On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act, which dramatically changes the patent system in the United States. The various sections of the Act contain a wide variety of effective dates that result in some provisions being effective immediately while others will not be effective for as long as 18 months. We have been going over the bill and its effects on the patent system and provide the following discussion of certain important sections of the bill and recommendations in light of the changes —

First Inventor to File System

Section 3 of the Act changes the United States patent system from a "first to invent" system to a "first inventor to file" system. This results in several significant changes to obtaining a patent in this country. First, there is no longer a one year grace period for filing a patent application and any patent or printed publication, or public use or offer for sale, up to the filing date of the application, can act as a bar. As an additional change, the public use or offer for sale activities that serve as a bar can occur anywhere in the world. One significant exception in the new system is that disclosures made by the inventors themselves, or any disclosure based on information obtained from the inventors, will not act as a bar to a patent if the patent application is filed within one year from the date of the disclosure. This section will become effective 18 months from the date of enactment of the bill (i.e., March 16, 2013) and will apply only to applications filed with a priority date after the effective date.

Because of these changes, we recommend that our clients begin to immediately clear their back log of invention disclosures. Any patent applications filed within the next 18 months will be reviewed under the old system and will not be subject to the new provisions. Because of the removal of the one-year grace period, we also recommend that our clients consider, where appropriate, filing provisional applications and publishing their disclosures early. This is especially important for any inventions within an industry where there is considerable simultaneous invention, because for applications filed on or after March 16, 2013,the patent will go to the first inventor to file without concern for the date of invention.

Prior Commercial Use Doctrine

Section 5 of the Act expands the availability of prior commercial uses as a defense against infringement. Any third party that has continuously engaged in commercial use of a patent's subject matter at least one year before the earlier of the filing date of the application for patent or a disclosure of the invention by the patentee has a personal defense against the patent owner. The defense includes affiliates of the third party and applies to several types of business processes including business methods. The defense contains limitations that arise in the event of the sale of the third party This defense becomes effective immediately and applies to any patent issued on or after the date of enactment.

To take advantage of this defense, we recommend that our clients maintain adequate internal records to document their business processes including the dates on which such processes were first used. Because the burden of proving this defense is by clear and convincing evidence, these records are critical to proving the applicability of the defense.

Inter Partes and Post Grant Review

Section 6 of the Act adds a new post grant review process and replaces inter partes reexamination with inter partes review.

Post grant review provides a third party an opportunity to raise grounds of invalidity against recently-issued patents. The request for a post grant review must be filed within nine months of issuance of a patent, and the Patent Office will grant the request if it is "more likely than not" that the patent is invalid. The details of the post grant review procedures will be set by Patent Office regulations to be developed in the coming year. The post grant review provisions have an effective date of one year from date of enactment. However, absent very specific exceptions, only patents that have been issued pursuant to the new "first inventor to file" patent system are subject to post grant review.

Also effective one year from enactment, inter partes reexaminations will become inter partes reviews. An inter partes review can be filed after nine months from the issue date of the patent or after termination of a post grant review. Inter partes review differs from inter partes reexamination in that the process is significantly faster - it has a statutorily-imposed one year time limit. There is also the availability of discovery as well as the opportunity for a statement from the patent owner. The specifics of the new procedure will be set out in a set of regulations that the Director of the Patent Office is required to issue before the effective date in one year. Inter partes reexaminations and inter partes reviews will both use a new standard - "reasonable likelihood that the petitioner will prevail" on at least one claim. This standard is higher than the current "substantial question of patentability" standard. The new standard is effective immediately for all inter partes reexaminations.

Our clients will need to carefully consider participating in these new procedures, because an unsuccessful review could prevent the party who instigated the review from raising related arguments in future proceedings, such as infringement lawsuits.

Third Party Submissions

Section 8 of the Act expands the opportunity for third parties to submit prior art in connection with pending applications. Traditionally, third parties could submit patents or printed publications during the examination of a pending application, but were required to do so without comment. Now, if a third party wishes to submit patents or printed publications it must include a statement regarding the relevance of the submission, and can make such a submission before the notice of allowance or the earlier of six months after publication or first rejection of any claim. These provisions go into effect one year from the date of enactment of the bill.

Fee Increases

Section 11 of the Act provides for a 15% increase in all patent-related fees in the Patent Office which becomes effective on September 26, 2011. Additionally, this section also provides for a $4,800 ($2,400 for small entities) fee for prioritized examination. The prioritized examination system provides for the examination of a patent application within one year, but is subject to regulations set by the Director including a limit of 10,000 prioritized applications a year.

Supplemental Examination

Section 12 of the Act establishes a new supplemental examination procedure where a patent owner can request that the Office consider, reconsider, or correct information relevant to the patent. The information may not thereafter be relied on to assert unenforceability of the patent. This can be a beneficial procedure for clients to correct mistakes, but it should be noted that if there is evidence in the new information that fraud may have been committed, the claims can be canceled and the matter referred to the Attorney General. These provisions go into effect one year from the date of enactment.

Best Mode Requirement

Section 15 of the Act removes the failure to comply with the best mode requirement as a basis for finding a patent invalid or unenforceable. This provision becomes effective immediately. It is noted that despite its unavailability as a defense, the best mode of practicing an invention known to the inventors must still be disclosed in a patent application as it remains a possible basis for rejection of a patent application by the Patent Office. Although the defense is no longer available in litigation, we suspect that accused infringers will make continue to make related arguments, such as arguing that the failure to disclose the best mode results in a lack of enablement, which also can render a patent invalid. Accordingly, we recommend that our clients continue their current practice of disclosing the best mode for carrying out the invention.

Virtual and False Marking

Section 16 changes the practice of patent marking in two ways, and becomes effective immediately upon enactment. First, it permits virtual marking. Virtual marking refers to the practice of marking a product with "Patent" or "Pat." and the patent number, and making the patent information of the product available on the patent owner's website. The bill leaves many questions unanswered, such as what information needs to be available, how available the information must be, and how often the information must be available. Accordingly, we recommend that our clients continue current marking practices at this time.

The bill also restricts recovery in a civil suit for false marking only to those who suffer a competitive injury, and limit recovery to compensate for the injury. This provision, in addition to becoming effective immediately, also applies to pending litigation. Therefore, it will effectively eliminate both existing and future civil suits for false marking except for limited circumstances.

Advice of Counsel

Section 17 of the Act provides a statutory basis for preventing reliance on the failure to obtain or present advice of counsel with respect to any allegedly infringed patent to prove willful infringement. This is mainly a codification of a 2004 case in the Court of Appeals for the Federal Circuit that has been followed and has become settled law. Accordingly, it does not affect the practice of obtaining advice of counsel with respect to infringement concerns. However, because reliance on a ell reasoned opinion of counsel will continue to provide a defense against willful infringement, we recommend that our clients continue to obtain such opinions when a patent owner has asserted a claim of infringement.

Miscellaneous Provisions

The Act also includes certain miscellaneous provisions that are directed to particular industries. For instance:

  • Section 18 of the Act provides for a 8-year transitional period for parties charged with infringing certain business methods to challenge the validity of those patents in the Patent Office. Only patents that claim a method or corresponding apparatus for performing data processing or other operations used in the financial services industry are subject to this provision.
  • Section 14 of the Act which deems any patent directed to a strategy for reducing, avoiding or deferring tax liability that issues on or after September 16, 2011 within the prior art and not entitled to patent protection.
  • Section 33 of the Act prohibits the issuance of a patent directed to a human organism.
The Act also places a couple of burdens on non-practicing entities seeking to enforce their patents. Section 19 of the Act restricts joining multiple accused infringers in a single lawsuit solely on the basis that each of them has infringed the patents in suit. This provision will reduce the economies of scale which the non-practicing entities have used by naming a large number of unrelated parties in a single lawsuit. This provision became effective on September 16, 2011. Section 18 of the Act also provides that an automated teller machine is not a regular and established place of business for purposes of venue. This provision will limit where a financial institution is subject to a patent infringement lawsuit.

In the coming weeks and months, the Patent Office will be issuing a number of regulations and rulemakings on how the America Invents Act will be implemented and answering questions left unanswered in the Act. We are closely monitoring the Act's progress and will be looking into every regulation and rulemaking issued by the Patent Office.

If you have any questions do not hesitate to let us know and we will work with you to ensure a smooth transition into the new patent system provided by the Leahy-Smith America Invents Act.