Patent Reform Legislation Nears Enactment

Yesterday, the U.S. Senate passed, without amendment, the House patent reform bill H.R. 1249 which the President has promised to sign. This legislation, titled the "Leahy-Smith America Invents Act," provides the most significant revisions to the Patent Act since 1952. Some of the most significant features of the legislation are summarized below:

1. Movement to a "first to file" Patent System

• The legislation moves the U.S. patent system from a "first to invent" system to a "first to file" system similar to the systems in place in most other countries.  As a result, applicants will need to consider filing applications earlier in the inventive process.
• To accommodate the change to a first-to-file system, Section 102 of the Patent Act (conditions for patentability; novelty) is substantially amended. In general, novelty will be defeated based on disclosures that place the invention in the public domain (i.e. sales, public use, publications, etc.) prior to the filing date of the application or by earlier in time patent applications that ultimately result in published applications or patents. The legislation continues, however, to provide a one year grace period for disclosures by the inventor or by others who obtained the disclosed subject matter from the inventor. Sales or public use outside of the U.S. will now have the same impact on patentability as sales or public use within the U.S.
• In place of the former interference proceedings used to resolve disputes regarding the first inventor, the legislation establishes "derivation proceedings" through which a later applicant can seek to establish that an earlier applicant derived the invention from the later applicant.
• The provisions implementing the "first to file" system go into effect 18 months after enactment.  Accordingly, sufficient time exists to educate personnel regarding the potential need for earlier filing and to evaluate strategies for existing patent portfolios as the effective date approaches.

1. Expansion of the Infringement Defense Based on Prior Commercial Use

• The legislation establishes a general defense to infringement if the alleged infringer can establish prior internal commercial use of a claimed invention or the sale of an end result of such commercial use more than a year before the effective filing date of the asserted patent. This provision partially removes the historic concern in balancing the desire to maintain an invention as a trade secret against the risk that someone else will independently develop and patent the same invention.
• The right to the defense is transferrable under certain conditions (generally through the sale of the related business). Companies may therefore need to consider the value and transferability of these rights during due diligence in future mergers and acquisitions.
• The provisions relating to the prior commercial use defense will apply to any patent issued on or after the date of enactment.

1. Post-Grant and Inter Partes Review of Patents

• The Act establishes several measures for challenging the issuance of patents including a "post-grant review" and an "inter partes review" (the latter of which replaces inter partes reexamination).
• Post grant review is available until nine (9) months after grant of the patent and permits the petitioner to submit any prior art relevant to patentability and to raise all questions relating to patentability including those under 35 U.S.C. § 112 (e.g., enablement).      
  
• Inter partes review is available after the post-grant review period ends. The petitioner may only challenge the patent based on prior patents or printed publications and only novelty and obviousness will be considered.
• The legislation establishes procedures for staying either the reviews or corresponding civil actions when both are initiated.   
  
• For any review that takes place, the legislation provides for estoppel of any later challenge to the patent based on the same ground or grounds that reasonably could have been raised in the review.  
  
• The provisions relating to post-grant and inter partes review of patents go into effect one year after enactment.
  

1. Expansion of Pre-Issuance Submissions

• The legislation modifies Section 301 of the Patent Act to allow parties to submit statements made by the patent owner in court or in USPTO proceedings relating to the scope of a claim of an issued patent.  These statements are then available for use by the USPTO in procedures such as reexaminations.
• The provisions are effective one year after enactment, but will apply to any patent in force on or issued after that date.

1. Prioritized Examination

The legislation establishes a fee to request priority examination of the application (essentially authorizing the "Track One" process of prioritized examination nearly implemented by the USPTO earlier this year).  The legislation gives authority to the USPTO to limit use of this process and establishes initial limits on the number of applications and the number of claims in any individual application under which priority examination is requested while the USPTO determines final limitations to the program.

1. Correction of Patents Through Supplemental Examination
   

The legislation permits a patent owner to request "supplemental examination" of a patent to consider or correct information relevant to the patent. The USPTO will determine whether a "substantial new question of patentability" is raised in determining whether to proceed with a "reexamination" of the patent and will generally treat the request like an ex parte reexamination except that the patent owner will not file the usual patent owner's statement required under Section 304 of the Patent Act as in typical ex parte reexaminations.

1. Elimination of Best Mode as a Ground of Invalidity
   

The legislation amends Section 282 of the Patent Act to remove failure to comply with the best mode requirement as a ground for invalidating a patent claim.

1. Changes Related to Patent Marking
   

• The legislation establishes a procedure for "virtual" marking through which a patent owner can reference a publicly accessible internet site listing patent numbers and also removes false marking liability resulting simply from the expiration of listed patents thereby making it easier for manufacturers to address changes in patent marking.
• The legislation permits lawsuits for false marking to be filed only by the United States or by those suffering a competitive injury and applies this limitation immediately including to pending cases.

1. Joinder of Parties

• The Act attempts to limit the ability of patentees to bring multi-party infringement cases by permitting joinder only when the actions of the defendants arise out of the same transaction or occurrence and by explicitly stating that bare allegations that each party has infringed the patent are insufficient for joinder.
• This provision applies to any action commenced after the date of the Act.

1. Limitation and Review of Business Method Patents

• The legislation effectively bans future patenting of any strategy for reducing, avoiding or deferring tax liability.
• The legislation establishes a transitional program for post-grant review of business method patents under which a party sued for infringement can petition for review of the patent using substantially the same procedures as the new post-grant review (discussed above).  The legislation further provides factors for courts to consider in potentially staying litigation involving any such patent placed under review. These provisions will take effect one year after enactment and will apply to any business method patent regardless of when issued.  The provisions will be repealed (or sunset) eight years later.

The passage of patent reform legislation promises the most significant changes to the practice of obtaining and enforcing patent rights in decades. If you have questions regarding the impact of this legislation, Dykema's Intellectual Property Department is available to answer your questions at any time.

---

_{As part of our service to you, we regularly compile short reports on new and interesting developments and the issues these developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2011 Dykema Gossett PLLC.}