Will 2011 Be the Year of Patent Reform?

By Chelsea A. Loughran, Associate, Wolf Greenfield

On April 14, 2011, the House Judiciary Committee approved (by a vote of 32-3) the House version of the “America Invents Act”— or what has been more commonly referred to over the past six years as “Patent Reform Act of [insert year].”

This version is not hugely different from the version passed by the Senate in early March (by a vote of 95-5), and also not hugely different from the versions proposed in 2010, 2009, 2008, and back to 2005. While the bill is expected to reach the House floor this month, final agreement on the proposed changes to U.S. patent law continues to elude Congress.

It’s important to note that most provisions of the proposed reform will not be effective until one year following enactment. Even if the House bill passes soon, an accurate gauge on how reform will affect patent practice will not be possible for at least (and in many cases, for substantially longer than) a year.

The Shift to “First-To-File”

The proposed shift from a “first-to-invent” patent system to a “first-to-file” system has drawn perhaps the most emotional responses to patent reform on both sides, though it appears to pose less of an impact than many fear.

Currently, the U.S. operates under a first-to-invent system of determining priority of invention, relying on the premise that the inventor who can demonstrate earlier conception and diligence in reducing his/her invention to practice will be deemed the “first” inventor.

If the America Invents Act passes, however, priority of invention will be determined by the date the patent application was filed with the Patent Office.

Proponents argue this shift finally brings the U.S. patent system into harmony with the rest of the world, almost all of which follows the first-to-file system. It is also touted as a subjective, easily-determinable metric to evaluate close calls.

Opponents argue the U.S. patent system differs from other countries in so many meaningful ways that the alignment justification is mere rhetoric. These opponents claim a first-to-file system throws a single (though important) provision of U.S. patent law out of alignment with the totality of an otherwise unique, but high-functioning, U.S. system.

The current first-to-invent system creates a safety net for the inventor who has documented and protected the development of his/her invention but has been beaten to the Patent Office. Under this system, when two inventors dispute who is the first-to-invent, the winner is determined through lengthy and costly interference practice. One of the frequently-advanced cases for the shift to first-to-file, therefore, is that determining who files first is a straightforward and low-cost means for determining who is entitled to the patent.

In practice, the proposed shift to first-to-file would mean that first inventors who are slow to the Patent Office lose. While it may be easier and less costly to determine who invents first, there will also be a heavy burden imposed upon inventors to work up their inventions, obtain data or other detailed disclosures, and get to the Patent Office early.

Personal Grace Period

In today’s patent system, an applicant enjoys a one-year grace period under which a prior disclosure of an invention (by the applicant or any other entity) up to one year prior to the applicant’s filing date will not count as prior art as long as that applicant can show a conception date prior to the disclosure and diligence in either reducing the invention to practice or filing a patent application for the invention.

Under proposed patent reform, this would be replaced by a “personal grace period” under which only the applicant’s own prior disclosures (or disclosures derived from the applicant) within one year prior to the filing date are exempt as invalidating prior art. This means, however, that other disclosures of the applicant’s invention by third parties are fair game as invalidating prior art.

This provision’s heaviest opposition derives from the burden it places on applicants to prove that a potentially invalidating prior disclosure actually was derived from the inventor. To further muddy the waters, the House bill: (1) does not provide a discovery mechanism for how such a derivation proceeding will work, and (2) fails to consider that all of the potentially relevant information pertaining to an alleged derivation would rest with the deriver and not the applicant, who bears the burden (and cost) of demonstrating derivation. Advocates for small businesses, start-up companies, and solo inventors stress these ramifications in support of their opposition to this proposed revision.

Opponents of this provision also argue that small businesses and solo inventors would not be able to engage in these proceedings and thus would lose rights in their inventions to those who had essentially derived and disclosed such inventions prior to their application dates. This concern is a valid one. Any element of patent reform that increases the financial costs of securing a patent will disproportionately burden smaller companies and start-up ventures. Still, it is unclear what such proceedings would cost, how they would compare with current interference practice, or how frequently they would be utilized. It remains to be seen whether this modification to the one-year grace period would have the chilling effect on innovation that opponents fear.

Post-Grant Review

In addition to the current ex-partes and inter-partes reexamination procedures available for challenging the patentability of an issued patent, the America Invents Act adds a third route for such challenge – a post-grant review. This option would be available for nine months following the grant of an original or reissued patent and not more than six months after an accused infringer is served with a complaint alleging infringement.

In contrast to the current standard for ex- and inter-partes reexamination which is initiated only when the challenger has raised a “substantial new question of patentability,” a post-grant review will use a lower-threshold determination that the challenger has demonstrated the likelihood that at least one of the claims being challenged is unpatentable or an important or unsettled legal question is raised.

Perhaps even more notable, however, is that while current ex- and inter-partes reexaminations involve evidence only from prior art patents or printed publications, post-grant review challengers may advance other grounds of invalidity such as challenges involving enablement or lack of written description.

Again, because post-grant review will carry with it some cost (which will be incurred early in the patent’s life), opponents make the valid argument that small companies and start-ups with limited resources may not be able to bear the up-front financial burden of defending a recently issued patent. This has the potential to create an unfair advantage for larger companies, who have the resources to both defend their own patents and aggressively initiate post-grant review of competitors’ newly issued patents.

Overall, post-grant review presents a narrow window of opportunity to advance an otherwise broader array of legal arguments against an issued patent than is currently available today. Those diligent enough to monitor the issuance of questionable patents and file for post-grant review early may have a better chance at invalidation than they would under either ex- or inter-partes reexam. Additionally, there will almost certainly be a spike in the number of defendants seeking review of asserted patents early in litigation if and when this route becomes available. Cost and success rates remain to be determined.

Conclusion

Patent reform, which has been weaving its way between the House and Senate for almost six years, remains just short of final enactment. Although largely regarded as non-partisan legislation, this reform has managed to unearth heated debate on both sides of the aisle.

Some argue reform is necessary to reign in a patent system spiraling out of control, and others argue that, in its current proposed state, reform will stifle innovation and send crippling waves throughout the United States economy.

It remains to be seen whether 2011 will finally be the year of Patent Reform enactment. If I’d venture a guess, the ultimate effects—in comparison to the six year journey—will be anticlimactic.

Editor’s note: The views expressed here may or may not be those of Inventors Digest Magazine. This op-ed piece was written by Chelsea A. Loughran, an Associate at the intellectual property firm of Wolf, Greenfield in Boston, the largest law firm in New England devoted exclusively to intellectual property law. Contact her at 617-646-842 or via www.wolfgreenfield.com