Congress Considers Significant Changes to Patent Law

April 18, 2011 Published Work
Connecticut Law Tribune, Vol. 27, No. 16

In a bipartisan vote of 95-5, the U.S. Senate voted last month to pass S. 23, the "Amer­ica Invents Act," which includes the most significant changes to patent law in more than 50 years. The House of Representatives recently introduced a first version of its own patent law reform act, H.R. 1249.

Although the Senate bill includes a vari­ety of provisions, some of the more signifi­cant ones accomplish the following:

  • Change the U.S. system from a "first to in­vent" system to a "first to file" system
  • Create a post-grant opposition system within the Patent Office for challenging patents
  • Raise the standard for allowing inter par­tes re-examination of patents, another way to challenge patents after they are granted
  • Alter how the U.S. Patent and Trademark Office (USPTO) is funded.

First-To-File System
Presently, the U.S. is the last of the major developed nations to have a first-to-invent system. In a first-to-invent system, an inven­tor who can prove — using evidence such as lab notebooks, etc. — that he or she was the first to invent is given priority to the inven­tion over someone else who was the first to file a patent application disclosing the inven­tion in question.

A first-to-file system provides more cer­tainty in that the inventor who files first is given priority to the invention over all oth­ers. Critics of first-to-file complain that it hurts the small inventor who lacks the re­sources to file a patent application quickly.

Interestingly and in contrast to most oth­er countries, the Senate bill actually includes a "first-inventor-to-file" system, where a dis­closure of the invention is prior art except in the case of a disclosure by the inventor(s) himself (or a person who obtained the sub­ject matter from the inventor). In that case, the inventor gets a one-year grace period in which to file an application after making a disclosure. This type of system has the effect of encouraging early disclosure. Most other countries insist on absolute novelty, where there is no grace period to file after disclo­sure by anyone, including an inventor.

The Senate version of post-grant opposi­tion will allow anyone to petition the USP­TO to cancel a patent claim from an issued patent within the first nine months after it was issued. Such a system would provide a much less expensive way for third parties to challenge a patent as compared to current options and would further harmonize U.S. law with other countries, many of which of­fer some type of post-grant opposition.

Inter Partes Re-Examination
The Senate changed the threshold for gain­ing inter partes review from whether "a sub­stantial new question of patentabil­ity exists" to whether "there is a reasonable likelihood that the peti­tioner would prevail with respect to at least one of the claims challenged in the peti­tion." Such a change will make it more dif­ficult for parties to challenge patents.

USPTO Funding
The Senate bill includes two major pro­visions related to USPTO funding. First, it provides that the USPTO will have fee set­ting authority for patent and trademark ap­plications without approval from Congress.

Second, it prohibits the diversion of any fees collected by the USPTO for non-patent uses. As part of the anti-diversion provi­sions, the bill would establish a revolving fund to ensure that all fees collected by the USPTO are controlled by the agency until used.

The House version, introduced on March 30, differs from the Senate bill in several ways. First, while maintaining the first-to-file provisions of the Senate proposal, it ex­pands prior user rights to all types of inven­tions. Under the current law and the Senate bill, prior user rights are available with respect to only business method patents. Prior user rights provide a defense to patent in­fringement if an alleged infringer can prove that it reduced the patented subject matter to practice at least one year before the effective filing date of the patent and it commercially used the subject matter before the effective filing date of the patent.

While maintaining much of the Senate's language with respect to post-grant opposi­tion, the House bill includes additional pro­visions that add defendant-friendly restric­tions on related litigation. First, H.R. 1249 requires that patent infringement lawsuits be brought in a venue where the defendant "has a regular and established place of business."

The House bill allows a defendant to im­mediately appeal a denial of a request for a stay to the U.S. Court of Appeals for the Fed­eral Circuit for a de novo review. Finally, with respect to infringement lawsuits related to business method patents, the House bill pro­vides that the "prevailing party shall be en­titled to reasonable attorney's fees and costs."

With respect to inter partes re-examina­tion, the House bill differs in a few ways that are friendlier to parties challenging patents. First, it maintains the current standard for allowing such review, which is lower than the Senate bill's standard. Second, it gives an alleged infringer three extra months over the Senate's time period to initiate inter par­tes review – nine months rather than six months. Third, the House bill includes addi­tional provisions that increase the likelihood of a stay of related court or International Trade Commission proceedings.

Although the initial version of H.R. 1249 includes the same provisions as S. 23 with respect to USPTO funding, the ban on fee diversion may not survive the House pro­cess. U.S. Rep. Jim Sensenbrenner, R-Wis., has already suggested that the fee diversion provisions be stripped from the House bill and voted on separately.

Passage of patent reform is not guaran­teed. However, with a goal of trying to de­velop an environment in America that better promotes job creation, politicians are feeling significant pressure from major patent hold­ers to develop a system with more certainty.

At the same time, small inventors contin­ue a push to ensure their rights are not weak­ened. Over the next several weeks, Congress will have to work through these competing differences if its latest attempt at patent re­form is to succeed.