Senate Passes House Patent Reform Bill (H.R. 1249) -- What You Need to Know

Date: September 14, 2011

On September 8, 2011, the U.S. Senate passed the House version of the Leahy Smith America Invents Act (H.R. 1249) by margin of 89 to 9.  The President will sign the bill into law within the next 10 days.  The Leahy Smith America Invents Act is the result of more than ten years of attempts at patent reform and represents the most sweeping change of U.S. Patent laws in over 50 years.  The law makes significant changes to a number of areas of the patent law, and brings the U.S. more into alignment with the patent laws of other countries.  Here are some of the highlights:

False Marking:  Addressing the epidemic of false marking cases in the last several years, the new legislation eliminates qui tam actions for false marking and permits only the U.S. government to sue for statutory damages.  Private concerns can still file suits for false marking, but only if they have suffered a “competitive injury.”  In addition, marking with an expired patent is specifically exempted from violations of the statute.  This portion of the law goes into effect immediately upon enactment and applies to all pending proceedings.

Best Mode:  Under the new patent law, failure to disclose the best mode in a patent will no longer be permitted as an invalidity defense in a patent infringement action.  This portion of the law becomes effective immediately and will only apply to new actions.  The best mode will still be required to be disclosed under 35 USC 112, and will be available as a grounds for challenging a patent under the new post grant review proceedings, discussed below. 

Opinions of Counsel:  Effective one year from the date the bill is signed into law, the failure of a party to obtain an opinion of counsel, or to produce one during litigation, may not be used to prove willful infringement or intent to induce infringement.  This section of the law will apply to patents issued on or after the effective date.

First-to-File: In one of the most significant and long-awaited changes to U.S. patent law, the Act changes the U.S. patent system from a first-to-invent system to a first-to-file system.  Among other things, this means that patent applicants will no longer be able to overcome prior art rejections by demonstrating that they made their invention prior to the date of a cited reference.  Related changes include significant changes to the one year grace period for public disclosures, discussed below; and replacement of interferences (the hallmark of a first-to-invent system) with “derivation proceedings,” also discussed below.  This portion of the law will become effective 18 months after enactment and will apply only to applications having a priority date after the effective date.

One Year Grace Period: The one-year grace period will remain, but only if the inventor’s disclosure is the earliest disclosure of the subject matter within the one-year period.  Disclosures within the one-year period by persons other than the inventor but who obtained the information from the inventor will be considered to be disclosures by the inventor.  If a person who did not obtain the information from the inventor discloses the information within the one-year grace period and prior to any public disclosure by the inventor, the inventor will be prevented from showing an earlier invention date and will be barred from obtaining a patent.  The effective date of this change is the same as for the first-to-file changes.

Interferences and Derivation Proceedings: Under the new law, interference proceedings will eventually fade away, to be replaced by derivation proceedings.  Derivation proceedings will be limited to deciding whether the inventor in an earlier-filed application derived the invention from the inventor of a later-filed application.  The transition will be far from immediate, however, because this portion of the legislation does not go into effect until 18 months after enactment, and will apply only to applications having a priority date after the enactment date.

Prior User Rights: To protect entities that are early developers but that choose to protect their IP via trade secret, the new law expands the prior user defense to include machines, articles of manufacture and compositions of matter, but requires that the prior use occurred at least one year before a) the filing date of the patented invention, or b) the date on which the invention was publicly disclosed by the inventor, whichever is earlier.  This portion of the law becomes effective immediately upon enactment and will apply to any patent issued on or after the enactment.

Post Grant Review:  To conform U.S. patent law more closely to the patent laws in the rest of the world, new section 32 of the patent statute will provide a nine month period immediately following issuance of a patent during which a patent’s validity may be challenged on any grounds.  Appeals may only be made to the Federal Circuit.  This provision goes into effect one year after the date of enactment and will apply only to patents having a priority date on or after the effective date.

Inter Partes Review: Under the new law, inter partes reexaminations are re-cast as inter partes review proceedings, and they may not be instituted until the expiration of the nine month post grant review period.  As with the prior inter partes reexaminations, inter partes review proceedings can only be instituted based on prior art, and specifically only patents and printed publications.   Appeals may only be made to the Federal Circuit. This provision goes into effect one year after the date of enactment and will apply to all patents regardless of their issue or priority dates.

Third Party Submissions:  The new legislation specifically addresses pre-issuance and post-issuance third party submissions to the USPTO. Provided the submission is made prior to a notice of allowance, the USPTO will consider any third party submission made before a first office action or six months after publication, whichever is later.   Any third party submission made after a patent has issued will be entered in the file provided that it includes a statement explaining the pertinence of the prior art to at least one claim of the patent.  The information may only be used by the USPTO in reexamination, inter partes, and post grant review proceedings and only to determine the proper meaning of the claims in the patent.  These provisions are effective 1 year after enactment of the legislation and will apply to all patents issued and applications filed before, on, or after that date.

Inventor’s Declaration: Under the new legislation, declarations of inventorship need only be filed prior to a notice of allowance.  In lieu of a separate inventor’s declaration, statements required by the inventor may be placed in an assignment document.  Where inventors are unavailable or unwilling to sign an inventor’s declaration or assignment, assignees or employers may file a “substitute statement” in lieu of inventor declarations.   This provision is effective one year after enactment and it applies to all patent applications filed on or after that effective date.

Fees:  Filing fees will go up 15% upon enactment of the legislation.  This provision will become effective 10 days after enactment and will terminate upon setting of new fees by the USPTO.  A new “micro entity” category has been created that will receive a 75% reduction in fees.  Also, applications filed by inventors who are employees of universities and other institutions of higher education or who have an obligation to assign their rights to such entities may be entitled to the 75% discount.  This provision is effective upon enactment and will terminate upon setting of new fees by the USPTO.  The new law also establishes a surcharge of $400 for applications that are not filed electronically.  This provision is effective 60 days after the enactment.

Prioritized Examination: The new law provides for expedited examination of an application for a $4,800 fee (in addition to the regular filing fees).  The new law limits Prioritized Examination to 10,000 applications per fiscal year, but gives the USPTO the discretion to set a different limit.  The USPTO also has discretion to prescribe conditions for acceptance of a request for Prioritized Examination. This provision will become effective immediately upon enactment.

Supplemental Examination:  A patent owner may request supplemental examination to consider, reconsider, or correct information believed to be relevant to patentability.  Such a request cannot be used as evidence of inequitable conduct in a civil action. This provision is effective 1 year after enactment of the legislation and applies to all patents issued before, on, or after that date.

With this new legislation, U.S. patent owners and patent applicants will be stepping onto a new and unfamiliar patent landscape.  The attorneys at Whiteford, Taylor & Preston have closely studied all aspects of the new patent act and are ready and excited to begin working with their clients, helping them to navigate through the various changes effected by this historic legislation.  Look for regular client updates addressing more detailed aspects of each of the changes to U.S. patent law affected by this legislation and providing important and useful guidance in its wake.