Understanding The Leahy-Smith
America Invents Act
Denise L. Loring
Practising Law Institute
November 14, 2011
ROPES & GRAY LLP
Historical Overview
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Historical Overview
• June 8, 2005 –109th Congress began to consider
patent reform
– 110th and 111th Congresses followed suit, but no
legislation was passed
• January 25, 2011 – Senate introduced S. 23, the
Patent Reform Act of 2011 (later renamed, the
“America Invents Act”)
– Main goals:
1. Improve the patent application process by adopting a firstto-file system
2. Improve the quality of patents issued by the USPTO by
adopting broader post-grant review procedures
3. Increase certainty in litigation
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Historical Overview
• March 7, 2011 – FTC published The Evolving IP
Marketplace: Aligning Patent Notice and
Remedies with Competition
– Recognized:
• Importance of innovation
• Vital role of well-defined patents in promoting innovation
• Harmful effect of “patent market”
• Role of non-practicing entities (NPE’s) in increasing litigation
– Two Main Foci:
• Notice function of patents
• Remedies for patent infringement
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Historical Overview
– FTC recommendations:
Notice Function of Patents
• Stricter enforcement of
35 U.S.C. § 112 ¶ 2
• Increase level of detail in
prosecution history record
• Publish patent applications
after 18 months
• Shorten review period
• Improve patent searches
(especially in high-tech
sector)
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Remedies for Patent
Infringement
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Align lost profit and reasonable
royalty awards with patent
value
• “Entire market value” rule:
hypothetical negotiation
focusing on the time alleged
infringement began to calculate
reasonable royalty damages
• Discourage use of reasonable
royalties to deter infringement
• Discourage use of unproven
lost profit claims to increase
reasonably royalty awards
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Historical Overview
• March 8, 2011 – Senate passed S. 23
• June 23, 2011 – House of Representatives
passed H.R. 1249, the “Leahy-Smith America
Invents Act”
• September 8, 2011 – Senate adopted H.R. 1249
without amendment
• September 16, 2011 – President Obama signed
the Act into law
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Overview
• First-inventor-to-file
• Inventor declarations and non-inventor
application filings
• Validity and infringement defenses
• Third-party intervention
• Supplemental examination
• Federal court jurisdiction
• Impact on patent infringement litigation
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First-Inventor-To-File
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Section 102 – First-Inventor-to-File
• 35 U.S.C. §102 wholly rewritten
• Two classes of prior art:
– Patents and published patent applications, and
– all other public disclosures
• Prior art inquiry now keyed to effective
filing date, rather than date of invention
– First to file, not first to invent
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Section 102(a) – Novelty, Prior Art
• Removes territoriality – no “in this country”
restriction on prior art
• Foreign applicants no longer need to rely
upon a “section 102(e)” date – foreign
priority dates treated on a par with U.S.
filings
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Section 102(b) – Grace Period
• Provides two exceptions to prior art
– One-year grace period for filing if inventor or
assignee makes public disclosure
– A company’s own applications are not prior art
against its later applications
• Applications filed pursuant to joint research
agreements are not prior art against each other
• Similar to current system, but protects only
against inventor’s own disclosures or
patent applications
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Section 102(b) – Grace Period
• Once an inventor discloses invention, that
disclosure may be used as a shield
against later disclosures and patent filings
– Open question: do “public disclosures”
encompass sales, public use?
• Potential strategy: disclose early as a
sword against others’ filings, a shield
against others’ disclosures
– But only if foreign rights are not important
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Section 102(b) – Derivation
• Also provides protection from earlier
disclosures and patent filings if the
information was obtained directly or
indirectly from the actual inventors
– Grace period only one year for public disclosures,
but unlimited for patent filings
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Section 102(d) – Prior Art Dates
• Affirms that any priority date is the
effective filing date of a U.S. patent or
application cited as prior art
– whether prior art is a provisional application, a
utility application, or even a PCT or foreign
patent application
– Still requires adequate disclosure in the
priority document
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Section 102 – Timing
• Provisions generally take effect 18 months
after enactment
– Applies to applications filed on or after effective
date
– Later-filed applications claiming priority to earlier
applications are governed by first-to-invent
system
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Section 103 – Obviousness
• Essentially unchanged, except that prior
art status based on filing date instead of
invention date
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Section 135 – Derivation
Proceedings in the PTO
• A later applicant may assert that an earlier
applicant derived the claimed invention
and filed without authorization
• Effectively replaces interference
proceedings
– Question now revolves around single act of
invention, rather than competing acts of invention
• Remedy is cancellation/refusal of derived
claims
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Section 135 – Derivation
Proceedings
• Timing: petition must be filed within one
year of publication of a competitor’s
application
• Pays to monitor competitors’ applications
early in the filing process
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Section 291 – Derivation Actions
• Similar provision for patent owners to sue
in court, alleging that a third-party patent
was derived from the inventors’ work
• Must sue within a year of patent issuance
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Inventor Declarations And NonInventor Application Filings
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Section 115 – Inventor
Declarations
• Requires statement that inventor
authorized filing
– Companies may want to obtain blanket
authorizations from potential inventors to avoid
problems
• All required statements can be included in
assignment document – no need for
separate declaration
• Effective one year from date of enactment
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Section 118 – Assignee Filing of
Patent Applications
• Non-inventors may apply for patents:
– Persons to whom the inventor has assigned or is under
an obligation to assign the invention
– Persons who show “sufficient proprietary interest” in the
subject matter “on behalf of and as agent for” the
inventors
• Patents granted to “real party in interest”, upon
notice to inventor
• Effective one year after date of enactment
• Applies to any patent application filed on or after the
effective date
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Validity And Infringement Defenses
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Section 282 – Best Mode
• Best mode is no longer available as basis
for invalidity or unenforceability of an
issued patent
• Obligation to disclose best mode in
application remains
• Effective upon date of enactment
• Applies to all proceedings filed on or after
enactment
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Patent Marking
• False patent marking greatly curtailed
– Response to recent surge in qui tam litigation
– No statutory damages for private litigants; can only obtain
actual damages
– Marking a product with expired patent number that once
covered the product is not a violation
• Virtual marking permitted
– Marking may be achieved by posting patent information
online
• Effective upon date of enactment
– Applies to any case pending or commenced on or after
date of enactment
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Section 273 – Prior User Rights
• Defense to infringement if:
– defendant had been commercially using a
patented process, or machine, manufacture, or
composition useful in that process,
– at least one year before patentee’s effective filing
date or earlier publication (i.e., grace period)
• No longer just for business methods
• Burden on prior user to prove use by clear
and convincing evidence
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Section 273 – Prior User Rights
• Regulatory review periods and non-profit
laboratory use count as commercial use
• Defense is personal, and can be
transferred only with transfer of entire
enterprise or line of business protected by
defense
– Scope of defense is limited after transfer
• Downstream purchasers of accused
product protected by patent exhaustion
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Section 298 – Willful Infringement
• Failure to obtain advice of counsel with respect
to an asserted patent does not create an
inference of willful patent infringement
– Codifies Knorr-Bremse Systeme Fuer Nutzfahrzeuge
GmbH v. Dana Corp., 383 F.3d 1336 (Fed. Cir. 2004)
• Effective one year after date of enactment
• Applies to any patent issued on or after the
effective date
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Third Party Intervention
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Third Party Intervention
• Preissuance submission
• Post-grant review
• Inter partes review
• Post-grant submission
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Section 122(e) – Preissuance
Submission
• Any person may submit patents and printed
publications for review before the earlier of:
– date of allowance; or
– later of:
• six months after the patent application publishes, or
• first rejection of any claim
• Effective one year after date of enactment
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Sections 321-29 – Post-Grant
Review
• A third party may petition the USPTO to
institute post-grant review of a patent
– Petition must name real party in interest
• Petitioner may request cancellation claims
as unpatentable on virtually any ground:
– E.g., prior art, written description, enablement,
utility, or patentable subject matter
• Heard by Patent Trial and Appeal Board
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Sections 321-29 – Post-Grant
Review
• Petition must be filed within nine months of
patent grant
– Or within nine months of reissue, if claims were
broadened
• Review standard:
– Petition, taken alone, would make it more likely
than not that at least one claim is unpatentable;
or
– Petition raises novel or unsettled legal question
that would be important to other patents or
applications
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Sections 321-29 – Post-Grant
Review
• Effective one year after date of enactment
• Applies only to patents subject to first-tofile rules
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Transitional Post-Grant Review for
Business Method Patents
• Special program creates eight-year period
during which a person charged with
infringement of a business method patent
may file a petition for post-grant review
– Applies to any business method patent,
regardless of its filing date
• Effective one year after date of enactment
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Sections 311-15 – Inter partes
Review
• Challenges to validity based on patents or
printed publications only
• Replaces inter partes reexamination
• Review standard
– There is a reasonable likelihood that petitioner
would prevail with respect to at least one claim
• Heard by Patent Trial and Appeal Board
(not examiner)
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Sections 311-15 – Inter partes
Review
• Post-grant review and litigation affect
availability of inter partes review
– May not be filed before the deadline to file a postgrant review petition or during a post-grant review
proceeding
– Not available if petitioner previously filed a lawsuit
challenging the validity of the patent
– Not available if the petition is filed more than 12
months after the petitioner is sued for
infringement of the patent
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Sections 311-15 – Inter partes
Review
• Effective one year after date of enactment
• In the interim, standard for instituting inter
partes reexamination is changed to new,
inter partes review standard
• Applies to all existing patents, subject to
timing restrictions
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Post-Grant and Inter Partes Review
• Common provisions
– USPTO required to make final determination
within one year, with six-month extension for
good cause
– Estoppels bar any defense that was or
reasonably could have been raised during review
– No review may be filed if petitioner files an action
challenging patent validity
– Any declaratory judgment action challenging
validity filed after the petition is automatically
stayed, unless patentee moves to lift the stay or
files its own action
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Section 301 – Post-Grant
Submission
• Any person may submit to USPTO at any time
patents or printed publications believed relevant
to patentability of any patent claim
• Optional statement of relevance
– Becomes part of official public file if it explains how
the prior art is applicable to at least one patent claim
• Optional request for confidentiality
• Does not trigger any proceeding
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Supplemental Examination
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Section 257 – Supplemental
Examination
• New procedure for patentees
• Patentees may request examination to consider,
reconsider, or correct information relevant to
patentability
• USPTO must conduct examination within three
months to determine whether substantial new
question of patentability is raised
– If so, reexamination is ordered
• Newly disclosed information may not be used as
a basis for asserting inequitable conduct
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Section 257 – Supplemental
Examination
• Protection from inequitable conduct claim
does not apply:
– To allegations pleaded with particularity in
litigation before examination request is filed
– If patentee files patent infringement suit before
supplemental examination is concluded
• Effective one year after date of enactment
• Can be applied retroactively to existing
patents
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Effective Dates of AIA Provisions
Immediate – 9/16/2011
• Joinder restrictions
• Change in standard for
initiating inter partes
reexamination
• Limits on false marking
suits
• Virtual marking
• Prior user rights
• No best mode defense
One Year – 9/16/2012
• Post-grant review
• Except for business
method patents and
pending interferences;
only for patents subject
to first-to-file rules
18 Months – 3/16/2013
• First-to-file
• New §102; changes in
prior art status
• New inter partes
review
• Preissuance
submissions
• Supplemental
examination
• Willful infringement
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Federal Court Jurisdiction
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Section 299 – Joinder of Parties
• A patent owner may only join multiple defendants
in one action if:
– the right to relief arises out of the same events relating
to the infringement; and
– there are questions of fact common to all of the
defendants
• Effective upon date of enactment
• Applies to any court action filed on or after
enactment
• Exception for ANDA litigation
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Impact Of AIA On
Patent Infringement Litigation
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Impact on Patent Quality
• Hasty filing of applications may result in
inadequate disclosures
• Adverse effects on small businesses and
sole inventors
• Burden on patent examiners to review
more and greater variety prior art
• Strain on USPTO resources resulting from
new post-grant proceedings
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Impact on Litigation – First-to-File
• Expands prior art available to invalidate
patent claims
– Patentees may no longer antedate third party
prior art before a patent’s effective filing date
• Patents, printed publications, prior public use, prior sale
or offer for sale
– Public use and sales outside of the U.S. are now
available as prior art
• This could lead to increased litigation costs as
defendants engage in third party discovery to
prove up prior art
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Impact on Litigation – Validity
• Eliminates some invalidity defenses in
litigation
– Prior invention (old Section 102(g))
– Failure to disclose the best mode
– False marking defense reserved for those
suffering actual injury
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Impact on Litigation – Infringement
• Expansion of prior user defense to all
patents, not just business method patents
– Effectively replaces prior invention invalidity
defense with personal non-infringement defense
• Codifies existing restrictions on availability
of willful infringement claim
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Impact on Litigation – Inequitable
Conduct
• Attempts to curtail inequitable conduct in
prior bills were eliminated from Act
– Recent Federal Circuit decision in Therasense
may eliminate need for statutory reform
• Supplemental examination may provide
limited means to cure alleged inequitable
conduct
– But only if examination is sought before the
defense is raised in litigation
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Impact on Patent Infringement
Litigation – Damages
• No changes to damages calculation
– Once a hot issue, now widely considered to
have been resolved by the courts
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Impact on Patent Infringement
Litigation –Post-Grant Reviews
• Expansion of grounds for invalidity that USPTO may
consider in post-grant review
– Absence of live testimony before USPTO limits nature of
evidence to be considered
• Reduction in ability to use reviews as tactic to delay
district court litigation
– Reviews must be completed within one year, vs. three
years for inter partes reexamination
– Ban against filing petition for inter partes review 12
months after commencement of litigation
• May further strain already limited resources of the
USPTO
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Impact on Litigation – District Court
vs. USPTO Proceedings
• Post-grant and inter partes reviews may shift
validity challenges to USPTO
– Estoppels barring litigation in court of questions that
could have been raised during post-grant or inter
partes reviews
– Transitional post-grant review of business method
patents, regardless of date of issuance
• Restrictions on joinder of unrelated parties in a
single litigation aimed at curtailing non-practicing
entity litigation
– Federal courts still have discretion under Federal
Rules to join parties for efficiency
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Thank You
Denise L. Loring
Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036
212-596-9069
[email protected]
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Understanding The Leahy-Smith America Invents Act