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Leahy-Smith America Invents Act 

On September 16, 2011, President Obama signed the Leahy-Smith America Invents Act and, with his signature, ushered in the first major change to the U.S. Patent System since 1952.  The House passed the bill 304-117 earlier this year and the Senate voted 89-9 to pass it.

Why Patent Reform?

Congress initially began considering patent reform back during the first term of President George W. Bush when the goal was to fix what was seen as a broken patent litigation system.  It was the dawn of business method patents which spurned a new wave of litigation by non-practicing entities commonly termed “patent trolls” attempting to enforce a wide range of broadly defined and commonly used business systems and software applications.  In trying to address the new challenges, the House back in 2005, passed a version of patent reform that attempted to target poor quality patents that were encouraging a plethora of frivolous patent infringement lawsuits.  The bill, however, never cleared the Senate and as a result of constant lobbying between powerful interests (e.g. Drug companies, tech giants,  etc…), the substance of the bill slowly deteriorated for the next several years.

In 2010, Congress decided to drop all attempts to reform the patent litigation system and chose instead to focus on other less controversial issues including, among other things, attempting to make it easier for entrepreneurs to patent new inventions and changing the U.S. into a “first to file” instead of “first to invent” country to harmonize it with the rest of the world.

Supporters of the new patent reform law believe it will foster innovation and spur economic growth by providing more certainty for patent applications and owners, and provide the USPTO the resources needed to operate more efficiently to issue high-quality patents.  Opponents argue that the new law favors large corporations and fails to address the major issues concerning the patent litigation system. In 2010, Congress decided to drop all attempts to reform the patent litigation system and chose instead to focus on other less controversial issues including, among other things, attempting to make it easier for entrepreneurs to patent new inventions and changing the U.S. into a “first to file” instead of “first to invent” country to harmonize it with the rest of the world.

Highlights

Many rule changes will not take place until a year or more after September 16, 2011 but many changes, however, will take effect immediately or soon after.

Immediate Changes or Occurring within 10 Days of Enactment

  • A 15% increase in general USPTO fees and maintenance fees under 35 U.S.C. Section  41(a), (b), (d)(1), and 132 (b) and will take effect on September 26, 2011.  Patent application filing fees fall within this provision.
  • A 75% reduction in fees for a new category of individual inventors termed “micro entities,” to encourage individual entrepreneurs to innovate and protect their inventions To qualify as a “micro-entity,” the applicant must be an individual or small business that hasn’t been named as an inventor on more than 4 other patent applications, doesn’t exceed certain gross income (currently set at $149,310), and has not assigned, licensed, or be under any agreement to grant or convey the invention to an entity that exceeds the gross income amount.  Although technically effective on September 26, 2011, the USPTO still has to adjust the fees and create the new Micro-Entity Status which it has not yet done.
  • An option for “prioritized examination,” which has an associated $4800 fee ($2400 for small entity) will take effect on September 26, 2011, allowing the USPTO to fast-track review of the application with the promised goal of final disposition within 12 months (as opposed to the current 2-3 yr time frame).
  • Elimination of the best mode defense under (35 U.S.C. Section 112) for patent lawsuits commencing after September 16, 2011.
  • A revised defense to infringement under (35 U.S.C. Section 273) based on prior commercial use occurring one year before the filing date of the patent in suit.
  • Elimination of tax strategy and human organisms types.
  • Limiting the standing requirement to file for patent false marking lawsuits.
  • Joinder of unrelated accused infringers will be limited in actions commenced on or after September 16, 2011, under 35 U.S.C. Section 299.
  • Re-Examination standard changed from “substantial question of patentability” to requiring the requestor to show “that there is a reasonable likelihood that the requestor would prevail with respect to at least one of the claims challenged in the request.”

Changes Effective in 1 Year after Enactment (September 16, 2012)

  • First to File Provision- changes U.S. from “First to Invent” to “First to File” country bringing the United States closer to the rest of the world for international harmonization purposes.
  • Post Grant Review- under a new Chapter 32 (35 U.S.C. Section 321), there will be a nine-month window for challenging a patent on any statutory ground.
  • Inter Partes Review- patents can be challenged on the basis of patents or printed publications only after the post grant review 9 month window has passed.
  • Derivation Proceedings- 35 U.S.C. Section 135 will add derivation proceedings to replace current interference proceedings. Derivation proceedings determine whether the inventor named in an earlier-filed application derived the claim invention from the inventor named in a later-filed application without authorization.

Closing Thoughts

Although, we have some concerns about the effect of a “first to file” system on small inventors, we are pleased that the new patent reform laws will expand the universe of prior art and allow for a more efficient way to challenge and invalidate poor patents.  We anticipate that there will be an increase of provisional application filings due to the first to file rule and more attention will be required to ensure that the proper scope of the invention is adequately disclosed.  The new joinder rules limiting multi-defendants in one case is a step in the right direction to curtail aggressive patent trolling litigation.

Unfortunately, the new patent reform act missed an opportunity to address several of the hot button topics such as the limitation of patent damages obtainable by non-practicing entities or “patent trolls.”  In addition, although the new patent laws allow the USPTO to set its own fees and keep much of it, it still does not prevent Congress from diverting USPTO fees toward other purposes.  Over the years, Congress has diverted a reported $900 million dollars from the USPTO to pay for other government programs and needs.  Given that there is a current backlog of over 700,000 patents, these diverted fees could have been used to hire additional USPTO examiners and staff to alleviate the current review delays.

Only time will tell regarding how the new patent laws will affect the patent system and overall economy but like it or not, patent law reform is here.

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