13 years ago

Steven J Hultquist, Principal, Hultquist PLLC

The Leahy-Smith America Invents Act (“AIA”) was signed into law by President Obama on September 16, 2011 amending Title 35, United States Code, "to provide for patent reform."

Some of the more pertinent aspects of this legislation are identified below, with brief commentary.

Change From First-To-Invent To First-To-File

On March 16, 2013, the provisions of the AIA-revised 35 U.S.C. §102 come into effect, with the result that the U.S.patent system will change on that date to a first-to-file system. 

The new first-to-file law will apply to patent applications filed on or after March 16, 2013, or that contain any claims having an effective date on or after March 16, 2013. The old first to invent law will continue to apply to patent applications filed before March 16, 2013. The practical consequence of the change to the first-to-file system will be a significant rush of U.S. Patent application filings as this date approaches, to obtain the benefits of the prior law.

The old law first-to-invent system was based on the premise that an invention is made by (i) conception of the inventive idea, followed by (ii) reduction of practice of that inventive idea.

Reduction to practice thus is a completion-of-the-invention event.  It can be carried out in two different ways. One way is to physically implement the invention, to "prove out" the inventive idea and demonstrate its workability. This is called actual reduction to practice. The other way to complete an invention under the old law is to simply file a patent application on the inventive idea. This filing of a patent application without any actual reduction to practice is called constructive reduction to practice.

Constructive reduction to practice of an invention may be resorted to when an invention is costly to physically implement, and it is possible to set out the description of the inventive idea in a patent application with enough detail so that an ordinarily skillful person in the field of the invention could utilize the description to make and use the invention without excessive effort.

Under the old law first-to-invent system, rules were set up to determine who receives the patent when two parties independently make an invention.

If the first party both conceived and reduced to practice the invention prior to conception of that invention by the second party, the first party prevails as the "first to invent." 

If the first party conceived the invention first, but a second party later conceived the invention and more rapidly completed the invention by reduction to practice, before the first party could complete it, then the first party is still deemed to be the first inventor, if the first party has progressed from conception to reduction to practice with continuing diligence. Such "first to conceive, last to reduce to practice" diligent inventor therefore is awarded the patent rights in the invention.

The Patent and Trademark Office in order to make official determinations between competing inventors seeking a patent on the same invention has provided administrative trial proceedings called "interferences," in which the inventors present evidence of the conception, reduction to practice, and continuing diligence activities.

While the first-to-invent system has worked well in theUnited States, theUnited Stateshas been virtually alone in the world in using such system to determine invention rights and ownership.

The vast majority of patent systems outside theUnited Stateshave been conducted under first-to-file rules, meaning that the first party to file a patent application prevails over a party who later files a patent application on the same invention.

This "race to the patent office" system, as the first-to-file system is often termed, has created instances in which one of competing parties seeking to patent an invention prevails in the United States under the first-to-invent rules, while another or others of such competing parties prevail outside the United States under foreign first-to-file rules.

Under the new system applicable to all patent applications filed in the U.S. Patent and Trademark Office on or after March 16, 2013[1], the first applicant to file a patent application on the invention will prevail.  

Nonetheless, any patent applications filed prior to the new law coming into effect will be governed by the old law, with the effect that there will be a rush of filing to "get in under the wire" and take advantage of the old law, particularly with respect to situations in which novelty issues are raised by disclosures, priority rights or prior art under the new law, but are not prejudicial to patentability under the old law.

The Concept of Effective Filing Date under the New Law

35 U.S.C. §100 has been amended by the AIA to specify the term “effective filing date” which means "the actual filing date of the patent or the application for the patent containing a claim to the invention" or, if there is a priority claim to an earlier application, then the effective filing date is the earliest priority filing date to which the patent or application is entitled.   

This change globalizes the U.S.patent system in a very different way than under the old law. Under the old law, the effective date of a foreign patent reference was its date of publication, or in the case of an international patent application designating theU.S.for ultimate protection, the international patent application filing date.  The old law therefore permitted applicants to secure U.S.patents despite the fact that the same invention had earlier been the subject of a foreign patent application by another party. Under the new law, foreign patent/patent application references are effective as prior art, as of their filing date.

Categories of Patentable Subject Matter

The new law makes no change in 35 U.S.C. §101, which sets out the categories of subject matter eligible for patent protection, as “process, machine, [article of] manufacture, or composition of matter, or any new and used for improvement thereof.”

Although the §101 categories of subject matter eligible for patent protection have not changed, there has been increasing focus in judicial decisions on “patent eligibility” requirements for  various types of invention, e.g., software, pharmaceutical diagnostic methods, and business methods. 

Novelty Requirements Under 35 U.S.C. 102

The three requirements for patentability under the old and new statutes include novelty, non-obviousness and utility.  The novelty requirements in 35 U.S.C. §102 have been significantly changed under the new law that becomes effective in March, 2013. 

Under the new law provisions of 35 U.S.C. §102, novelty of an invention is destroyed, thus precluding patentability of an invention, by:  

• a patent, printed publication, public use,  “on sale” status, or other public availability of the invention, before the effective filing date of a patent application directed to such invention, or
• an issued patent or published patent application that names another inventor and has been filed before the effective date of the patent application directed to such invention.

The foregoing events destroying the novelty of an invention are subject to exceptions in paragraph (b) of 35 U.S.C. §102. 

In essence, a disclosure of the invention made within one year of the effective filing date of the invention is disregarded as prior art if:

(i)                  the disclosure of the invention was made by the inventor(s) or by another party who obtained the subject matter directly or indirectly from the inventor(s); or

(ii)                the disclosure was made by another party[2], but such disclosure of the invention was preceded within the one-year period of time by a disclosure of the invention by the inventor(s) or another party who obtained the subject matter directly or indirectly from the inventor(s); or

(iii)               the disclosed subject matter and claimed invention were commonly owned[3] no later than the effective filing date.

Thus, there is an exception or "grace period" for these disclosures of the invention, but the statute is unclear as to whether public use or "on sale" activities involving the invention will fall under such "disclosures" exception, and be subject to a one-year grace period, or whether there will be immediate destruction of novelty by any such use or sale activities by the inventor.

This is one of a number of examples of legislative ineptitude in the drafting of the new law that create tension between various sections of the patent statute, and will require clarification by subsequent judicial decisions construing the statute, unless Congress acts to provide clarifying amendments or otherwise resolves such issues.

The safest and most conservative course in this regard is to treat all prospective use, sale and disclosure/publication activities as patent-defeating events, and to file the patent application directed to the invention prior to any such events.

Non-Obviousness

35 U.S.C. §103 contains the non-obviousness requirement for patentability. The new law’s §103 provision continues the requirement that the differences between the claimed invention and the prior art must be such that the claimed invention as a whole would not have been obvious to a person having ordinary skill in the art (i.e., the field of the invention). 

The new law non-obviousness provision differs from the old law in the applicable point in time at which such determination of the differences between the claimed invention and the prior art is made. The new law establishes the effective filing date as the relevant point in time for making this determination, whereas the old law required this obviousness/non-obviousness determination at the time the invention was made. 

Best Mode Requirement

A “best mode” requirement is contained in 35 U.S.C. §112 in both the old and new laws.  This requirement obligates a patent applicant to set forth in the patent application the best mode of carrying out the invention known to the applicant at the time of filing the application.  Previously, best mode requirements were frequently used in litigation to attack the validity of patent claims.  Under Section 15 (“best mode requirement”) of the new law, applicable to all proceedings commenced on or after September 16, 2011, “failure to disclose the best mode shall not be a basis on which any claim of a patent may be cancelled or held invalid or otherwise enforceable.” 

Joint Inventorship

35 U.S.C. 116 under both the old and new laws provides that patent applications may be filed by joint inventors even though “(1) they did not physically work together or at the same time, (2) each did not make the same type or amount of contribution to the invention, or (3) each did not make a contribution to the subject matter of every claim of the patent.”

Federal Circuit case law has imposed an additional requirement for joint inventors that there be "some quantum of collaboration." Kimberly-Clark Corporation v. Procter & Gamble Distributing Company, Inc., 973 F.2d 911, 917 (Fed. Cir. 1992).

While the new law in §100(f) refers to inventors in a joint invention as "individuals collectively who invented" the subject matter in question, there is nothing in the statute to clarify what is meant by the term "collectively" or whether such term has any relationship to "collaboration" as used in the case law decisions construing joint inventorship.

Accordingly, it is not clear under the new law whether any extent of interaction or collaboration between inventors is necessary for joint inventorship to obtain.  It may therefore be prudent to combine related subject matter deriving from different individuals in an organization, to avoid any earlier filed application prior art issues that would otherwise arise if separate patent applications were filed at different times, with an earlier one of such applications nominally being prior art to the other.

Prohibition of Patents on Human Organisms

Section 33 of the AIA ("Limitation on Issuance of Patents") provides that "no patent may issue on a claim directed to or encompassing a human organism." This provision applies to any application pending on, or filed before or after, September 16, 2011.

The scope of this provision as regards isolated human DNA, progenitor stem cells, or bioengineered replacement body parts, is not known, and likewise awaits further judicial and/or legislative clarification.

AIA Advice of Counsel Provisions

The AIA in Section 17 thereof ("Advice of counsel") amends the Patent Law in new §298 to provide that failure of an infringer to obtain advice of counsel on an allegedly infringed patent, or the failure of such party to present such advice to a court or jury, cannot be used to prove willful infringement or intent to induce infringement of the patent.

Patent Marking Provisions

Section 287 of the Patent Law is amended by the AIA to provide for marking of products "by fixing thereon the word ‘patent’ or ‘pat.’ together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent."  This virtual marking provision is effective from and after September 16, 2011.

In response to the spate of private action qui tam suits filed in recent years to recover damages for products marked with patent number(s) of patents that remained on the product after patent expiration, §292 of the Patent Law has been amended by the AIA to provide that on after September 16, 2011, only the United States can sue for penalties for false marking (§292(a)), that private action for false marking is limited to persons suffering competitive injury with damages recoverable that are "adequate to compensate for the injury," and that product marking relating to a patent that "covered that product but has expired is not a violation" of §292.

Third Party Prior Art Submission

The AIA in Section 8 thereof amends 35 U.S.C. §122 to provide that any third party can submit patents, published patent applications and other printed publications of potential relevance to the examination of a pending U.S. application, for consideration and inclusion in the record of such pending U.S. application, when submitted prior to: (i) six months after the publication of the patent application or (ii) a rejection of claim(s) by the PTO, whichever is later; or otherwise before a notice of allowance (NOA) is issued, if the NOA precedes the later of events (i) and (ii).

Such a prior art submission must set out a concise description of the relevance of each submitted document, and be submitted with a prescribed fee.

These provisions relating to third-party prior art submission take effect on September 16, 2012, for patent applications filed on, before or after such date.

Post-Grant Proceedings

The AIA modifies current reexamination practice, by providing for continuation of ex parte reexamination proceedings but phasing out inter partes reexamination proceedings in favor of a new inter partes review process. A new post-grant review procedure is established, as well as a supplemental examination process.

Ex parte Reexamination

Ex parte reexamination proceedings under the AIA can no longer be appealed to the U.S. District Court under 35 U.S.C. §145. The sole appellate route is now from the Patent Trial and Appeal Board (which replaces the USPTO Board of Patent Appeals and Interferences) to the United States Court of Appeals for the Federal Circuit. This provision is effective from September 16, 2011.

Inter partes Reexamination

Inter partes reexaminations are being phased out in favor of the new inter partes review procedure as of September 16, 2012. In the interim, inter partes reexamination requests filed after September 16, 2011 are no longer subject to the old requirement that the request for reexamination must raise a "substantial new question of patentability," and instead are subject to the higher standard that the request must establish a "reasonable likelihood that the requester would prevail" with respect to at least one of the claims that is challenged in the request.

This standard of "reasonable likelihood" of prevailing as to at least one of the claims challenged in the request is the standard that will apply in the new inter partes review, available on after September 16, 2012.

The inter partes review proceedings will be conducted before the Patent Trial and Appeal Board. Any appeal from a PTAB decision in such proceedings is directly to the United States Court of Appeals for the Federal Circuit, and there is no appeal to the U.S. District Court. Inter partes review is limited to grounds "that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publications" pursuant to AIA Section 311.

Petitions for inter partes review must be filed after a date nine months after the grant of the patent or patent reissue being challenged, or if a post-grant review is instituted under chapter 32, then after such post-grant review has terminated, whichever is later. The patent owner may file a preliminary response to a petition for inter partes review, opposing such proceeding. 

Inter partes review is precluded if a petitioner has already filed suit in federal court challenging the patent, but if such a suit is filed after the petitioner has requested inter partes review, then inter partes review is stayed. Such stay can be lifted on motion of the patent owner, or if the patent owner files an action or counterclaim for infringement, or if the inter partes review petitioner makes a motion for dismissal of the suit. Final rules for the inter partes review procedure are required from the USPTO Director by September 16, 2012.

Post-Grant Review

Section 6 of the AIA revises the Patent Law to provide for post-grant review by the U.S. Patent and Trademark Office of claims in an issued patent. Final rules for the post-grant review procedure are required from the USPTO Director by September 16, 2012. In post-grant review proceedings, a party may request cancellation by the PTAB of one or more claims of a patent on any ground that could be raised under Title 35 Section 102 (novelty grounds), Section 103 (non-obviousness grounds), or Section 112 (grounds other than best mode requirement), or that relates to any "novel or unsettled legal question that is important to other patents or patent applications." Such petition must be filed within nine months after the grant of a patent or issuance of reissue of a patent, or if another post-grant review is pending, then prior to the date of termination of such other post-grant review.  The patent owner can file a response to the petition for post-grant review, setting forth reasons why no such review proceeding should be instituted.

The threshold standard for granting post-grant review is that the petition set out information which if not rebutted, would demonstrate that "it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable" (§324).

The post-grant review is conducted before the Patent Trial and Appeal Board, and is required to be completed within 1 year of its initiation, unless the PTO Director extends the proceeding for up to 6 months for “good cause.” The patent owner may file a motion to amend the patent by the cancellation of any patent claim, and the proposal of a reasonable number of substitute claims. The post-grant review proceedings may be settled by the petitioner and patent owner. A decision of the Patent Trial and Appeal Board in the post-grant review proceeding will result in a certificate cancelling any claims of the patent finally determined to be unpatentable, confirming any claims determined to be patentable, and incorporating in the patent any new or amended claims determined to be patentable.  Amended and new claims will be subject to intervening rights as to activities previously outside the scope of the patent claims, but subsequently encompassed by the claims as confirmed by the PTAB decision.  The PTAB decision can be appealed to the U.S. Court of Appeals for Federal Circuit. 

To be eligible for post-grant review, the patent must have a priority date that is on or after March 16, 2013. 

Post-grant review is precluded if a petitioner has already filed suit in federal court challenging the patent, but if such a suit is filed after the petitioner has requested post-grant review, then post-grant review is stayed. Such stay can be lifted on motion of the patent owner, or if the patent owner files an action or counterclaim for infringement, or if the post-grant review petitioner files a motion for dismissal of the suit.

Supplemental Examination

Supplemental Examination is an ex parte procedure that can be used to obtain a USPTO determination of issues under 35 U.S.C. §112 or public use or on sale issues under 35 U.S.C. §102 or any information relevant to the patent that includes but exceeds the limits of printed publication or patent prior art issues. Supplemental Examination is available as of September 16, 2012. It is conducted within three months of request, and reexamination is ordered if there is a substantial new question of patentability. No patent owner statement is permitted.

The new provisions in §257 of Title 35 provide that a patent shall not be held unenforceable on the basis of conduct relating to information that had not been considered, was inadequately considered, or was incorrect in the prior examination of the patent if such information was considered, reconsidered, or corrected during the Supplemental Examination of the patent, unless it involves an allegation that was previously pled with particularity under the U.S. Food, Drug & Cosmetic Act, or unless the Supplemental Examination and resulting reexamination were not complete before a civil action or ITC proceeding was brought on the patent. The making of a request for Supplemental Examination, or the absence of such request, shall not be relevant to enforceability of a patent under 35 U.S.C. 282.

If the USPTO Director determines that a material fraud on the PTO has been committed in connection with the patent that is the subject of Supplemental Examination, the Director can refer the matter to the Attorney General for further action.

Prior User Rights

Section 5 of the AIA establishes prior user rights in amended 35 U.S.C. §273, applicable to any patent issued on or after September 16, 2011.  The statute provides a prior user defense to otherwise applicable infringement for good faith prior commercial use of an invention in theUnited States, either in connection with internal prior commercial use of the patented invention or an actual arms-length sale or commercial transfer of a "useful end result of such commercial use." In order for the defense to apply, the commercial use activity supporting the defense must have occurred more than one year before the earlier of (i) the effective filing date of the patent or (ii) the first "public disclosure" constituting an exception to otherwise applicable prior art under 35 U.S.C. 102(b).  

The prior user defense under this provision of the Patent Law must be established by clear and convincing evidence. The aforementioned sale or commercial transfer of a "useful end result" to which the defense is applicable will exhaust the applicable patent rights, to the same extent as if the patentee had sold or transferred the end result product.

If a court finds that there is no reasonable basis for assertion of a pleaded prior user defense, the court may find the case to be of "exceptional" character, for purposes of awarding attorneys fees under 35 U.S.C. §285.

Activities establishing safety or efficacy for pre-marketing regulatory review, such as clinical trials of a pharmaceutical necessary for FDA market approval, are deemed to be prior commercial use within the meaning of §273.

Prior use of an invention will support the prior user defense, if carried out by a nonprofit research laboratory, University, hospital, or other nonprofit entity, for which the public is the intended beneficiary. Such use is deemed to be prior commercial use within the meaning of §273, but the defense may be asserted only for continued and noncommercial use by such entity.

Tax Strategies Deemed Within Prior Art

Section 14 of the AIA provides that "any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art."  Excluded from the scope of this provision are a method, apparatus, technology, computer program product, or system, that is used solely for (i) preparing a tax return or information return or other tax filing, or (ii) financial management, to the extent that it is severable from any tax strategy or does not limit the use of a tax strategy by any taxpayer or tax advisor.  This provision is effective September 16, 2011.

Steven J. Hultquist

Hultquist, PLLC

October 1, 2011