. New procedures are provided to challenge business method patents.
The AIA provides a new type of review procedure called a “transitional proceeding” (phases out in 8 years unless reenacted or renewed) to review finance-related business method patents. The procedure is available only for patents that claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration or management of a financial product or service, except that the term does not include patents for technological inventions.” A review can be instituted at any time during the life of the patent, and is not limited to within 9 months of issuance like the Post-Grant Review procedure. The effect of this procedure likely turns on court interpretation of “financial product or service” and “technological inventions.”
Transitional proceedings make it easier for financial institutions to challenge the validity of method patents asserted against them in litigation by lowering the standard of review required to raise the issue. Further, petitioners may use non-published evidence, not just patents and printed publications, to support their positions.
5. The AIA places new limitations on multiple defendant lawsuits.
The AIA provides narrow rules intending to limit the number of defendants that can be joined in one lawsuit. While there is no per se numerical cap, defendants must be involved in some common infringing conduct to be joined together. This differs from the current practice of joining tens or hundreds of disjointed defendants in one suit on flimsy jurisdictional grounds.
The changes are intended to deter frivolous lawsuits filed against multiple defendants by plaintiffs seeking to extract cost-of-defense settlements by effectively raising the costs of litigation on patentees. After this provision went into effect, patentees began mass filing single-defendant lawsuits. Courts in the Eastern District of Texas began entering orders directing the parties to work together toward common Markman hearings despite different lawsuits with different defendants.
While Federal courts will enjoy exponential increases in filing fees, it is unclear whether these changes will reduce the burden on the court system. I expect to see a significant amount of limited joinder by the courts for claim construction and invalidity purposes.
Darin M. Klemchuk is an intellectual property (IP) trial lawyer, with significant experience enforcing patent and trademark rights. He is a founding partner of Klemchuk Kubasta LLP ( http://www.kk-llp.com ). More information about Mr. Klemchuk can be found at his bio: http://www.kk-llp.com/Darin-Klemchuk.asp.
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