Westlaw Journal Expert Commentary Series
PATENTS IN THE 21st CENTURY
THE LEAHY-SMITH AMERICA INVENTS ACT
CONTRIBUTING AUTHORS
Robert A. Armitage, Esq.
Eli Lilly & Co.
Marc Hubbard, Esq.
Gardere Wynne Sewell LLP
Robert G. McMorrow Jr., Esq.
Connolly Bove Lodge & Hutz LLP
David Boundy, Esq.
Cantor Fitzgerald
Matthew I. Kreeger, Esq.,
Eric S. Walters, Esq., and Zahra Hayat, Esq.
Morrison & Foerster
James Mullen, Esq.
Morrison & Foerster
Michael Dixon, Esq.
Akerman Senterfitt
Edward Fan, Esq., and
Karen Townsend, Esq.
Torys LLP
41264794
Ammon Lesher
Turner Padget Graham & Laney
Philippe Signore, Esq., Steve Kunin, Esq.,
and Jonathan Parthum, Esq.
Oblon, Spivak, McClelland, Maier &
Neustadt LLP
Todd McCracken
National Small Business Administration
Ed Walsh, Esq., and Janice Vatland, Esq.
Wolf, Greenfield & Sacks
LETTER FROM THE EDITOR
TABLE OF CONTENTS
Outdated.
A barrier to innovation.
Job stifling.
Westlaw Journal – Intellectual Property
Those are some of the terms used to
describe the state of the U.S. patent
system.
Overview
For years, Congress has grappled with
how to fix the patent law. Now, for the
first time in 60 years, it has acted to fix
what has been widely seen as a broken
system.
President Barack Obama signed into
law the Leahy-Smith America Invents
Act Sept. 16, 2011.
The reforms included in the law will
have a meaningful impact on American
entrepreneurs and inventors for
generations to come and will promote job
creation, according to Sen. Patrick J. Leahy
(D-Vt.), who co-sponsored the legislation
with Rep. Lamar Smith (R-Texas).
This special issue contains commentary
from its supporters who hail its major
changes, including the implementation
of the first-to-file system and other
provisions such as a new procedure for
post-grant review.
President Signs Long-Awaited Patent Reform Legislation.....................................................................3
Commentary
The Sweeping Changes of the 2011 America Invents Act.....................................................................4
By Michael Dixon, Esq.
Akerman Senterfitt
The America Invents Act: Will it be the Nation’s Most Significant Patent Act Since 1790?..............8
By Robert A. Armitage, Esq.
Eli Lilly & Co.
Focus on Provisions
The New Grace Period Under the American Invests Act..................................................................... 11
By Ammon Lesher
Turner Padget Graham & Laney
Advising Clients on the First-to-File System....................................................................................... 14
By Marc Hubbard, Esq.
Gardere Wynne Sewell LLP
United States Converts to First-to-File Patent System.......................................................................17
By Edward Fan, Esq., and Karen Townsend, Esq.
Torys LLP
Post-Grant Review: A Preview.............................................................................................................. 19
By Robert G. McMorrow Jr., Esq.
Connolly Bove Lodge & Hutz LLP
Challenging a Patent: Before and After the America Invents Act....................................................22
By Ed Walsh, Esq., and Janice Vatland, Esq.
Wolf, Greenfield & Sacks
But the new law also has its detractors.
Practice Strategies
Some small businessmen and
entrepreneurs think the new system
poses a huge disadvantage for smaller
companies and start-ups, because the
first-to-file provision greatly diminishes
the existing one-year grace period that
allows inventors to refine their ideas and
seek funding to develop a patent before
they have to make the details of their
patent public.
How the Patent Reform Act Will Change Patent Litigation...............................................................25
By Matthew I. Kreeger, Esq., Eric S. Walters, Esq., and Zahra Hayat, Esq.
Morrison & Foerster
This Westlaw Journal special report
features expert analysis of the major
points of the law, both pro and con. The
commentaries provide a comprehensive
review of the law, and offer insights and
practice tips for some of its key provisions.
Contrary Views
Please see our Westlaw Journal
newsletters for continuing coverage
of related analysis and updates
regarding implementation of this major
legislation.
Deborah Nathan, Esq.
Senior Attorney Editor
Phyllis Skupien, Esq.
Managing Editor
West Publishing,
A Thomson Reuters business
Practice Implications of the Leahy-Smith America Invents Act........................................................28
By Philippe Signore, Esq., Steve Kunin, Esq., and Jonathan Parthum, Esq.
Oblon, Spivak, McClelland, Maier & Neustadt LLP
Commercial Advantage Through Understanding the Post-Issuance Review System
of the America Invents Act....................................................................................................................32
By James Mullen, Esq.
Morrison & Foerster
Patent Reform Bill Hurts Small Business............................................................................................35
Todd McCracken
National Small Business Administration
Why Patent Reform is Bad for Startups, Small Business, Patent Attorneys and America..............38
By David Boundy, Esq.
Cantor Fitzgerald
Patents in the 21st Century: The Leahy-Smith America Invents Act
Publisher: Mary Ellen Fox
Managing Editor: Phyllis Lipka Skupien, Esq.
Production Coordinator: Tricia Gorman
Principal Editor: Debby Nathan, Esq.
Copy Editors: Sheryl Chernoff, Katie Pasek
Graphic Artist: Ramona Hunter
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2 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
© 2012 Thomson Reuters
President Signs Long-Awaited Patent Reform Legislation
President Obama signs the Leahy-Smith America Invents Act Sept. 16.
President Barack Obama signed the LeahySmith America Invents Act Sept. 16, ushering
in a long-awaited overhaul of the U.S. patent
system.
Obama signed the bill after the Senate
passed the measure Sept. 8 by an 89-9
bipartisan vote.
The House of Representatives passed the bill
in June.
President Obama hailed the new law as a
boon to creating new businesses and jobs.
“I am pleased to sign the America Invents
Act,” Obama said in a press statement
following the bill signing.
“This much-needed reform will speed up
the patent process so that innovators and
entrepreneurs can turn a new invention into
a business as quickly as possible,” he said.
Sen. Patrick J. Leahy, D-Vt., co-sponsor
of the legislation, echoed the president’s
comments.
The law “is a true jobs bill at a time when
we need it the most,” Leahy said in a press
statement.
© 2012 Thomson Reuters
“This is bipartisan, commonsense legislation
that will spur the innovation that drives
the American economy,” Leahy said,
commenting that the law is the product of six
years of battles and compromise on Capitol
Hill under two presidents.
The new law allows the U.S. Patent and
Trademark Office to set its own fees and to
do the hiring and technical upgrades needed
to catch up on a backlog of nearly 700,000
patent applications.
PTO Director David Kappos hailed the
provision.
“This bill will give the [PTO] the tools it needs
to deliver cutting edge technologies to the
marketplace sooner and drive down the
backlog of patent applications,” Kappos said
in a statement after the Senate action.
“We intend to aggressively implement
that mandate by immediately hiring
new examiners, instituting new patent
acceleration
tools
and
aggressively
modernizing our IT infrastructure,” Kappos
said.
Photo by Marcelle Leahy
Under the new law, the PTO will grant
patents to the first inventors to file, rather
than requiring inventors to show they were
the first to develop an innovation.
The first-to-file system will bring the U.S.
patent process in line with that of many other
countries.
The law establishes a post-grant review
process to allow challenges to patents before
they are used in litigation.
Another new provision puts a limitation on
“false marking” suits.
Currently, there has been what some have
called a plague of false-marking lawsuits by
plaintiffs who stand to gain by sharing the
proceeds of any consequent settlement or
court award.
The America Invents Act will substantially
reduce false-marking suits by requiring that
plaintiffs show a personal injury or interest in
the suit.
The new law will be fully implemented by
2014.
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 3
COMMENTARY
The Sweeping Changes of the 2011 America Invents Act
By Michael Dixon, Esq.
Akerman Senterfitt
After more than 10 years within Congress, the
America Invents Act was enacted on Sept. 16,
2011, and includes the most comprehensive
legislative patent reform in the United States
in more than 60 years. The act attempts to
increase the quality of issued U.S. patents
by reducing uncertainty and increasing
opportunities for third-party involvement
both pre- and post-issuance. Specifically,
the act has changed the U.S. patent system
from a first-to-invent to a first-to-file system,
created a pre-issuance prior-art submission
mechanism and created numerous postgrant challenge mechanisms in an effort
to reduce litigation costs, strengthen U.S.
patents and harmonize U.S. patent law with
the majority of foreign jurisdictions.
WHAT CONSTITUTES PRIOR ART?
The act changed U.S. patent law from a
first-to-invent to a first-to-file system. The
first-to-invent system had been considered
supportive of independent inventors and
small companies with limited resources by
allowing them time to finalize the invention
and seek patent protection. However, the
first-to-invent system created ambiguity
as to which inventor had priority and what
constituted prior art. Moreover, the system
was not aligned with foreign countries.
Section 102 has been revised in that the first
inventor to file a patent application has the
priority of invention, with notable exceptions.
As an accommodation to independent
inventors and small companies, the oneyear grace period remains intact. Thus, an
inventor may file a patent application within
one year of first offering to sell or publicly
disclosing the idea.
Nonetheless, revised Section 102 has
created ambiguity where there was once
some degree of certainty. In particular,
Section 102, which once described prior art as
art that “was known or used by others in this
country, or patented or described in a printed
publication in this or a foreign country,” now
describes prior art as that which is “otherwise
available to the public.” Undoubtedly, it will
take some time for the Federal U.S. Circuit
Courtesy of USPTO
One of the most significant changes made by the act is the shifting of the U.S. patent system from a system that grants a patent to the
inventor who is first to invent the claimed invention to a system that grants a patent to the inventor who is first to file a patent application
at the U.S. Patent and Trademark Office, shown here.
Court of Appeals to sort this out but not
before potentially prolonged prosecution
and an increase in appeals before the newly
created Patent Trial and Appeal Board and
the Federal Circuit.
Furthermore, the expansion of prior art
from offers for sale and public use occurring
in the United States to those occurring
outside the United States will likely reduce
the enforceability of U.S. patents as U.S.
patent examiners will most likely not have
such information available to them during
prosecution, thereby creating uncertainty
when determining the likely success of
enforcing a patent.
Additionally, revised Section 102 includes
an interesting provision for inventors
who publish documents describing their
inventions. Specifically, a patent application
filed by Inventor A does not qualify as prior
art to Inventor B if Inventor B had publicly
disclosed the invention, such as through
a publication or presentation, before the
patent application was filed by Inventor A, so
long as the public disclosure does not occur
more than a year before Inventor B’s filing of
the patent application. Thus, a third-party
4 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
patent application filed after publication by
an inventor does not qualify as prior art to the
inventor’s later-filed patent application filed
within one year of the earliest publication.
At first blush, revised Section 102 appears to
incentivize public disclosure of an invention
before filing a patent application. However,
such disclosure would result in the loss
of potential foreign rights in most foreign
countries, with the exception of Australia,
Canada and Japan.
Preserving an inventor’s rights may best be
accomplished by filing a U.S. provisional
patent application, and, if necessary, filing
multiple provisional patent applications as
the invention evolves, thereby eliminating
any negative implications at the foreign
stage from an earlier public disclosure.
CHALLENGING U.S. PATENTS,
PATENT APPLICATIONS
The act has created the new challenge
mechanisms of pre-issuance submission,
post-grant review and supplemental
examination, and has replaced inter partes
examination with inter partes review.
© 2012 Thomson Reuters
In addition, while the elimination of the firstto-invent system has brought interference
practice to an end, the act retained a slightly
modified version of derivation proceedings
that includes a limited one-year time period
for initiating a derivation proceeding.
The derivation proceeding is an adversarial
proceeding decided by settlement or
arbitration before the Patent Trial and
Appeal Board in which each party is able
to present evidence and take testimony to
determine whether the inventor named in
an earlier-filed application that was filed
without authorization derived the claimed
invention from the inventor of a later-filed
application. The derivation proceeding
must begin within one year of the date of
first publication of a claim to an invention
that is substantially the same as the earlier
application’s claim to the invention.
Pre-Issuance Submission
The pre-issuance submission mechanism
further bolsters corporate intelligence
initiatives by enabling third parties to submit
prior art consisting of patents, published
patent applications and printed publications
of potential relevance to the examiner of a
patent application. Prior-art submissions
must set forth a concise summary of the
relevance of each prior-art submission.
The submissions may be submitted before
the earlier of the date of a notice of allowance,
or the later of six months after publication of
the application or the date of first rejection
of any claim in the patent application.
Essentially, if a notice of allowance is not
issued within two years of the filing of a
patent application and there is no claim for
priority to an earlier-filed patent application,
third-party submissions may occur for at
least two years. A publication earlier than
18 months or an early notice of allowance will
reduce the available window for third parties
to file pre-issuance submissions.
Businesses should augment ongoing
monitoring programs in which published
patent applications assigned to competitors
are identified with prior-art searches and
pre-issuance submissions.
Businesses
should also carefully consider whether filing
for foreign patent protection is necessary to
their business concerns and, if not, should
file a request for nonpublication, thereby
keeping their pending patent applications
secret within the patent office and effectively
© 2012 Thomson Reuters
eliminating the possibility of pre-issuance
submissions being submitted against their
patent applications.
Post-Grant Review
that is lower than the “reasonable likelihood
that petitioner will prevail” standard of the
newly formed inter partes review that applies
to all other technologies after nine months
from issuance.
The newly created post-grant review process
resembles European oppositions in which
third parties can challenge the validity of a
patent on any ground as a less expensive
dispute resolution procedure than federal
The post-grant review process can be used to
stay litigation, and only those issues actually
raised within post-grant review — not all
issues that could have been raised — will be
prevented from being raised at trial.
Businesses should augment ongoing monitoring programs
in which published patent applications assigned to
competitors are identified with prior-art searches and
pre-issuance submissions.
court litigation. Within nine months of
issuance of a U.S. patent, a post-grant review
may be initiated as long as the petitioner has
not already filed a civil action challenging the
validity of the patent.
A post-grant review petition must satisfy one
of two threshold requirements:
•
Unless rebutted, it must be more likely
than not that at least one challenged
claim is unpatentable.
•
The petition must raise a novel or
unsettled legal question of importance.
Importantly, a post-grant review proceeding
may be based on any ground for invalidity.
This is consistent with the revised
Section 102 but broader than current
ex parte re-examination and newly formed
inter partes review, which are both limited to
patents or printed publications.
Thus, within nine months of patent issuance
a third-party competitor may attack the
patent through post-grant review with
any prior art, such as public uses, prior
publications, offers to sell, actual sales,
lack of enablement and inadequate written
description. Challenges for lack of setting
forth the best mode are unavailable.
Section 18 of the act provides a transitional
program for review of “covered business
method patents,” which resembles an
extended post-grant review system.
Beginning Sept. 16, 2012 — and running
until Sept. 16, 2020, unless extended by
Congress — a party charged with patent
infringement of a business-method patent
may petition for post-grant review of the
asserted patent upon meeting a threshold
Prior art allowed in a post-grant review
proceeding is broader than the prior art
allowed in an inter partes review proceeding.
In particular, a post-grant review proceeding
may allow use of prior art falling under the
Supplemental
Examination Under
35 U.S.C. § 257
• New procedure permitting a
patent owner to request an
additional examination by the
PTO to “consider, reconsider or
correct information believed to
be relevant to the patent.”
• Enables a patent owner
to have a patent examiner
determine questions of patent
enforceability before an
infringer raises them at trial.
• Allows a patent owner to
cure some previous failures to
disclose that otherwise would
be grounds for a finding of
inequitable conduct.
• A patent cannot later be
held unenforceable based on
conduct relating to information
that had been considered
during the supplemental
examination.
• Will take effect Sept. 16, 2012.
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 5
pre-act Section 102(a), as well as prior art
by the applicant and prior art that describes
the invention more than one year before the
filing date of the patent application.
Guidance is likely forthcoming from the U.S.
Patent and Trademark Office to determine
what qualifies as a “covered business
method patent,” which the act delineates
as being a patent that claims “a method or
corresponding apparatus for performing
data processing or other operations used in
the practice, administration or management
of a financial product or service ... [and are
not] technological inventions.”
Business-method patent owners should
consider conducting a thorough pre-suit
a substantial new question of patentability,”
the PTO will order a re-examination. Upon
conclusion of the proceeding, the PRO will
issue a certificate indicating whether the
information presented during the proceeding
by the patent owner presented a “substantial
new question of patentability.”
A patent may not be held unenforceable
based on information that had been
previously considered during a supplemental
examination proceeding, provided that the
supplemental examination request was
made before the allegations of misconduct
are pleaded in court proceedings.
The substantial-new-question-of-patentability
standard of the supplemental examination
Prior art allowed in a post-grant review
proceeding is broader than the prior art allowed
in an inter partes review proceeding.
analysis to determine whether prior art exists
that could result in a business-method postgrant review proceeding. Business-method
patent owners may also consider delaying
enforcement actions until the PTO issues
guidance on this issue. Prior to patent issuance,
inventors should consider applying for claims
directed to the application of their concept to
industries other than the financial industry.
Supplemental Examination
Section 12 of the act, codified at 35 U.S.C.
§ 257, provides for supplemental examination
after Sept. 16, 2012. This procedure enables
a patent owner to have any information
considered quickly by a U.S. patent examiner
to determine patent enforceability before
being raised by an infringer at trial without
requiring that the patent go through
re-examination. Thus, a patent owner may
have any information considered by the PTO
and presumably may even be able to cure
some intentional failures to disclose prior
art that would otherwise be grounds for a
finding of inequitable conduct.
However, the act does state that if the
director becomes aware of material fraud
on the PTO, the director may confidentially
refer the matter to the attorney general for
criminal prosecution, if appropriate.
The PTO will conduct a supplemental
examination of the patent within three months
of receiving a supplemental examination
request. Should the new information “raise
proceeding is the same standard in ex parte
re-examinations, which have generally been
freely granted in the past. Presumably,
the PTO will issue guidelines clarifying
application of the supplemental-examination
process before supplemental examination
takes effect next year.
Inter Partes Review
The act creates inter partes review, which
replaces
inter
partes
re-examination
Sept. 16, 2012, as a mechanism for review of
a U.S. patent based on prior-art patents and
printed publications.
The inter partes review will be conducted
by administrative patent judges and will
allow the PTO to complete most reviews
within 12 months. Their decision will be
appealable directly to the Federal Circuit.
An inter partes review may not be pursued
if an accused infringer has already filed a
declaratory judgment action challenging
the patent or if more than six months has
passed since the date the infringer was
served with a complaint. A patent owner
will have the opportunity to explain why the
inter partes review should not be initiated
before it is initiated, unlike the inter partes
re-examination process, in which input
is accepted only after a re-examination
proceeding has been initiated.
To invalidate a claim of the patent to
institute an inter partes review proceeding,
6 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
a challenger must now establish that there
is a “reasonable likelihood that the petition
will prevail.” The previous threshold for
inter partes re-examination required that a
substantial new question of patentability
existed to initiate a re-examination
proceeding. The legislative history states
that the new threshold is higher than the
“substantial new question of patentability”
threshold, which was met in nearly 95 percent
of inter partes re-examination requests.
The revisions to inter partes re-examination
do not impact ex parte re-examinations
proceedings, which remain the same.
The inter partes review proceeding will include
new procedural safeguards to prevent a
challenger from using inter partes review
to harass patent owners. The inter partes
review challenges may also now include prior
art, including written statements made by
the owner of a patent in another lawsuit or
at the PTO regarding the scope of the claims.
Finally, this section creates estoppel for an
inter partes review challenger. In particular,
a challenger who “reasonably could have
raised” an argument during an inter partes
review is prevented from raising such an
argument in court.
The act provides a timeline for transitioning
from the inter partes re-examination to the
inter partes review to prevent a rush of filings
before Sept. 16, 2012. Any request for inter
partes re-examination filed by Sept. 16, 2012,
will be granted if a “reasonable likelihood
that the petition will prevail” is shown,
which is the new standard for inter partes
review, and such standard will be applied
throughout the proceeding. Any request for
inter partes re-examination filed after Sept.
16, 2012, will not be granted. Only a request
for inter partes review may be filed after Sept.
16, 2012.
The practical application of the inter partes
review is unclear as the act describes many
of the limitations in only broad terms. For
instance, the act’s provision for allowing
limited discovery related only to factual
assertions by either party will have to be
fleshed out. With such ambiguity, there
is the risk that such changes will not
reduce litigation costs; rather, the costs of
challenging and defending a patent will
increase with the creation of these alternative
challenge mechanisms.
© 2012 Thomson Reuters
LITIGATION
Prior-Commercial-Use Defense
Section 5 of the act expands the priorcommercial-use
defense
beyond
business-method patents. In particular,
an alleged infringer of a process, a
machine or composition of matter used in
a manufacturing process is not liable for
infringement if a use occurred at least one
year before the earlier of (a) the effective filing
date of the claims invention or (b) the date on
which the claim invention was disclosed to
the public.
The alleged infringer must have commercially
used the product in good faith in connection
with an internal commercial use or an actual
arm’s length sale or transfer. The alleged
infringer carries the burden of proof and
shall establish the defense with clear and
convincing evidence.
The broadening of the prior-commercial-use
defense strengthens the option available to
businesses struggling with the decision of
how to best protect a method of manufacture
or the like used within the business. Now,
rather than obtaining patent protection and
disclosing the invention for all to see with
little chance of uncovering an infringing use,
a business may keep the method secret and if
challenged, rely on the prior commercial use
defense with proper documentation to avoid
liability.
Opinions of Counsel
The act codifies In re Seagate Technology LLC1
as it relates to willfulness and clarifies the
case law decided thereafter. In particular,
Section 17, codified at 35 U.S.C. § 298,
provides that the failure of an alleged
infringer to obtain an opinion of counsel
of noninfringement or the decision of an
alleged infringer to not disclose to a plaintiff
the opinion of counsel of noninfringement
may not be used to prove that the accused
infringer willfully infringed the patent or that
the alleged infringer induced infringement.
unenforceable, thereby further harmonizing
U.S. patent law with foreign jurisdictions.
Qui Tam False Marking
Section 16 of the act has effectively stamped
out the cottage industry in pursuit of easy
money by enforcing the previous falsemarking statute at 35 U.S.C. § 292. In
particular, effective upon the act’s enactment
date and applicable to pending cases, only
the United States may sue for the penalty
authorized under the statute, and a person
who suffered a competitive injury as a result
of a violation of this statute may pursue a
civil action for damages. Marking a product
with a patent that has expired is no longer a
violation of Section 292.
The act also created virtual marking to reduce
the burden upon patent owners to comply
with the marking requirement. Specifically,
a product may be marked with “patent” or
“pat.” together with an Internet address that
associates a U.S. patent with the product.
CONCLUSION
While the America Invents Act is the broadest
legislative patent reform in the United States
in years, the consequences of the application
of many of the act’s provisions remain
uncertain in view of the broad language of
the act. The rulemaking proceedings within
the PTO over the next year will attempt to
provide more clarity; however, it will likely
take years before aspects of the act have been
settled. Time will tell if the act’s provisions
reduce costs and increase the quality of
issued U.S. patents, or whether unintended
consequences dominate the landscape.
NOTES
497 F.3d 1360 (Fed. Cir. 2007) (en banc).
1
See Markman v. Westview Instruments Inc.,
517 U.S. 370 (1996).
2
Joinder
Section 16 of the act, codified at 35 U.S.C.
§ 299, sets news limits on joinder of accused
infringers as parties in one action. Under
Section 16, accused infringers may be
joined only if relief is asserted against the
parties jointly or severally, or arising from
the same transaction or occurrence relating
to the making, using, importing or selling
of the accused product. Simply alleging
infringement of the same patent is no longer
sufficient.
While combining multiple infringers
producing the same class of products is
no longer available, combining multiple
infringers that are vertically aligned and
jointly infringe a patent remains allowable.
The limitation of joinder will likely be
problematic to plaintiffs and defendants
alike as inconsistent Markman claiminterpretation rulings2 are more likely to
occur.
Best Mode
LIMITATION OF PATENTABLE
SUBJECT MATTER
Foreign patentees are typically ill-prepared
to comply with the best-mode requirement in
35 U.S.C. § 112. Section 15 of the act, codified
at 35 U.S.C. § 282 and effective upon the
act’s enactment, provides that failure to
comply with best mode shall not be a basis
upon which a patent may be held invalid or
The United States has long had fewer
limitations on what constituted patentable
subject matter.
However, the act has
carved out some territory from that broadly
defined patentable subject matter.
In
particular, the act states that any strategy for
reducing, avoiding or deferring tax liability
© 2012 Thomson Reuters
is insufficient to differentiate an invention
from the prior art but excludes systems used
for the preparation of tax returns or that
organize such data or systems used solely for
financial management.
Michael K. Dixon of Akerman Senterfitt
represents clients in an array of intellectual
property matters, with an emphasis on patent
procurement, patent litigation, technology
transfer transactions such as drafting and
negotiating licenses, intellectual property
due diligence in private equity and mergers
and acquisitions, intellectual property asset
management, intellectual property law
opinions, trademarks, protection of trade
secrets, confidentiality agreements, and
copyrights. He represents a broad range of
clients, including Fortune 500 companies,
universities, start-up companies and
individuals.
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 7
COMMENTARY
The America Invents Act: Will it be the Nation’s Most Significant
Patent Act Since 1790?
By Robert A. Armitage, Esq.
Eli Lilly & Co.
On Sept. 16 the 150-page Leahy-Smith
America Invents Act, H.R. 1249, became
law. It is, without question, significant, even
record-setting, patent legislation.
The America Invents Act is — by far — the
lengthiest patent act in our nation’s history.
It is more than double the size of the bill
creating the 1952 Patent Act, which recodified
the entirety of U.S. patent law from scratch.
The new act’s legislative gestation consumed
over six years. Only once before, in enacting
the American Inventors Protection Act of
1999, did Congress take so long to bring a
new patent law into being.
Being the lengthiest patent act of all time
— and the slowest to transit Congress —
constitute at best uninspiring superlatives.
They hardly suggest that this new
congressional work product might one day
be acknowledged not just as a significant
advance in U.S. patent law, but as the most
significant since the first Congress crafted
the first patent act in 1790.
To make good on such a brash and bold
aspiration would be to fulfill a very tall order.
It would require that the new law surpass in
its implications and affect both the Patent
Act of 1836 (creating the patent office and the
modern system of patent examination) and
the 1952 Patent Act (providing a complete
and cogent, ground-up restatement of
all U.S. patent law under a full statutory
recodification). In other words, the America
Invents Act needs to achieve nothing short
of extraordinary credentials to top the
significance of these two great patent acts of
the 19th and 20th centuries.
Just why might the America Invents Act
someday realize such an outsized potential?
For the proponents of the new law, it holds
the promise of accomplishing two things,
each of which is potentially profound.
The first possible accomplishment would
be to work a revolution in the criteria by
which a new invention can be judged to
have been validly patented in the United
States. The new act both limits and then
reshapes patenting rules to those that, both
individually and collectively, are transparent,
objective, predictable and simple. It also
successfully retains and even enhances the
Photo by Sen. Patrick J. Leahy
The America Invents Act, shown here after President Obama signed it, more than double the size of the bill creating the 1952 Patent Act,
which recodified the entirety of U.S. patent law from scratch.
8 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
historic inventor-friendly and collaborationfriendly features that have long set U.S.
patent law apart from patent systems
globally.
The second potential impact is even more
ambitious: that our new patent law will serve
as a beacon to guide future changes in foreign
patent laws so that in the decades ahead,
foreign patent laws would come to be built
around the very same principles Congress
enshrined in our new law. Should this
potential be realized, greater harmonization
of the world’s patent laws may come to
mean nothing more than foreign patent laws
adopting the mold and model of America
Invents Act provisions.
HOW DOMESTIC PATENT
LAW PRINCIPLES WILL BE
REVOLUTIONIZED
The New Law is TOPS
The proponents of the America Invents Act
sought a new patent law — and a reformed
patent system — operating with greater
transparency, objectivity, predictability and
simplicity in the determination of whether a
valid patent could be granted on an invention.
To a quite stunning degree, they got what
they were seeking with the enactment of the
America Invents Act.
Transparency. Once the America Invents
Act takes full effect, only information that
has become available to the public before
an inventor seeks a patent for an invention
— or had become publicly available from an
earlier patent filing by someone else — will
be used to determine whether the invention
to be patented is sufficiently different from
pre-existing knowledge to merit a patent.
To achieve this result, the America Invents
Act erases from U.S. patent law an array of
archaic principles and practices that resulted
in secret knowledge or secret activities —
sometimes secret activities undertaken by
the inventor and other times secret work
done by third parties — being cited to prevent
© 2012 Thomson Reuters
a patent from issuing or to destroy its validity
once granted.
Objectiveness. In a similar manner, the new
statute removes from existing patent law
subjective tests that have historically been
considered in the assessment of whether a
patent is valid. When did the inventor first
think of the invention in its completed form?
On the day of the patent filing, what did the
inventor contemplate would be the best
mode for practicing the invention? These
types of subjective inquires have no relevance
under the America Invents Act. This full
objectivity in patenting principles will be
particularly relevant in assessing whether the
inventor’s patent filing sufficiently disclosed
the new invention. Henceforth, a sufficient
disclosure rests on two objective standards:
whether the actual embodiments of the
claimed invention are properly identified in
the patent, and whether those embodiments
could be put to a practical and substantial
use based on the information provided by the
inventor in the patent.
Predictability. To a remarkable extent, the
new law secures greater predictability in the
assessment of a patent’s validity by removing
unneeded patent law concepts that were
fact-intensive and required much discovery
during lawsuits to resolve. What remains is
a patent law focused on legal standards in
preference to extensive factual inquiries.
Predictability is further enhanced for
inventors through a set of new remedial and
“safe harbor” provisions aimed at permitting
an inventor to address and rectify errors and
omissions in the information provided to
the U.S. Patent and Trademark Office prior
to the grant of the patent. If an inventor is
incorrectly named in the patent, the naming
of the inventor can be more readily corrected.
If the inventor supplied a deficient oath as to
inventorship, a corrected substitute can be
more readily provided and accepted. If other
information was missing or incorrect during
the original examination of the patent, the
missing or corrected information can now be
provided and considered in a new procedure
that is specifically tailored for this purpose. In
each of these respects, patents will become
more predictably valid and predictably
enforceable.
Simplicity. What the America Invents Act
has in essence done is to boil the entirety of
U.S. patent law down to a set of four largely
legal questions and standards that, while
© 2012 Thomson Reuters
The statute successfully retains and even enhances
the historic inventor-friendly and collaboration-friendly
features that have long set U.S. patent law apart
from patent systems globally.
they fully protect the public from overly
broad or overly vague patents, require little
discovery and minimal fact-finding. In a
sentence, once the law fully takes hold, the
validity for a patent will require no more
than that an inventor’s claimed invention be
confined to subject matter that is:
of the new act now tout. The United States
has long recognized a “grace period”
during which inventors who disclosed their
inventions during the year before seeking
patents were not subject to their own
disclosures being used against them to
destroy the validity of their patents.
•
Sufficiently different from what was
already available to the public (or
previously disclosed in a publicly
available patent filing made by someone
else) as of the date that the inventor’s
patent was sought.
•
Sufficiently disclosed so that the actual
embodiments of the invention are
identified and can be put to a substantial
and practical use.
The America Invents Act not only continues
these protections for inventors, but further
enhances them with a guarantee to the first
inventor to publicly disclose an invention
of the right either to patent the invention,
provided a patent filing is made during the
one-year grace period after the disclosure, or
to dedicate the invention to the public, in the
event the inventor elects not to seek a patent.
•
Sufficiently definite so a skilled person
reading the patent knows what is and is
not being patented.
•
Sufficiently concrete so that whatever is
claimed in the patent is not excessively
conceptual or otherwise abstract in
character.
Once the new patent law is fully implemented,
patents granted under it will be valid or
invalid based on whether these four legal
criteria are met, producing a patent law its
proponents contend is TOPS: transparent,
objective, predictable and simple. Indeed, by
being TOPS, basing patenting on information
available to the public and largely restricting
the law to legally rather than factually
grounded tests for patenting, it becomes
possible that in much patent litigation, little
— perhaps no — discovery from the inventor
may be of any relevance to the validity of a
patent. This, of course, would represent
a profound reversal of the situation that
applies under existing U.S. patent law.
U.S. Patent Law Becomes Even More
Inventor-Friendly and CollaborationFriendly
Making the substantive patent law simpler
and more transparent was, however, only
the beginning of the benefits that supporters
The same can be said for the so-called
“collaboration-friendly” features of U.S.
patent law. In 1999, and again in 2004,
Congress amended patent law initially to
protect co-workers, and later to protect all
individuals working collaboratively under
joint research agreements, from having their
respective patent filings cited against one
another as “prior art.” Prior to these changes,
an earlier-filed patent application of one such
co-worker or collaborator could be cited as a
ground for holding the later patent filings of
any others unpatentable, even if the earlier
patent filing had not become public at the
time the later patent filing was made.
The America Invents Act reinforces these
unique collaboration-friendly features of
U.S. patent law by providing that such
earlier patent filings cannot be cited to show
either lack of novelty or obviousness in the
later patent filing of another co-worker or
collaborator. The ironclad protections of
this type now found in U.S. patent law are
unprecedented; foreign patent systems
typically hamper collaborative work by
allowing all of the earlier patent filings of
inventors, co-workers and other collaborators
to be cited as prior art to destroy the novelty
of later-filed patents within the same
organization or joint-research group.
Looking globally across patent systems
today, it becomes clear that one and only one
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 9
patent system now exists that fully recognizes
the realities of invention in the 21st century.
In an era of cooperation and collaboration
among research organizations, it is essential
that patenting principles reflect that reality.
The U.S. patent law now embodies the
international “gold standard” for protecting
the fruits of collaborative research — and
can be credibly monikered as the world’s first
truly 21-century patent law.
How U.S. Law Will Set The Standard
for the Public’s Role in the Patenting
Process
As early as 1980, Congress recognized that
the 1836 model of patent examination was
deficient in failing to provide any formalized
means for public participation in the
patenting process. In that year, Congress
passed a bill providing for the ex parte
re-examination of previously issued patents,
on the limited ground of whether a patent or
other publication raised a substantial new
question of patentability. These provisions
were subsequently broadened in 1999 under
the American Inventors Protection Act to add
an inter partes re-examination procedure.
someone challenging a patent’s validity can
receive a prompt and fair adjudication of
each significant validity issue raised by the
challenger. The new procedures are termed
“post-grant review” and “inter partes review,”
with the first available only during the period
immediately after a patent issues and the
latter available thereafter throughout the life
of the patent.
These replacement procedures are to be
conducted by legally trained, technically
competent administrative patent judges,
not (as under current law) patent examiners.
They can only be initiated through a request
that provides all the legal arguments and
factual support for moving ahead with
the proceeding at the time the request to
challenge the patent is initially lodged with
the Patent and Trademark Office. They are
to be confined to addressing only issues
where a serious question of validity has been
established, an issue that is more likely than
not to invalidate the patent or for which
there is at least a reasonable likelihood of
invalidation.
As a result of being “front loaded” with
the relevant evidence and arguments of
What the America Invents Act has in essence done is to
boil the entirety of U.S. patent law down to a set of four
largely legal questions and standards that require little
discovery and minimal fact-finding.
The America Invents Act phases out the 1999
inter partes procedure and instead offers what
could prove to be the world’s best provisions
for public participation in the patenting
process. First, the new law provides effective
public participation early in the patenting
process — before a decision to issue a patent
is made by a patent examiner. It does so by
providing a formal mechanism for submitting
information relevant to whether the subject
matter for which a patent is being sought is
new and nonobvious — sufficiently different
from the prior art to merit issuing a patent.
In a more sweeping set of statutory changes,
the replacement for the 1999 re-examination
law provides that both the patent owner and
the challenger and limited to truly serious
questions of patent validity, each of these new
proceedings is subject to a one-year statutory
deadline to reach a final decision. Because of
the legal nature of the patent validity issues
under the America Invents Act — and the
limited nature of the factual matters that will
underlie those legal determinations — the
new procedures provide for limited discovery,
assuring fairness while tightly controlling
the time and costs required to get to a final
resolution.
Again, the promise of the new law is nothing
short of revolutionary. By moving away from
the so-called “opposition” procedures used in
Europe since the 1970s, where the European
10 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
Patent Office typically takes five times —
even 10 times — as long to resolve a “patent
opposition” as the new U.S. law will permit,
the new U.S. post-grant regime, if effectively
implemented, may well earn the status of
international gold standard for defining the
mechanisms for public participation in the
patenting process.
What The New Act Means for Efforts
at Global Patent Cooperation and
Harmonization
The America Invents Act — the world’s first
truly 21-century patent law — contains all
the elements needed for a patent system to
operate effectively, efficiently, economically
and equitably. If the decade ahead yields
greater international patent cooperation
and harmonization among patent systems
around the world, the starting point for that
effort should lie in the incorporation of its
provisions into patent laws across the globe.
Should that promise be realized, the
America Invents Act will have realized its full
potential as the most significant patent act
since 1790, not only for the United States,
but for inventors and creators everywhere,
as well as those who invest in the creation
of new inventions, those who are employed
producing and selling them, and, of course,
those who are then able to benefit from them
as consumers.
Robert A. Armitage is senior vice
president and general counsel of Eli
Lilly & Co. Reprinted with permission
from the Washington Legal Foundation.
© 2011.
© 2012 Thomson Reuters
COMMENTARY
The New Grace Period Under
the America Invents Act
By Ammon Lesher, Esq.
Turner Padget Graham & Laney
On Sept. 16, 2011, President Obama
ceremoniously signed the America Invents
Act into law and proclaimed that the “muchneeded reform will speed up the patent
process so that innovators and entrepreneurs
can turn a new invention into a business as
quickly as possible.”1 Given the extreme
partisanship that exists in Washington
these days, it was refreshing to see a piece
of legislation pass through the Senate by a
vote of 89-9.
However, it appears that even when
Congress can actually agree on something, it
is still unable to formulate a comprehensive
solution. Right now, there is considerable
debate occurring throughout the patent
world as to whether the AIA is, in fact,
an improvement to our existing system.
Regardless of which side of the fence you are
on when it comes to the law’s impact, the
AIA is arguably the most significant change
to U.S. patent laws since the 1836 Patent
Act, which established the modern American
system of patent examination.
At the heart of the AIA is the change to a
first-inventor-to-file system, which replaces
the “well-developed 200-year-old American
patent system that has a proven record as
the best in the world.”2 This alone begs the
question whether “harmonization” is in fact
in our country’s best interest.
Replacement
of
the
first-to-invent
system with a first-inventor-to-file system
necessitated a complete rewrite of 35 U.S.C.
§ 102, altering the definition of “prior art”
under the new regime. The complexities
introduced through the new Section 102 alone
are so great that it would be impossible to
discuss each change in a meaningful way in this
article. Therefore, this article will focus on one
particular aspect of the new Section 102 that
will haunt patent practitioners and litigators
for the foreseeable future.
In addition, the new Section 102 eliminates
the separate categories of prior art that exist
under the current laws. Currently, 35 U.S.C.
§ 102(a) is directed to the acts of others, versus
the prior-art events set forth in Section 102(b),
which are applicable to an inventor and have
occurred more than one year before the filing
date. Under the new Section 102 there is no
segregation of these prior art-events.
As an introduction, the new Section 102
has an effective date of March 16, 2013.
This means that an application containing
a single claim that is not based upon an
earlier application entitled to a priority date
before March 16, 2013, is governed by the
first-inventor-to-file system.3 However, the
transition will effectively take several years,
given that an applicant will be able to file
continuation applications under 35 U.S.C.
§ 120, with an ultimate priority date before
March 16, 2013, in order to continue operating
under the first-to-invent system.
The America Invents
Act is arguably the
most significant change
to U.S. patent laws
since the 1836 Patent
Act, which established
the modern American
system of patent
examination.
Accordingly, the initial step for any patent
litigator in evaluating a potential dispute
must be to determine which set of patent
laws is applicable to the patent at issue.
Failure to perform this critical first step could
lead to disastrous results.
The most perplexing aspect of the AIA,
however, is the ambiguity and uncertainty
associated with one of the most important
provisions of the new law: the grace period.
Sen. Patrick J. Leahy (left) and Rep. Lamar Smith (right) sponsored the America Invents Act.
© 2012 Thomson Reuters
One of the most noteworthy changes in
the new Section 102 is that the prior-art
categories now extend to events occurring
anywhere in the world. In contrast, current
Section 102(a) and the “public use” and “on
sale” bars under current Section 102(b) are
all limited to acts occurring within the United
States. The broadened scope of available
prior art will undoubtedly increase the costs
associated with prior-art searches conducted
in furtherance of an invalidity defense.
Under current law, an inventor’s own
activities are excluded from the prior art
if they occur within the one-year period
leading up to filing.4 This uniquely American
provision has fostered efficient innovation for
decades, allowing inventors to fully develop
their inventions and make informed decisions
as to whether the cost of seeking patent
protection is justified by the potential value
of the technology at issue.
With the passage of the AIA, Congress has
seemingly narrowed the activities protected
by the grace period and introduced an
unacceptable level of uncertainty that will
remain until the courts are forced to resolve
the issue. Under the new Section 102(a)(1), a
person is entitled to a patent unless:
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 11
[T]he claimed invention was patented,
described in a printed publication, or in
public use, on sale, or otherwise available
to the public before the effective filing
date of the claimed invention.5
The public-use and on-sale bars are wellestablished under the current law. However,
Congress has added a new catchall category
to cover inventions that are “otherwise
available to the public” prior to the time an
application is filed. The applicable grace
period for inventors is set forth in new Section
102(b)(1)(A), which states:
[A] disclosure made one year or less
before the effective filing date of a
claimed invention shall not be prior
art to the claimed invention … if … the
disclosure was made by the inventor
or joint inventor or by another who
obtained the subject matter disclosed
directly or indirectly from the inventor or
a joint inventor.6
Congress’ failure to clearly and consistently
delineate the boundaries of the new grace
period will create problems for years to come.
Instead of preserving the comprehensive
exemption for an inventor’s own acts
during the one-year period before filing,
Congress chose to exclude only qualifying
“disclosures” from the prior art. However, new
Section 102(a)(1) includes statutory bars that
may or may not qualify as “disclosures” under
the literal wording of the statute.
The public-use and on-sale bars were absent
from the original bill introduced in 2005
and were not added until this year.7 In the
2005 bill, prior-art events under 35 U.S.C.
§ 102(a)(1) occurred when an invention had
previously been patented, described in a
printed publication, or otherwise publicly
known.”8 The 2005 bill clearly defined the
scope of the grace period under Section
102(b)(3)(A), which provided that:
[S]ubject matter is publicly known for
the purposes of subsection (a)(1) only
when (i) it becomes reasonably and
effectively accessible through its use,
sale or disclosure by other means; or (ii)
it is embodied in or otherwise inherent
in subject matter that has become
reasonably and effectively accessible.9
Under subsections (a) and (b) of this provision,
any prior-art event would serve as a bar only
where it occurred more than one year prior
to the filing of the application, or through
disclosures made by someone other than
the inventor, or a joint inventor, or by others
who obtained the subject matter disclosed
directly or indirectly from the inventor or a
joint inventor.10 Clearly, in order for an event
to qualify as prior art under this provision, it
had be both “public” and “accessible.”
in such activity must argue either that the
literal wording of “public use” is in clear
contradiction to secret commercialization;
or that such commercialization constitutes a
“disclosure” under the new Section 102 and is,
therefore, protected if it occurred within one
year prior to the filing.
Congress’ intent to include a complete oneyear exemption for an inventor’s own prefiling actions within the 2005 act was clear
and unequivocal. Further, the definitional
statements within the statutory language
undeniably overruled the broad definition
of “public use” as set forth in Metallizing
Engineering Co. v. Kenyon Bearing & Auto Parts
Co.11 and its progeny. The AIA provides no
such clarity.
In contrast, alleged infringers will argue that
the term public use was preserved from the
old law and must be applied in accordance
with prior precedent. The fact that a provision
expressly overruling Metallizing Engineering
was included in the 2005 bill and subsequent
versions of patent reform, but was later
excluded from the AIA, will only serve to
bolster this position. Therefore, each party will
be forced to evaluate the merits of these types
Congress’ failure to clearly and consistently delineate
the boundaries of the new grace period will create
problems for years to come.
In Metallizing Engineering, the 2nd U.S. Circuit
Court of Appeals held that an inventor‘s secret
commercialization of an invention creates
a patentability bar against the inventor, and
is considered a public use under 35 U.S.C.
§ 102(b).12 This holding was later followed by
the U.S. Supreme Court, which recognized
that “it is a condition upon an inventor’s
right to a patent that he shall not exploit
his discovery competitively after it is ready
for patenting; he must content himself with
either secrecy, or legal monopoly.”13
Further, the Federal U.S. Circuit Court of
Appeals has, on multiple occasions, followed
the precedent that “[a] commercial use is a
public use even if it is kept secret.”14 While
prior precedent has established that this type
of activity constitutes a public use under new
Section 102(a), it is not evident whether such
public use would also constitute a disclosure
under Section 102(b)(1)(A).
of cases with little to no guidance on how a
court may interpret the critical provisions of
the new law.
One commentator has suggested the AIA
does in fact overrule Metallizing Engineering
and that “basing patenting on information
available to the public and largely restricting
the law to legally rather than factually
grounded tests for patenting, it becomes
possible that in much patent litigation, little
— perhaps no — discovery from the inventor
may be of any relevance to the validity of
a patent.”15 Unfortunately, this position is
incorrect.
Congress’ affirmative addition of the publicuse limitation and effective elimination of the
comprehensive one-year grace period allowed
for in the 2005 bill is persuasive evidence
of its intent to narrow the grace period and
preserve the Metallizing Engineering bar to
patentability. However, this issue will not be
settled until many years from now, when the
first test case is brought before the Federal
Circuit.
The global scope of available prior art and
the seemingly narrowed protections of
the new grace period mean that alleged
infringers will expend substantial time
and expense attempting to unearth any
potentially patent-defeating event. Further,
if any discovered activity originated with
the inventor, the question will then become
whether it was a public use, was on sale, or
was otherwise available to the public under
new Section 102(a), but fails to qualify as a
disclosure under Section 102(b)(1). Under
such circumstances, a patentee may be
forced to settle a dispute for far less than its
actual value, as opposed to rolling the dice
on a novel interpretation of an ambiguous
statute.
In cases involving secret commercialization
activity, parties will be faced with uncertain
positions. Patentees that arguably engaged
The AIA does many things well; however,
its failure to clearly define the scope of the
applicable prior art with respect to the grace
12 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
© 2012 Thomson Reuters
period will present significant problems in
many future cases. Many commentators
also question whether the grace period
is personal to the inventor or whether an
early disclosure by an inventor may prevent
a subsequent third-party disclosure from
becoming prior art.16
These arguments are indicative of the problem.
One provision of the new Section 102 appears
to encourage early “disclosure” of an invention,
while another provision within the same
statute seemingly discourages such conduct
by failing to delineate the boundaries of what
qualifies as a “disclosure.” Prior-art and
invalidity issues are raised in practically every
patent infringement case.
Before the new Section 102 becomes
effective, here’s hoping that Congress will
amend this particular provision, providing
clarity and predictability for innovators,
practitioners and the courts.
NOTES
See Press Release, White House, President
Obama Signs America Invents Act, Overhauling
the Patent System to Stimulate Economic
Growth, and Announces New Steps to Help
Entrepreneurs Create Jobs (Sept. 16, 2011),
available at http://www.whitehouse.gov/thepress-office/2011/09/16/president-obamasigns-america-invents-act-overhauling-patentsystem-stim.
1
See Ron Katznelson, The America Invents
Act’s repeal of secret commercial use bar is
constitutionally infirm, IP Watchdog (May 31, 2011),
available at http://ipwatchdog.com/2011/05/31/
the-america-invents-acts-repeal-of-secret2
© 2012 Thomson Reuters
commercial-use-bar-is-constitutionally-infirm/
id=17489/.
America Invents Act, Pub. L. 112-29, § 3(n)(1)(A).
3
35 U.S.C. § 102.
4
America Invents Act, Pub. L. 112-29, at 10
(1st Sess. 2011) (emphasis added).
5
Id. at 6 (emphasis added).
6
See Lamar Smith, Patent Reform Act of 2005,
H.R. 2795 (1st Sess. 2005) (emphasis added).
7
Id. at 3(emphasis added).
8
Id. at 5-6.
9
10
Id. at 3.
Metallizing Eng’g Co. v. Kenyon Bearing & Auto
Parts Co., 153 F.2d 516 (2d Cir. 1946).
11
Id.
12
Pfaff v. Wells Elecs., 525 U.S. 55, 68 (1998)
(quoting Metallizing Eng’g, 153 F.2d at 520).
13
Kinzenbaw v. Deere & Co., 741 F.2d 383, 390
(Fed. Cir. 1984) (citing Metallizing Eng’g, 153 F.2d
at 520); D.L. Auld Co. v. Chroma Graphics Corp.,
714 F.2d 1144 (Fed. Cir. 1983).
14
Robert A. Armitage, Leahy-Smith America
Invents Act: Will it be nation’s most significant
patent act since 1790?, Wash. Legal Found. Legal
Backgrounder, Vol. 26 No. 21 (Sept. 23, 2011),
(available at http://www.wlf.org/publishing/
publication_detail.asp?id=2268).
15
Ammon Lesher is an intellectual property
attorney with Turner Padget Graham &
Laney in Greenville, S.C. His practice focuses
exclusively on patents, trademarks, copyrights
and trade secrets, and on the procurement and
enforcement of intellectual property rights for
both corporate and individual clients. His work
includes patent prosecution, trademark and
copyright registrations, and patent, trademark
and copyright litigation. He also handles
inter partes proceedings within the Patent
and Trademark Office. He can be reached at
alesher@turnerpadget.com or (864) 552-4640.
See Gene R. Quinn, Prior art under America
Invents: The USPTO explains first to file, IP
Watchdog (Oct. 4, 2011), available at http://
ipwatchdog.com/2011/10/04/prior-art-americainvents-uspto-explains-first-to-file/id=19571/.
16
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 13
COMMENTARY
Advising Clients on the First-to-File System
By Marc Hubbard, Esq.
Gardere Wynne Sewell LLP
The Leahy-Smith America Invents Act
changes the American patent system from
a “first to invent” to a “first inventor to file”
system. What do you tell clients about the
switch and, more importantly, how do you
prepare them for it?
TIME TO GET READY
To make the switch from a first-to-invent
system to a first-to-file system the AIA amends
Section 102 of Title 35 of the U.S. Code by
substituting an entirely new novelty standard
bearing little resemblance to the current one.
The new standard will apply only to claims
with an effective filing date on or after
March 16, 2013. Applications filed before
this date, as well as all claims in applications
filed after this date entitled to priority from
or the benefit of earlier filed applications,
will be subject to the existing rules. It may
seem like there is plenty of time to get ready,
but clients need to start planning well before
effective date of the amendment.
ABSOLUTE NOVELTY, WITH A GRACE
PERIOD
The new novelty standard is essentially
comprised of two parts or rules: one relating
to acts and the other relating to previously
filed U.S. applications.
The first rule, which is set out in the new
Section 102(a)(1), is that the claimed invention
cannot have been made available to the
public in any way, including by patenting
or printed publication, before the earliest
effective filing date for the claimed invention.
This is consistent with the absolute-novelty
requirements in most countries. However,
unlike the absolute-novelty standard used by
other countries, the rule further specifies that
novelty is lost when the claimed invention
has been in “public use” or “on sale.” If these
terms are interpreted the same as they are
under current law, nonpublic events can
result in a loss of novelty.
There are two exceptions to this rule.
The first, set out in Section 102(b)(1)(A), is a
one-year grace period for direct or indirect
disclosures of the inventor. A disclosure up
to one year before the effective filing date of
an invention is not considered prior art if the
disclosure is made by either the inventor or
someone who obtains the subject matter of
the disclosure directly or indirectly from the
inventor. The term “disclosure” has not been
defined by the AIA.
Under the second exception, found in Section
102(b)(1)(B), a third-party disclosure of a
claimed invention is not prior art if it is made
after the inventor, or a person who obtains
it from the inventor, publicly discloses it.
Therefore, a public disclosure of an invention
prevents others from patenting it and permits
an inventor to wait up to one year to file a
patent application without losing novelty.
PRIOR APPLICATIONS
The second novelty rule, stated in Section
102(a)(2), specifies that all patents and
applications that have been published or
deemed published under Section 122, and
that have an earlier effective filing date than
the claimed invention, constitute prior art.
The effective filing date of an application
is, according to Section 102(d), the filing
date of the earliest application containing
the relevant subject matter, to which the
application is entitled to claim priority, or
which the application can claim the benefit
of, under Sections 119, 120, 121 or 365. This
means that all earlier filed applications,
except for those that have not been
published, constitute prior art, in contrast
to the current novelty rule of Section 102(e),
which limits the prior art effect of published
applications and patents to those filed before
the date of invention.
Furthermore, unlike the current rule in
Section 102(e), applications claiming priority
to foreign filed applications will have priorart effect as of their priority dates and not
their filing dates in the United States.
There are three exceptions to this second
rule, which are set out in Section 102(b)(2).
First, subject matter disclosed in a prior
application is not considered prior art if both
14 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
U.S. Patent and Trademark Office Director David Kappos hailed
the act.
it and the claimed invention are owned by, or
are subject to an obligation to assign to, the
same person as of the effective filing date of
the claimed invention. This first exception is
consistent with current law. Second, subject
matter disclosed in a prior application that
was obtained directly or indirectly from
the inventor of the claimed invention is not
prior art. Third, subject matter in a prior
application is not prior art if the inventor
publicly disclosed it before the effective filing
date of the prior application.
To address joint-research situations, Section
102(c) provides that the subject matter of the
prior application and the claimed invention
will be deemed to be owned by the same
person if both were developed by or on behalf
of a party to a joint-research agreement that
was in effect prior to the effective filing date of
the claimed invention. The claimed invention
must also have been the result of activities
under the agreement, and the application
must identify, or be amended to identify, all
parties to the agreement.
If these conditions are satisfied, a prior
application of a party to a joint-research
agreement will not be prior art as a claimed
invention arising from the joint research
(unless there has been a publication or other
© 2012 Thomson Reuters
novelty-defeating act before the effective
filing date for the claimed invention).
KEY POINTS TO KEEP IN MIND WHEN
ADVISING CLIENTS
Some clients believe that, under the new law,
a third party who did not invent will be able
to “steal” the invention from the client and
obtain a patent on it. However, as is the case
under current law, only a true inventor may
apply for a patent. A client can be further
reassured that the disclosure of the client’s
invention in an application by a third party
who obtained it from the inventor cannot be
used against the inventor’s own application.
Should the third party apply for a patent, the
inventor can initiate a derivation proceeding.
Another fear, expressed by smaller clients,
is that patenting will turn into a race to
the Patent and Trademark Office under
the first-to-file system. Unfortunately, this
clients can take some comfort that they will
not immediately lose their U.S. patent rights
by disclosing an invention to a third party or
by publishing details of it, or that actions of
third parties who obtain information about
the invention cannot result in a loss of rights.
But clients should be cautioned that such
disclosure presents yet additional risks. If
it is a public disclosure, the client will most
likely lose patent rights in most countries
outside the United States. Furthermore,
determining whether a third party obtained
the invention from the client, particularly
if the client made a public disclosure, may
be difficult or impractical and we do not yet
know what type of showing will be required
to prove that information about the invention
in a publication or prior application was
obtained from the inventor.
A client now also has the interesting option
of publicly disclosing the invention as a way
A public disclosure of an invention prevents others from
patenting it and permits an inventor to wait up to one year
to file a patent application without losing novelty.
fear may turn out to be real. PTO Director
David Kappos and others have been saying
that it will be important to file “early and
often.” On the one hand, under the current
first-to-invent system, it has always been
better to file earlier than later due to the
risk of third-party activities creating bars to
patenting. On the other hand, the new firstto-file system poses additional risks. Thirdparty activities will have immediate prior-art
effect in most cases, rather than prior-art
effect only after one year. Furthermore,
previously filed applications can be used not
only for determining novelty, but also to show
obviousness.
The race to get an application on file with
the PTO will, of course, need to be balanced
against the increasing importance in the
United States of a well-prepared specification
that will support the desired scope of claims.
Deciding when an invention is ready for
patenting will be a difficult call. One solution
might be filing a series of applications as
development work continues, but such an
approach will be much more costly, even if
the applications are filed provisionally.
Although the risk of unpatentability increases
the longer a client waits to file an application,
© 2012 Thomson Reuters
of creating, in effect, a priority right in the
United States. In addition to cutting off the
possibility of a third party obtaining a patent
on the invention in a patent application
filed after the publication, a publication of
the invention will preserve a right to file an
application on the invention for up to a year.
Thus, for a client not interested in patenting
the invention outside the United States,
promptly publishing a description of the
invention will give the client time to figure
out whether to patent the invention, and at
the same time create prior art against third
parties obtaining a patent on the invention
or an obvious variant of it. For clients with
limited resources, publication could partially
offset the need to rush to the PTO.
However, a public disclosure does have
disadvantages. It will force the client to make
a decision on applying for a patent within a
12-month period, when the client might not
have the resources to file an application, is
still developing the invention or otherwise
cannot make a decision.
Furthermore, obviousness will now be
determined as of the filing date of the
application, not as of the date of invention.
Although a client’s prior applications
cannot be used against it when evaluating
obviousness, third party applications filed
in the interim could be used in combination
with other references to demonstrate
obviousness. Waiting up to a year to file an
application could be the difference between
the invention being not obvious and obvious.
After a year, the public disclosure also can be
used to show obviousness of, for example,
the client’s own improvements.
Finally, it is critical to keep in mind that
a commercial use or offer for sale by the
inventor might not be treated as a disclosure
and thus receive the benefit of the one-year
grace period. If “public use” and “on sale”
continue to be interpreted as they are under
current law, these acts will not necessarily
involve a disclosure of the invention to a third
party, and they will involve more than a mere
disclosure. It will likely be many years before
the Federal U.S. Circuit Court of Appeals
provides guidance on these issues.
Officials at the PTO have sidestepped the
issue on how to interpret the new Section 102
for now, saying that the courts will need to
answer these questions. Until there is some
case law on the issue, the prudent counsel
to clients would be to avoid commercial
use, offers for sale, or any novelty-defeating
activity that could be viewed as more than a
mere disclosure, until a decision on filing an
application is reached.
INTERIM STRATEGIES
Clients may continue to use their current
patenting strategies in advance of the switch
to the first to file system, but they should
make a couple of adjustments.
Clients should seriously consider filing
applications before March 16, 2013, on any
invention ready to patent, as the old law
is likely to be more advantageous from a
patentability perspective than the new law.
Furthermore, unless there is clarification
on the issue of whether offers for sale and
commercial use constitute disclosures, an
application should be filed, as a precaution,
before the 2013 switchover date on any
invention that may have been in public use or
on sale before that date.
Clients who are considering the strategy of
making a public disclosure of an invention
before filing an application should consider
the possibility of beginning to make such
public disclosures starting March 16, 2012.
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 15
The Two Parts to the New
Novelty Standard Under
35 U.S.C. § 102(a)
• The claimed invention cannot
have been made available
to the public in any way,
including by patenting or
printed publication, or by
being in public use or on sale.
• All patents and applications
that have been published
or deemed published under
Section 122, and that have
an earlier effective filing date
than the claimed invention,
constitute prior art.
AFTER THE TRANSITION
Following the switchover March 16, 2013, and
until there is clarification on what is meant by
“disclosure,” it would be wise for all clients
to file applications before engaging in any
activity that might be considered a public use
or an offer for sale until a priority application
is filed.
As most applications will be prior art as
of their filing date, even for obviousness
purposes, filing “early and often” is probably
the best strategy going forward. Everyone
will need to make decisions more quickly
on when an invention is ready for patenting
timing.
Whether and when to publish details of an
invention will likely involve a balancing of
interests. For inventions that will definitely
not be patented and cannot be kept secret,
an early publication seems to be a logical
choice. If the client is considering only
domestic protection, publication might still
be an attractive option, but the benefits need
to be balanced against the disadvantages
mentioned above and the loss of trade secret
protection.
Clients with international filing strategies
already in place will probably not make
significant changes to their existing
strategies, unless they were engaging in
secret commercial use or making secret offers
for sale before filing a priority application, or
unless they want to incorporate pre-filing
publication into their strategy for categories
of inventions not meriting patent protection
outside the United States or any patent
protection at all.
Marc Hubbard, a partner in the Intellectual
Property practice group in the Dallas office
of Gardere Wynne Sewell LLP, counsels
businesses of all sizes on IP issues and
strategies. His practice focuses on patentrelated counseling, opinions, portfolio
management,
prosecution,
post-grant
proceedings, and litigation, primarily in the
electronics, mechanical, computer software,
and business method fields. He is currently
the vice-chair of the American Intellectual
Property Law Association’s Patent Law
committee. His email address is mhubbard@
gardere.com.
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16 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
© 2012 Thomson Reuters
COMMENTARY
United States Converts to First-to-File
Patent System
By Edward Fan, Esq., and Karen Townsend, Esq.
Torys LLP
On Sept. 16, the Leahy-Smith America Invents
Act was signed into law, implementing the
most significant changes to U.S. patent law
in more than half a century. These changes
affect many aspects of U.S. patents, including
the registration process for patents, the postgrant review of patents and patent litigation.
Although many of the provisions under the
AIA will take effect a year or more from now,
some took effect as soon as the legislation was
signed into law and others will go into effect
soon. Below we highlight some of the more
significant features of the AIA.
PRE-GRANT CHANGES
First to Invent
The AIA changes the U.S. patent system from
a first-to-invent system to a first-to-file system,
which is consistent with patent laws of most
other countries, including Canada. Until now,
an inventor who was not the first to file for a
patent in the United States could nonetheless
challenge a patent application previously made
by others for the same invention through an
interference proceeding, on the basis that the
inventor was the first to invent the invention.
Under the AIA, interference proceedings will
eventually be phased out and will be replaced
with derivation proceedings. In derivation
proceedings, the later inventor to file a
patent application on the same invention can
challenge an earlier-filed application only on
the basis that the first inventor “derived” the
invention from the second inventor.
These changes will become effective March 16,
2012, and will relate to applications with an
effective filing date on or after Sept. 16, 2011.
Prior Art
Along with the change from a first-to-invent
to a first-to-file system come changes to
the way prior art is assessed. Under the AIA,
assessment of both novelty and obviousness
of a patent claim will be based on the effective
filing date of a claimed invention, rather than
the previously used date of invention.
In addition, the AIA eliminates the ability
to “swear behind” independently derived
© 2012 Thomson Reuters
third-party patents and publications based
on an inventor’s earlier invention date. The
AIA also removes territorial limitations that
used to be applicable to public uses and
sales as bars to patentability.
However, the new law continues to provide a
one-year grace period, allowing for exclusion
as prior art any disclosure made one year
or less before the effective filing date by
the inventor (or someone who obtained the
information directly or indirectly from the
inventor).
These changes will become effective on
March 16, 2012, and will relate to applications
with an effective filing date on or after
Sept. 16, 2011.
Prioritized Examination
As of Sept. 26, 2011, it was possible to
request prioritized examination of a patent
application. This program of prioritized
examination
will
allow
accelerated
examination without requiring the applicant
to submit additional search or support
documentation.
A patent undergoing
prioritized examination must have a limited
number of claims, and the additional fee
for large-entity applicants is currently set at
$4,800.
Ineligible Subject Matter
The AIA stipulates that as of Sept. 16, 2011,
tax strategies are deemed insufficient to
distinguish pending patent claims from the
prior art (that is, tax strategies are deemed
to be the prior art). Therefore, all pending
and future applications directed solely to tax
strategies will not be patentable. In addition,
the AIA states that “no patent may issue on a
claim directed to or encompassing a human
organism.”
POST-GRANT CHANGES
Supplemental Examination
Beginning Sept. 16, 2012, a new postissuance proceeding called “supplemental
examination” will allow a patentee to
correct errors or omissions made during
the registration process of its own patent
application. The supplemental examination
proceeding will allow the patentee to
present information that was inadequately
considered, was not considered at all or is
incorrect and might otherwise lead to an
allegation of inequitable conduct.
Post-Grant Review Process
The AIA establishes a new post-grant
review process. An interested third party
may request such a review within nine
months of the issuance or reissuance of
a patent by demonstrating that it is more
likely than not that one or more patent
claims are unpatentable. Unlike current
re-examination proceedings, the post-grant
review is not limited to questions of novelty
and obviousness, but can be based on other
grounds for invalidating a patent.
Inter Partes Review
The AIA also replaces the current inter partes
re-examination procedure with a new “inter
partes review” process. This process can
only be requested nine months after the
issuance or reissuance of a patent or after
the conclusion of any post-grant review that
may have been instituted. As with the old
inter partes re-examination process, the inter
partes review can be brought only on grounds
of lack of novelty or obviousness based on
patents or printed publications.
The standard for being granted an inter partes
review has also changed from requiring a
substantial new question of patentability
to a showing of reasonable likelihood of
success that the requestor will prevail on at
least one of the challenged claims. The inter
partes review proceedings will not begin until
Sept. 16, 2012, but the new standard for granting
an inter partes review takes effect immediately
with respect to inter partes re-examination.
Transitional Post-Grant Review
of Business-Method Patents
The AIA creates a special post-grant review
procedure for persons who have been
accused of infringing a patent directed to the
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 17
Interference proceedings will eventually be phased out
and will be replaced with derivation proceedings.
practice, administration or management of a
financial product or service. Such a person
can challenge the asserted patent at the U.S.
Patent and Trademark Office in a post-grant
review, which can be used as a ground to stay
a civil action. This provision of the AIA will
expire eight years after Sept. 16, 2012, unless
renewed by Congress.
Virtual Marking
To comply with marking requirements under
the AIA, a patentee may now mark an article
with the word “Patent” or the abbreviation
“pat.,” together with an Internet address
accessible to the public free of charge that
associates the patented article with the
number of the patent.
LITIGATION MATTERS
Prior-Commercial-Use Defense
to Infringement
The AIA broadens the prior-commercial-use
defense, which previously applied only to
patented business methods, to now include
continued commercial use of subject matter
used in a manufacturing or other commercial
process at least one year before the filing or
public disclosure of a claimed invention.
The new defense can be used against any
patent issued on or after Sept. 16, 2011.
However, some exceptions for the use of
this defense may apply to nonprofit research
laboratories and other nonprofit entities such
as hospitals and universities.
Best Mode
The AIA also eliminates the failure to disclose
the best mode of practicing an invention as
grounds for canceling a patent or holding a
patent invalid or unenforceable. This new
provision applies only to proceedings filed
on or after Sept. 16, 2011. For the invention
to be patented, however, the patent
application must still disclose the best mode
contemplated by the inventor for practicing
the invention.
Joinder
The AIA also prevents a plaintiff from suing
multiple defendants in a single lawsuit if
the only justification for the joinder is that
all defendants are alleged to have infringed
the same patent. This law applies to all
proceedings filed on or after Sept. 16, 2011.
Edward Fan (left) of Torys LLP focuses on the acquisition, enforcement and exploitation of intellectual property in patents,
trademarks, copyrights and industrial designs. In addition to advising on issues relating to information management, he
is also involved in negotiating and drafting intellectual property and other technology-related licenses and agreements.
His work includes evaluating, procuring and protecting rights in the electronics, telecommunications, medical devices,
computer technology and manufacturing industries. Fan is a registered patent agent in Canada and the United States.
Karen Townsend (right) focuses on intellectual property matters. She has substantial experience in drafting, filing and
prosecuting U.S. and foreign patent applications in the areas of biotechnology, pharmaceuticals and chemistry. Townsend
also has significant expertise in drafting patentability, validity, infringement and freedom-to-operate opinions, as well as
advising clients on establishing and improving their patent portfolios. She is a registered patent agent in the United States.
Torys LLP is an international business law firm with offices in New York, Toronto and Calgary.
18 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
© 2012 Thomson Reuters
COMMENTARY
Post-Grant Review: A Preview
By Robert G. McMorrow Jr., Esq.
Connolly Bove Lodge & Hutz LLP
The America Invents Act has now been
signed into law. Among the changes enacted
to the U.S. patent laws is the introduction of
a “post-grant review” of issued U.S. patents,
pursuant to which an interested party may
seek to cancel one or more claims of a
granted U.S. patent.
Congress expressed the view, contained in
the act’s legislative history, that post-grant
review procedures will improve the quality of
issued patents and make the presumption of
validity that applies in patent infringement
actions more meaningful.
The post-grant review procedure described
below takes effect on Sept. 16, 2012. Before
that date, the U.S. Patent and Trademark
Office will promulgate the implementing
regulations.
BASICS OF POST-GRANT REVIEW
Post-grant review is an administrative
procedure in the PTO through which any
person or entity other than the owner of the
patent may challenge the patentability of any
one or more claims of a granted U.S. patent.
Review is sought by filing a petition in the
PTO within nine months after grant of the
patent.
requirement or the enablement requirement
of 35 U.S.C. § 112, or lack of utility under 35
U.S.C. § 101.
For a petition to be granted, the PTO must
determine that the petition establishes “that
it is more likely than not that at least one
of the claims challenged in the petition is
unpatentable.”
Upon initiation, the review will be conducted
and decided by the (re-named) Patent Trial and
Appeal Board. This is a distinction from current
re-examination, which takes place initially
before a single examiner and before the board
only if the examiner’s decision is appealed.
In post-grant review, the petitioner bears
the burden to prove unpatentability of the
challenged claims by a preponderance of
the evidence. The parties are entitled to
oral argument before the board. The board
is required to issue a written decision that
addresses patentability of all challenged
claims and all claims added by the patent
owner during the review proceeding. The
entire review procedure in the PTO must,
according to statute, be concluded within
one year.
At the conclusion of the review, the PTO
will issue a certificate indicating whether or
Unlike current re-examination, the post-grant review
procedure is not limited to challenges based on
prior-art patents or printed publications.
Unlike current re-examination, the postgrant review procedure is not limited to
challenges based on prior-art patents or
printed publications. The petition may allege
as grounds of unpatentability one or more of
the grounds specified as defenses in Section
282 of the U.S. Patent Act.
For example, under the new law, the grounds
asserted in the petition could include
public use, sale or other public knowledge
of the invention that occurred prior to the
effective filing date of the challenged patent.
Challenges can also be made asserting
that the claims are unpatentable for failure
to comply with the written description
© 2012 Thomson Reuters
how the patent claims have been changed
by cancellation or amendment as a result of
the review. Intervening rights will apply to
amended claims of the patent.
Any party to the review that is dissatisfied
with the board’s decision may appeal from
the decision to the U.S. Court of Appeals for
the Federal Circuit.
PROCEDURE
A post-grant review is initiated by filing
a petition in the PTO, which must be
accompanied by the evidence that establishes
the alleged grounds of unpatentability.
The grounds of unpatentability must be
explained “with particularity.”
The evidence supporting the petition
may include prior art (e.g., patents or
publications), factual declarations and
expert declarations. In determining whether
to grant the petition, the PTO will consider
the sufficiency of the allegations and the
sufficiency of the evidentiary support for the
allegations.
The PTO will also consider whether the
same or substantially similar grounds of
unpatentability, or substantially the same
prior art, were previously presented to the
PTO.
While the PTO is entitled to consider whether
the alleged prior art is new or previously
of record, experience with re-examination
would suggest that even “old art” can be a
proper basis for post-grant review, where the
“old art” was not correctly or fully considered
in prior PTO proceedings.
Alternatively, or in addition, the petition may
demonstrate that the issue to be decided in
post-grant review raises “a novel or unsettled
legal question that is important to other
patents or patent applications.”
The law provides for a “preliminary response”
by the patent owner, which must be filed
before the PTO reaches a decision whether
to grant the petition. In that preliminary
response, the patent owner may assert that
the petition is somehow deficient and does
not justify the initiation of a post-grant review.
The forthcoming rules may provide that
acceptance of the patent owner’s preliminary
arguments could end the review peremptorily,
without the merits of patentability being
addressed.
For example, if the patent owner’s
preliminary response correctly points out a
procedural deficiency in the petition, or that
the petition lacks the required particularity of
pleading, the petition will likely be dismissed.
TIMING
The PTO must decide whether a post-grant
review proceeding will be initiated within
three months of the filing of a preliminary
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 19
response to the petition, or three months
after its due date if no preliminary response
is filed.
If the petition is granted, a review proceeding
will be initiated and the petitioner and patent
owner will be notified accordingly. The
determination by the PTO of whether or not
to grant the petition is final and cannot be
appealed.
The patent owner will be provided with an
opportunity to respond to the merits (to
defend patentability of the claims), including
one opportunity to cancel or amend the
patent claims. The statutory language limits
the patent owner to offering a “reasonable
number” of substitute claims. The claim
scope cannot be enlarged in relation to the
original patent claims, and introduction of
new matter into the patent is prohibited.
Only one opportunity to amend or add claims
is provided to the patent owner as of right.
Additional amendments are permitted only
upon consent of all parties in connection
with settlement, or upon a showing of “good
cause” by the patent owner.
The petitioner is given at least one further
opportunity to respond in writing to the
patent owner’s arguments.
Presumably the regulations will fix the time
for petitioners to reply and comment on
the patentability of amended or substitute
claims proposed by the patent owner.
Since the opening petition and the patent
owner’s response can include declaration
testimony, the implementing rules will provide
The grounds of unpatentability must be explained
“with particularity.”
opportunity for live cross-examination of any
witness whose declaration is offered into the
record.
This implies a substantial time period
between each responsive paper filed by
the parties to allow adequate time for the
cross-examinations and for use of the crossexamination results in the subsequently filed
response.
As is currently the case in interferences, it
is expected that live cross-examination will
take place only within the United States,
absent exceptional circumstances.
The law expressly contemplates consolidated
post-grant review proceedings involving
multiple petitioners. It is not difficult to
foresee a one-year schedule being very
constrained in a case involving multiple
petitioners, each of which presents a complex
evidentiary record and testimony of multiple
witnesses. The board is given the discretion
to extend the one-year period by a single
six-month period.
The statute also allows for joinder of
additional parties into an already-initiated
review proceeding. Addition of a new party
into a review that has already significantly
progressed could be complicated, and the
right of a later entrant to participate may not
be unlimited.
Given the statutory one-year limit to complete post-grant
reviews, the scheduling order in a review proceeding
may look something like this:
Owner response/amendment................................................................4 months
(including cross of petitioner’s declarants)
Petitioner reply........................................................................................7 months
(including cross of owner’s declarants)
Patent owner observations.................................................................... 8 months
(including cross of reply declarants)
Filing the record......................................................................................9 months
Oral hearing.......................................................................................... 10 months
Decision................................................................................................. 12 months
20 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
COST/BENEFIT ASSOCIATED WITH
POST-GRANT REVIEW
As the U.S. Supreme Court recently
reaffirmed, a claim of an issued U.S. patent,
when challenged in a U.S. district court,
must be proven to be invalid by “clear and
convincing” evidence.
By contrast, in a post-grant review, a
preponderance-of-evidence burden of proof
applies. The absence of any presumption of
validity, and the differing burden of proof, means
that the burden of proving unpatentability may
be more easily carried in a post-grant review
than in district court litigation.
The differing burden of proof could be
particularly important in dealing with specific
types of patent claims, such as claims that
recite a functional limitation and present an
issue as to whether the recited functional
limitation is inherent in the prior art.
In addition, in proceedings before the PTO,
the claims under review are given their
broadest reasonable interpretation in view of
the specification. In addition to the possibility
of forcing the patent owner to cancel or
amend the claims, the review process can
also lead to clarification or limitation of the
meaning of the claims on the public record.
Post-grant review will allow a party to
challenge the claims of a granted patent
without being subjected to the costs and
rigors associated with patent infringement
litigation in a district court. Discovery during
a review is limited by the statutory language
to discovery of evidence directly related to
factual assertions advanced by either party in
the proceeding. Since the factual assertions
will be limited to assertions that are ancillary
to patentability issues, the scope of any
permissible discovery will be narrow.
Past experience with interferences suggests
that the board will be reluctant to allow
additional discovery, and the administrative
record will normally consist only of the
evidence the parties choose to present and
the associated cross-examination evidence.
ESTOPPEL
Cautioning against indiscriminate use of the
post-grant review procedure is the estoppel
provision associated with the conclusion of a
post-grant review.
© 2012 Thomson Reuters
An unsuccessful review can limit the
petitioner’s right to plead patent invalidity
both in later PTO proceedings and in later
district court litigation.
Specifically, the
petitioner and its privies are estopped by a final
written review decision from later challenging
the patent on any grounds that were “raised or
which reasonably could have been raised in the
post-grant review.”
It is troublesome to contemplate the scope
of what grounds “reasonably could have
been raised.” The analogous language
addressing the estoppel created by inter
partes re-examination, found in 35 U.S.C.
§ 315(c), expressly exempts newly discovered
prior art from the scope of the estoppel,
whereas the language of Section 325(e) of
the America Invents Act contains no such
exemption. The difference between these
statutory provisions creates an implication
that, in the case of post-grant review, there is
an even higher burden to identify all relevant
prior art grounds before filing the petition.
The act as passed includes the estoppel
provision as contained in the bill passed by
the U.S. House of Representatives, H.R. 1249.
The earlier Senate bill, S. 23, contained a less
expansive estoppel provision, which provided
that a petitioner would be estopped in later civil
litigation only as to issues actually raised and
actually decided during the review.
Since the House version of the estoppel
provision is contained in the law as enacted,
it will be strategically important to identify all
of the relevant and applicable grounds upon
which to challenge the patent at the time the
petition is filed. The due diligence associated
with a well-presented petition could be
considerable.
It will also be important to carefully prepare
the initial petition and accompanying evidence
to provide full support for the unpatentability
contentions. As many practitioners have
learned, the board does not credit argument
with having the force of evidence. Again by
analogy to interference trial practice, the board
is not likely to allow supplementation of the
evidence presented in the initial petition in any
reply paper filed by the petitioner.
Rebuttal evidence with the petitioner’s reply will
probably be limited to addressing the patent
owner’s evidence and claim amendments.
New arguments in reply, or presentation of
additional evidence needed to fully make out
the grounds alleged in the opening petition, will
probably not be permitted. For these reasons,
a thorough understanding and investigation of
© 2012 Thomson Reuters
the issues raised in the petition, at the time the
petition is filed, will be an advantage.
It should also be kept in mind that the Federal
U.S. Circuit Court of Appeals reviews the factual
findings of the board under a deferential
“substantial evidence” standard. It is therefore
important to win on disputed issues of fact at
the board level. This consideration likewise
favors thorough consideration and preparation
of the opening petition.
While both benefits and risks will be
associated with post-grant review, the low
cost in relation to patent litigation should be
an important factor driving utilization of the
review procedure. The one-year time frame,
while compressing the activity and cost into
a tight schedule, will prevent the review from
becoming drawn-out. The review will be
focused on patentability as the sole relevant
issue, which will further reduce cost in relation
to litigation. Due the availability of live crossexamination of witnesses by deposition, which
tends to add cost, a review proceeding may
be more costly than a comparable European
opposition.
OTHER POINTS
The parties to a review can terminate the
proceeding by settlement at any point prior
to the board’s decision on the merits, in which
event no estoppel arises against the petitioner.
The parties are required to file settlement
agreements with the PTO, optionally under
seal. However, unlike 35 U.S.C. § 135(c) relating
to interference settlement agreements, the act
provides no express penalty against the patent
owner if a settlement agreement is not filed in
the PTO.
The proceedings differ primarily in terms
of the scope of grounds permitted to be
raised, and when the proceeding may be
initiated. The inter partes review proceeding,
like current re-examination, will be limited
to consideration of unpatentability over
patents and printed publications.
An
inter partes review proceeding may not be
initiated until after nine months after patent
grant, or the conclusion of any post-grant
review proceedings, whichever is later, but
thereafter may be filed any time during the
life of the patent.
The current ex parte re-examination
procedure will remain available. Current
inter partes re-examination is being phased
out in one year, being replaced by inter partes
review.
CONCLUSION
How extensively the post-grant review
will be utilized remains to be seen when
the procedure goes into effect in one year.
Many of us remember the expectations
surrounding the introduction of inter
partes re-examination, which went largely
unrealized, primarily due to concern over the
estoppel provisions. The post-grant review
legislation itself anticipates enthusiastic
utilization, since the PTO is authorized to
limit the number of reviews during the first
four years following enactment.
All information submitted in the review will
be made publicly available. A mechanism
will exist for a party to move the board to seal
confidential information from public disclosure.
Protective orders will be available to restrict
use of confidential information exchanged
between parties.
A petition cannot be filed by a party who has
previously filed a civil action challenging the
validity of a claim of the same patent, although
this prohibition does not apply to a party filing
a counterclaim asserting invalidity. A later
or concurrently filed civil action filed by the
petitioner asserting invalidity of a claim of the
patent will be stayed automatically in favor of
the post-grant review proceeding.
The post-grant review proceeding is overall
very similar to the new “inter partes review”
proceeding that is also being created.
Robert G. McMorrow Jr. is a partner in the
Intellectual Property Group of Connolly Bove
Lodge & Hutz LLP. He represents clients in
patent counseling and opinions, interferences,
and patent prosecution including reissues and
re-examinations, in the pharmaceutical, chemical
and biotechnology arts. He can be reached at
RMcMorrow@cblh.com. The views expressed are
those of the author and not necessarily those of
Connolly Bove Lodge & Hutz.
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 21
COMMENTARY
Challenging a Patent: Before and After
the America Invents Act
By Ed Walsh, Esq., and Janice Vatland, Esq.
Wolf, Greenfield & Sacks
Patent re-examination continues to gain
momentum as a strategic way for businesses
to avoid liability for patent infringement.
The America Invents Act, signed into law by
President Obama Sept. 16, makes extensive
changes to portions of the U.S. Patent Act
relating to post-grant challenges of issued
patents.
These changes are intended to streamline
and reduce the costs of resolving disputes
over the validity of a patent. The fundamental
goal of re-examination will remain: to
provide a mechanism to have someone who is
technically skilled and versed in the nuances
of patent law take an objective second look at
an issued patent.
RE-EXAMINATION BEFORE THE
AMERICA INVENTS ACT
Re-examination is a proceeding within the
U.S. Patent and Trademark Office in which
an issued patent is examined to determine
whether one, some or all of the claims of
the patent are invalid in view of prior art
that raises a substantial new question of
patentability. A request for re-examination
may be initiated by the PTO or requested by
the patent owner or a third party.
Re-examination can be either ex parte or
inter partes. Unless initiated by the PTO,
both proceedings begin in the same manner
with the filing of a request for re-examination
in response to which the PTO determines
whether a substantial new question of
patentability exists. If it does, the request
is granted, and a proceeding occurs where
a patent examiner, who understands
patentability and likely the technology
underlying the invention of the claims,
reassesses validity of challenged claims of
the patent.
In ex parte re-examination, the patent owner
has an opportunity to respond to the request
to dispute that there is a new question of
patentability. If the patent owner responds,
the third party is given two months to file a
reply. Thereafter, the third party does not
participate.
The remainder of the proceeding is between
the examiner and patent owner with only
the patent owner being able to appeal the
examiner’s final decision to the Board of
Patent Appeals and Interferences. In inter
partes re-examination, however, a third party
actively participates and may respond each
time the patent owner files a response.
Once the examiner makes a decision in inter
partes examination, either the patent owner
or the third party may appeal. However, a
third party is estopped from later asserting in
district court that a claim is invalid based on
grounds that were “raised or could have been
raised” during the re-examination.
Intervening rights can limit or prevent liability
for infringing a claim added or amended
during re-examination, where actions that
might otherwise give rise to infringement are
initiated before a certificate concluding the
re-examination is issued. Thus, it is important
for patent holders in re-examination to
consider the consequences and avoid
amendments so that at least some strategic
claims may be maintained unamended.
RE-EXAMINATION AFTER THE
AMERICA INVENTS ACT
Under the AIA, there are numerous changes
to post-grant challenges that are intended
to streamline the process and increase the
desirability of challenging a patent through
the PTO. Below is a description of how
re-examination will differ under the act.
INTER PARTES RE-EXAMINATION
Inter partes re-examination, used in many
of the most hotly contested patent cases,
will be replaced by inter partes review and
post-grant review in September 2012. These
procedures are conceptually similar to each
The fundamental goal of re-examination will remain:
to provide a mechanism to have someone technically
skilled and versed in the nuances of patent law take an
objective second look at an issued patent.
The
PTO
conducts
re-examination
proceedings with “special dispatch” with
an interest in closing prosecution as quickly
as possible. In fact, by statute, once a
re-examination is requested, the request
must be granted or denied within three
months, and in inter partes re-examinations,
the first office action typically accompanies
the notice that the request has been granted.
Thereafter, rigid timelines are imposed for
responding to office actions and submitting
evidence, with extensions of time not
permitted without sufficient cause.
Re-examination currently allows a patent
owner to amend or add new claims, provided
that the claim scope is not broadened. This
can provide an opportunity for a patent
owner to obtain claims that overcome the
prior art while still capturing infringing acts.
However, intervening rights can be created
by such amendments.
22 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
other in that both are initiated by a third party
challenging the validity of an issued patent.
However, post-grant review must be
requested within nine months of issuance
and expands the types of defects in a
patent that may be challenged to include
failures to meet any statutory requirement of
patentability, as well as novel legal questions
affecting patentability. Challenges under
post-grant review need not be based on prior
art or documents.
Inter partes review, on the other hand, will
be limited to challenges based on prior art
documents as in current re-examination
practice.
For a request to be granted under the new
regime, it must establish a prima facie
case that at least one claim is invalid by a
preponderance of the evidence. In the past,
a “new” question — one not considered
© 2012 Thomson Reuters
Strategic Considerations
Brought About by Changes
in Post-Grant Challenge
Procedures
• The streamlined process will
require much more advanced
preparation and tough
tactical decisions.
• Deciding between post-grant
challenge and litigation will
become more of an either/or
choice.
• Settlement of post-grant
challenges will now be
permitted, thus placing
a premium on a patent
practitioner’s ability to project
how the PTO will decide a
re-examination.
• The risks and benefits of
taking action now under the
current rules, or waiting for
the new procedures to roll out
over time, must be carefully
considered.
before the patent was granted — had to be
shown. This change in the threshold showing
required applies immediately. Though the
effect of this change was much debated, the
difference is illusory.
In addition to expanding challenges available
post-grant, the new law expands a challenger’s
ability to notify a patent examiner about
prior art to a pending application — and to
provide an explanation of why it should block
issuance of the application. By removing the
requirement that a post-grant challenge be
based on a “new” question, challengers may
feel more comfortable submitting prior art in
an attempt to persuade a patent examiner
to reject or limit a patent application before
it is issued. If unsuccessful, challengers will
retain the ability to challenge the patent on
the same basis after grant.
Other departures from current practice will
be apparent if the PTO grants a request for
a post-grant challenge. Both of the new
proceedings will be streamlined, with a
mandate to be completed within one year
from the PTO decision granting a request for
review. The patent owner will be given time to
respond to the request, the PTO will have time
to consider the request and the process could
be extended for six months for good cause.
Nevertheless, the full proceeding is likely to be
over in 15 to 24 months from the date on which
a proper request for review is submitted. That
time is faster than most district courts take to
resolve issues of patent validity.
In order to achieve a streamlined process, the
requester is expected to submit a complete
case, including evidence, such as declarations,
with the request. Additionally, the patent
owner normally will get only one opportunity
to amend the claims by canceling or replacing
claims with “a reasonable number of
substitute claims.”
Proving that a claim is likely invalid, though
seemingly harder than merely raising
a question of validity, in practice is not
likely to matter. It has always been illadvised to merely question the validity of a
patent without being able to offer proof of
invalidity. In fact, statistics of inter partes
re-examinations, in which at least one claim
was canceled or amended, suggest the new
standard would have been met at least 87
percent of the time.
While all of the details of the process are
not yet known, as the PTO is tasked with
developing rules over the next year, it is likely
that there will be limited opportunities for a
challenger to submit evidence or new grounds
for invalidity once the process is under way.
Further streamlining the process, there will
be no possibility of appeal within the PTO
or to a district court (which generally affords
an opportunity to further develop evidence).
Any appeal will go directly to the Federal U.S.
Circuit Court of Appeals.
Of potentially more significance, under the
new law the basis of invalidity does not have to
be “new.” Re-examination is now appropriate,
even in scenarios in which the “best” prior art
was before the examiner, but the examiner
failed to appreciate it. Abolishing the need
for a new question may have ramifications,
even before issuance of a patent, for those
concerned about a competitive patent.
Another significant change is that the
proceedings will be conducted before a new
Patent Trial and Appeal Board. There will
be no examiner. Either party can request
an oral hearing. Additionally, discovery
will be allowed, but limited, consistent with
the nature of the proceeding, to the factual
assertions made by either party.
© 2012 Thomson Reuters
In inter partes review, discovery is largely
limited to depositions of declarants, if
declarations are submitted. In post-grant
review, however, where challenges are
permitted on a wide range of grounds,
discovery may be much broader. Protective
orders and sanctions will even be available.
But, be warned. Despite these litigation-like
characteristics, those contemplating or facing
a post-grant challenge should not cavalierly
assume that these proceedings are just like
litigation. The PTO is likely to enact rules
that put its distinctly patent-like spin on these
proceedings. The rules of practice before the
Patent Trial and Appeal Board are expected to
Of potentially more
significance, under the
new law the basis of
invalidity does not have
to be “new.”
be modeled after rules currently in place for
interference proceedings, which are known to
require special skills to navigate.
In addition, the interplay between
re-examination and litigation is modified.
Post-grant challenge and litigation will
become more of an either/or choice.
Re-examination must be requested within
one year of a suit enforcing the patent. Also,
a requester is not allowed to maintain a
declaratory judgment action in court while
making a post-grant challenge but can
pursue a counter claim for invalidity if sued.
However, the existence of a post-grant review
will not be a basis for denying a preliminary
injunction if an infringement action is
filed within three months of patent grant.
Furthermore, a decision on validity in litigation
does not automatically end a re-examination
proceeding.
A new strategic consideration enabled by
the AIA is that settlement of post-grant
challenges is now permitted. Any settlement
agreement must be in writing and recorded
with the PTO, but can remain confidential.
The possibility that a re-examination can be
privately settled after being declared by the
PTO may make re-examination an attractive
option for disputes when a business
resolution, rather than complete victory,
is the goal. In addition to expanding the
role of re-examination, this new dynamic of
settlement will place a premium on a patent
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 23
practitioner’s ability to project how the PTO
will decide a re-examination in order to guide
clients in strategizing settlement. This skill
may be particularly important if there should
be a judgment in a parallel proceeding in
district court, which doubtlessly will leave
one party dissatisfied, but under the new
regime does not automatically terminate the
re-examination.
Of course, many elements of inter partes
re-examination remain.
Estoppel still
applies, if the proceeding goes to a final
decision on a challenged claim, and includes
the same standard, precluding litigation of
anonymously — which can be important for
those worried about a patent before their
business is known to the patent holder.
IMPLICATIONS
Other than the immediate effect of the
threshold showing required to institute
re-examination, these procedures will roll
out over time. Inter partes review will replace
inter partes re-examination in September
2012. Post-grant review will nominally be
available six months later, but will apply only
to patents that have an earliest priority date
after that time, such that it may be several
The rules of practice before the Patent Trial and Appeal
Board are expected to be modeled after rules currently in
place for interference proceedings, which are known
to require special skills to navigate.
issues raised or that could have been raised.
Intervening rights also will continue to apply,
as will the special care needed by patent
owners to mitigate their impact.
EX PARTE RE-EXAMINATION
Ex parte re-examination will be substantially
unchanged. It will remain a useful option
both for patent owners and for challengers.
Patent owners have found ex parte
re-examination a useful tool to dispel doubts
blocking their efforts to license a patent or
stop infringement by those who deny the
patent’s validity. In fact, about half of all ex
parte re-examinations today are requested
by patent owners.
Even so, a new “supplemental examination”
proceeding may better fit the bill in some
circumstances. However, the desirability of
ex parte re-examination will remain in many
cases, providing an opportunity to add claims
to or amend claims of a patent and to work
with an examiner, such as through ex parte
interviews. These characteristics may make
proactively initiating ex parte re-examination
an even more desirable option if a post-grant
challenge is expected.
For challengers, ex parte re-examination,
though it will move at a slower pace than
the new post-grant review proceedings,
will still have characteristics that will be
desirable in some circumstances. It avoids
the risks associated with estoppel, likely
entails a lower cost and can be requested
Even more so than under the current
re-examination
system,
advanced
preparation will be crucial for both patent
owners and challengers. The streamlined
process will require much more forethought
and tough tactical decisions on the part of
both patent owners and challengers. Even
actions that are seemingly as simple as lining
up counsel who can field a team experienced
in the myriad skills needed to successfully
navigate the new regime of patent challenges
can pay huge dividends. Once an expedited
post-grant challenge takes off, there will be
little time and few opportunities to correct its
course.
Setting a course from the outset, guided
by the strategic interplay of litigation and
post-grant challenge, as well as a company’s
commercial objectives and its technology,
will be a key to navigating the new realities of
patent challenges under the AIA.
years before the PTO conducts its first
post-grant review.
Though this roll out may seem too far in
the future to warrant attention now, the new
mechanisms for challenging patents under
the AIA provide strategic opportunities for
companies to manage risks from competitive
patents.
Companies should use that time to consider
whether and how to monitor competitive
patent applications to be ready to challenge
them — either before or after grant. In this
regard, the parallels between post-grant
review and European-style oppositions
should not be overlooked. The benefits that
many companies gain from oppositions —
even if only to clarify the scope of competitive
patent rights — should be expected in the
United States. Moreover, for any active or
looming disputes, the risks and benefits of
taking action now under the current rules —
or waiting for these new procedures — must
be carefully considered.
Patent owners, too, should be proactive.
Claims in pending applications should be
crafted to be more defensible, even under
the strict process for amending and adding
claims in a post-grant challenge. Moreover,
the changes brought by the AIA are not
all in favor of challengers. Supplemental
examination and the continued availability
of ex parte re-examination are likely to be
crucial tools for increasing patent value, by
removing issues that might otherwise be
used as an excuse to ignore a patent.
24 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
Ed Walsh (top) is a shareholder at Wolf,
Greenfield & Sacks and co-chair of the
firm’s re-examination practice group.
Janice Vatland, (bottom) an associate at
the firm, is a member of its biotechnology,
pharmaceutical and cleantech practice
groups. © 2012 Thomson Reuters
COMMENTARY
How The America Invents Act Will Change
Patent Litigation
By Matthew I. Kreeger, Esq., Eric S. Walters, Esq., and Zahra Hayat, Esq.
Morrison & Foerster
President Obama signed the Leahy-Smith
America Invents Act Sept. 16, enacting it into
law. The act — the first significant overhaul
of the U.S. patent system in nearly 60 years
— was preceded by months of debate and
speculation about which proposed reforms
would finally become law.
The act will have significant, immediate
impacts on patent litigation. Many of its
litigation-related provisions will go into
effect on the date of enactment, and a few
will apply retroactively.
FALSE-MARKING CLAIMS
EVISCERATED
The America Invents Act will likely deal the
final blow to the “false marking” boom.
Prior to patent reform, under 35 U.S.C.
§ 292(a) any individual could bring a qui tam
action based on products that are mismarked
as covered by a patent. The statute provided
for substantial statutory fines of $500 “per
offense,” which could add up to hundreds
of millions of dollars for popular consumer
products.
Under the reform law, only the United States
will be able to sue for statutory damages for
false marking. Private parties will be entitled
only to compensatory damages based on
“competitive injury” flowing from the false
marking.
This transformation of false marking from a
qui tam action to an ordinary civil action for
damages will apply to all cases pending on,
or commenced on or after, the enactment of
the America Invents Act. It will, therefore,
have a retroactive effect and will likely lead to
a spate of motions to dismiss filed by those
accused of false marking. Future falsemarking actions are likely to be rare.
’BEST MODE’ NO LONGER A BASIS
FOR INVALIDITY
Pre-reform law statutes provided for several
defenses to a claim of patent infringement,
including the defense that the patent is
invalid because the patentee failed to
© 2012 Thomson Reuters
disclose the best mode of practicing the
invention.
The America Invents Act eliminates the
best mode invalidity defense, amending
the list of defenses to patent infringement
to exclude “failure to disclose the best
mode.” Section 112 continues to require
that patentees comply with the best mode
requirement; the new law simply prevents
one accused of infringing a patent from
mounting a defense based on the failure to
disclose best mode.
Patent examiners will retain the right (rarely
exercised) to reject claims under examination
for failure to disclose the best mode.
This inventor-friendly amendment went
into effect the day the America Invents Act
was enacted and applies to proceedings
commenced on and after that date.
Companies facing imminent patent
one action only if “(A) any right to relief is
asserted against them jointly, severally, or
in the alternative with respect to or arising
out of the same transaction, occurrence, or
series of transactions or occurrences; and
(B) any question of law or fact common to all
defendants will arise in the action.”
The America Invents Act codifies this
standard into law and adds that “accused
infringers may not be joined in one action
as defendants or counterclaim defendants,
or have their actions consolidated for trial,
based solely on allegations that they each
have infringed the patent or patents in suit.”
In raising the joinder and consolidation bar in
this manner, the new law crystallizes a recent
trend among federal courts of taking a stricter
approach to joinder and consolidation and
refusing to relate cases asserting the same
patents, or even dismissing for misjoinder.
Under the America Invents Act, only the United States will
be able to sue for statutory damages for false marking.
infringement actions must, therefore,
immediately begin recalibrating their
defense strategy to account for the loss of
this potential invalidity defense.
STRICTER JOINDER,
CONSOLIDATION REQUIREMENTS
The America Invents Act imposes new
requirements that must be fulfilled before
accused infringers may be joined in one action
as defendants or counterclaim defendants,
or have their actions consolidated for trial.
Previously, patentees (particularly nonpracticing entities) frequently filed a single
lawsuit against many different defendants,
whose only connection is that they are all
accused of infringing the same patent. The
America Invents Act makes explicit that such
actions are improper.
Under Federal Rule of Civil Procedure
20(a)(2), multiple defendants can be joined in
Plaintiffs unable to meet the new
requirements of the America Invents Act
will now have to file separate lawsuits
alleging infringement of the same patents
and will lose the economies of scale joinder
and consolidation currently allow for. This
provision is, therefore, likely to temper
the increasingly common trend in patent
litigation for one plaintiff to sue several
unrelated defendants on the same patent,
often in a single action.
As these provisions will apply to any civil
action commenced on or after the date of
enactment of the statute, their effects will be
felt immediately. Indeed, many courts saw a
flurry of last-minute complaints filed shortly
before the America Invents Act was expected
to be signed into law.
Whether a case arises from the “same
transaction or occurrence” will, however,
be the subject of litigation in the future.
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 25
For example, courts will have to consider
whether a patent holder can sue in a single
case a component manufacturer along with
the companies that used the component in
their products.
Also unclear is how a court faced with
multiple cases involving the same patent will
address motions to transfer. In exercising
its discretion on a motion to transfer, can a
court take into account the efficiencies that
may result from keeping the multiple cases
in a single court for claim construction and
invalidity summary judgment motions? The
America Invents Act does not provide any
explicit guidance on this and many other
pragmatic considerations that will arise.
NEW SUPPLEMENTAL EXAMINATION
PROCEDURE
The America Invents Act creates a new
procedure allowing a patent owner to request
the U.S. Patent and Trademark Office to carry
out a supplemental examination of a patent
to “consider, reconsider or correct information
believed to be relevant to the patent.” This
provides patent owners an opportunity to
disclose previously undisclosed information
or to correct incorrect information. If the
action or a Section 337(a) investigation by
the International Trade Commission before
completion of the supplemental examination
or ensuing re-examination.
This new procedure will not be implemented
until a year after the enactment of the
America Invents Act, but at that time will
apply to any patent, whether issued before
or after the effective date. It therefore will
apply retroactively to all patents, regardless
of when they issued.
REVAMPED RE-EXAMINATION/
REVIEW PROCEDURES
The former law provided for ex parte
re-examination
and
inter
partes
re-examination, procedures that accused
infringers frequently employed to challenge
the validity of patents and potentially obtain
a stay of litigation.
The America Invents Act makes major
revisions to the procedures available for
post-grant review of patents.
In the near term, the litigation impact of
these new procedures will be limited. The
new inter partes review will not be available
until one year after the America Invents Act
Stricter joinder and consolidation requirements are likely
to temper the increasingly common trend
in patent litigation for one plaintiff to sue
several unrelated defendants on the same patent.
new information is deemed to raise a
substantial new question of patentability, a
re-examination will be ordered.
The primary benefit to patent owners of
this “cleansing” procedure is that a patent
cannot be held unenforceable on the basis
of conduct relating to information that was
not considered or was incorrect in a previous
examination, as long as the deficiencies are
rectified during supplemental examination.
But there are some important caveats.
A patent is not shielded from a finding of
unenforceability if the unenforceability
allegation is pleaded with particularity in a
lawsuit or ANDA paragraph IV certification
notice before the date of the supplemental
examination request. Nor can a patentee rely
on a pending supplemental examination to
defeat any defenses raised in an infringement
becomes effective. With the exception of
certain business method patents (described
below), post-grant review will be possible
only for patents issued from applications
with an effective filing date more than
18 months after the law goes into effect.
Thus, post-grant review will likely not become
significant for several years.
INVALIDITY CHALLENGES TO
FINANCIAL BUSINESS METHOD
PATENTS
The America Invents Act creates a special
procedure for challenging the validity of a
certain category of patents: “covered business
method patents,” defined as patents claiming
“a method or corresponding apparatus for
performing data processing or other operations
used in the practice, administration, or
management of a financial product or service,
except that the term does not include patents
for technological innovations.”
This special procedure is called the
“Transitional Program for Covered Business
Method Patents,” and it permits those accused
of infringing business method patents to bring
a post-grant review proceeding without some
of the restrictions generally applicable to such
proceedings.
The transitional program for covered business
method patents is essentially a more expansive
version of the post-grant review. There is, for
example, no nine-month deadline, and the
petitioner can challenge the validity of a
covered business method patent regardless
of the patent’s age. The petitioner must,
however, have been sued for or charged with
infringement of the patent.
Of particular interest are the stay provisions
of the transitional program. The America
Invents Act lists four factors the court must
consider when deciding whether to stay the
infringement case pending the transitional
proceeding:
•
Whether a stay will simplify issues for trial.
•
Whether discovery is complete and a trial
date set.
•
Whether a stay would present a clear
tactical advantage for the movant and
prejudice the nonmoving party.
‘Best mode’ requirement
• No change to provision under 35 U.S.C. § 112 requiring patentees to
disclose “the best mode contemplated by the inventor of carrying out”
the invention.
• However, failure to disclose best mode is no longer among the defenses
listed in 35 U.S.C. § 282 to a claim of patent infringement.
• Elimination of best-mode invalidity defense went into effect Sept. 16, 2011.
26 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
© 2012 Thomson Reuters
•
Whether a stay or denial thereof would
reduce the burden of litigation on the
parties and the court.
These are the factors many federal courts
already consider when deciding motions to
stay, pending parallel proceedings. Their
crystallization in statutory form, however,
increases the likelihood that courts will stay
infringement actions pending transitional
proceedings.
Immediate interlocutory
appeal of the court’s stay decision is available
to the Federal U.S. Circuit Court of Appeals.
FOREIGN PRIOR ART
The America Invents Act expands the scope
of materials that may be considered prior
art. It amends 35 U.S.C. § 102 to eliminate
the “in this country” limit on prior art. In a
significant, pro-defendant development that
is also an acknowledgement of the globally
interconnected nature of innovation, patent
claims will now be subject to attack by
evidence of prior public use of the invention
anywhere in the world. The scope of prior
art searches that must be conducted by
patentees and accused infringers will widen
drastically as a result of this change, but its
effects will not be felt until 18 months after
the enactment of the law.
FAILURE TO OBTAIN OPINION
OF COUNSEL
The America Invents Act also provides that
the failure of an infringer to obtain the
advice of counsel or present such advice to
the court or jury “may not be used to prove
that the accused infringer willfully infringed
the patent or that the infringer intended to
induce infringement of the patent.’’
An open question is whether courts will
interpret the law to preclude consideration
of the lack of an opinion of counsel in the
determination of whether to enhance
damages.
PATENT LITIGATION GOING
FORWARD
The signing into law of the America Invents
Act marks a new era of patent litigation.
The statute presents a host of opportunities
for companies, especially those defending
against patent infringement actions, provided
they act quickly — given that several of the
above provisions have immediate prospective
and in some cases even retroactive effect.
Matthew I. Kreeger (left) and Eric S. Walters (center) are intellectual property partners with Morrison & Foerster LLP. Kreeger specializes
in helping clients find efficient, creative, business-oriented solutions to high stakes intellectual property disputes, and helps develop patent
prosecution and reexamination strategies that protect his clients’ patents and minimize the clients’ risks. He is in Morrison & Foerster’s San
Francisco office and can be reached at mkreeger@mofo.com. Walters focuses his practice on intellectual property and complex business
litigation for high-technology companies and entrepreneurs, and has worked on cases involving all aspects of IP including patents, trade
secrets, copyrights, trademarks and unfair competition. He is located in the firm’s Palo Alto office and can be reached at ewalters@mofo.com. Zahra Hayat (right) is a litigation associate in the firm’s Palo Alto office. She can be reached at zhayat@mofo.com.
© 2012 Thomson Reuters
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 27
COMMENTARY
Practice Implications of the Leahy-Smith
America Invents Act1
By Philippe Signore, Esq., Steve Kunin, Esq., and Jonathan Parthum, Esq.
Oblon, Spivak, McClelland, Maier & Neustadt LLP
The patent world changed significantly
Sept. 16, 2011, when President Obama
signed into law the Leahy-Smith America
Invents Act, thereby implementing the most
comprehensive reform to U.S. patent law
since 1952.
Written with an interest in moving toward
global harmony with other patent systems
and based on a recognition of the economic
importance of patents, the AIA introduces a
variety of changes ranging from replacing
the longstanding first-to-invent system in
the United States to establishing additional
post-grant procedures for challenging the
validity of patents.
What follows is a brief explanation of some
of the changes instituted by the AIA and
an overview of the practical implications of
these changes.
The grace period afforded the inventor
via the new first-inventor-to-file system
makes it extremely important for clients to
communicate to their attorney any disclosure
by the inventor, or another who obtained
the subject matter from the inventor, so
that the attorney can inform the PTO of this
information in order to perfect the graceperiod right. Informing the PTO will establish
the applicant’s grace-period disclosure date,
thus lowering the chances that a third-party
disclosure in the grace period will qualify as
prior art.
adequately protects against any future
disclosure from a third party that may later
qualify as prior art to the claimed invention.
On the other hand, practitioners should also
scrutinize third-party disclosures made prior
to the inventor’s disclosure to determine
the similarities as there is currently no way
of knowing how courts will compare one
disclosure to another disclosure in assessing
issues of derivation and antedating of the
third-party disclosure content in relation to
the claimed invention.
Informing the PTO of any disclosure will establish the
applicant’s grace-period disclosure date, thus lowering the
chances that a third-party disclosure in the grace period
will qualify as prior art.
FIRST INVENTOR TO FILE
One of the most significant changes made
by the AIA is the shifting of the U.S. patent
system from a system that grants a patent to
the inventor who is first to invent the claimed
invention, known as the “first to invent”
system, to a system that grants a patent
to the inventor who is first to file a patent
application at the U.S. Patent and Trademark
Office, known as the “first inventor to file”
system.
The first-inventor-to-file system is different
from other known first-to-file systems in that
it includes a unique, one-year international
grace period for disclosures by the inventor,
or another who obtained the subject matter
from the inventor, if made within one year
of the effective filing date of the claimed
invention and prior to a disclosure by a third
party of the same subject matter. Therefore,
under the first-inventor-to-file system, the
absolute grace period previously afforded an
inventor under the first-to-invent system no
longer applies if a third party discloses the
subject matter of the invention before the
inventor within the one-year grace period.
Further, receiving any grace-period disclosure
dates from the client as soon as possible is
especially important because the new grace
period will be measured from the earliest
priority date in a World Trade Organization
member country rather than the earliest
actual U.S. filing date.
Practitioners should also counsel their clients
that the AIA changes the definition of the
prior art to be considered when taking into
account the novelty and non-obviousness of
the claimed invention. The new definition
provides that an inventor shall be entitled
to a patent unless the claimed invention was
“patented, described in a printed publication,
or in public use, on sale or otherwise available
to the public anywhere in the world before
the effective filing date of the claimed
invention.”2
It is equally important that clients describe
and provide evidence of the “quality” of
the content of their grace-period disclosure
so that their attorney can assess whether
the grace-period disclosure is one that
28 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
Although a grace-period disclosure by
the inventor can provide a one-year grace
period that will shield the inventor from any
subsequent disclosures by third parties in the
United States, the applicant’s grace-period
disclosure can cause patentability issues
elsewhere in the world if the inventor plans
on filing in countries outside of the United
States that are absolute-novelty countries.
In absolute-novelty countries, a public
disclosure by the inventor prior to filing will
act as prior art to the claimed invention.
Due to the changes discussed above, the
need to quickly file at the PTO has never been
greater and clients must weigh the benefits
of obtaining a one-year grace period versus
the patent-rights-forfeiture effect of the
absolute-novelty requirements if a patent is
sought in other countries.
Once filed, however, foreign applicants
can take solace in the AIA’s elimination
of the Hilmer doctrine.3 This will allow
foreign applicants to obtain a prior effect
of their published U.S. patent applications,
© 2012 Thomson Reuters
their published Patent Cooperation Treaty
applications that designate the United
States, and their granted patents, as of the
foreign priority date of their U.S. patent
applications without having to file a U.S.
provisional application or a PCT application
in English.
On the other hand, the elimination of the
Hilmer doctrine will make foreign-origin
U.S. applications available as prior art one
year earlier than under old U.S. patent law.
This will make it more difficult to obtain
U.S. patents, because more prior art will be
available for both 35 U.S.C. §§ 102 and 103
purposes.
ASSIGNEE FILING
The AIA also provides changes to the
requirements for filing an inventor’s
declaration and assignment.
Currently,
an assignment and inventor’s declaration
must be submitted separately when filing
an application. However, issues often arise
when an inventor’s declaration or assignment
needs to be signed and the inventor cannot
be located or refuses to sign the declaration,
as it can be difficult under 37 C.F.R. § 1.47 to
convince the PTO to allow the assignee to
sign on behalf of the missing or nonsigning
inventor.
The AIA provides that the required
statements of an inventor’s declaration
can be made in a combined declaration
and assignment. Therefore, practitioners
should urge clients to have the inventor
sign the assignment and the declaration in
a single form as early as possible after the
U.S. or PCT application is drafted. This will
reduce inadvertent paperwork errors and
the number of missing-inventor issues, while
also expediting prosecution and lowering the
cost for clients. Moreover, under the new law
the inventor’s declaration need not be filed
until the application is allowed.
BEST MODE
The AIA also implements a variety of changes
relating to the best-mode requirement in the
United States. Under the AIA, the failure to
disclose the best mode contemplated by the
inventor of carrying out the invention will no
longer be a basis for which any claim of a
patent may be canceled in post-grant review
proceedings or held invalid or otherwise
unenforceable in litigation.
However, while the new law may appear to
provide some relief to litigants, practitioners
© 2012 Thomson Reuters
should be wary that foreign priority could still
be challenged during litigation if the priority
document does not disclose the best mode of
carrying out the invention.
With respect to patent prosecution, the
enacted law modifies provisions for claiming
domestic priority such that the disclosure in
an earlier-filed U.S. application must be made
in the manner provided by 35 U.S.C. § 112,
first paragraph, “other than the requirement
to disclose the best mode.”4 However, a
Sept. 20, 2011, internal memo to the Patent
Examining Corps vaguely stated, “Examiners
should consult with their supervisors if it
appears that an earlier-filed application does
not disclose the best mode … and the filing
date of the earlier-filed application is actually
necessary.”5
As the application of these changes to best
mode is at best unclear, practitioners should
inform clients that the best mode should
still be described in all applications, and
particularly in foreign applications. This will
prevent prosecution issues from arising as
well as a third party from challenging the
validity of a patent based on intervening
prior art having an effective date between the
foreign priority date and the U.S. filing date.
PRE-ISSUANCE SUBMISSION
BY THIRD PARTIES
Under current 37 C.F.R. § 1.99, third parties
are allowed to submit patents or printed
publications to the PTO within two months
from the date of publication of an application
or prior to the mailing of a notice of allowance,
whichever is earlier. However, this procedure
is rarely used as 35 U.S.C. § 122(c) precluded
the third party from explaining the relevancy
of the prior art with respect to a pending
application.
The AIA broadens the scope of prior-art
submissions to include patents, published
patent applications or other printed
publications of potential relevance to the
examination, and also allows for the third
party to set forth a concise description of
the asserted relevance of each submitted
document. The AIA also modifies the
submission timing to allow submissions
within six months of post-publication (unless
the application is already allowed), thus
providing a longer window of opportunity to
submit references.
While the attention afforded this area of
law by the AIA may make it appear a more
attractive option, practitioners should remain
wary of submitting references under this
scheme for a variety of reasons.
First, applicants are free to address the
submitted references or can wait and see
if the examiner will rely on them. If the
examiner relies on the submitted references,
the applicant can respond in writing or via
a personal interview, thereby allowing the
applicant to fully amend the claims or add
broader claims based on the submitted
references.
The applicant’s graceperiod disclosure can
cause patentability issues
elsewhere in the world.
Further, as the party submitting references
has no opportunity to intervene in the
discussion between the examiner and
applicant during examination, the preissuance submission scheme can result in
a patent that has a strong presumption of
validity relative to the submitted references.
It, therefore, appears that the only potentially
viable use of this refined procedure arises
out of the disclosure of information to the
examiner in a way that demonstrates that a
pending application fails to disclose the best
mode for carrying out the invention, as this
type of argument cannot be made in any
other type of PTO or litigation proceeding.
However, the availability of such information
to third parties may prove to be rare.
While submitting references under this
scheme does not create a formal estoppel, it
appears that pre-issuance submissions will
still be rarely used due to the likelihood of
hurting a third party’s chances in a possible
future litigation of invalidating patent claims.
A better way for a third party to be involved
in challenging an inventor by submitting
references is to initiate a post-grant
proceeding after the patent is issued by the
PTO.
POST-GRANT REVIEW, INTER
PARTES REVIEW
The AIA provides for the creation of a new
post-grant proceeding beginning Sept. 16,
2012, titled “post-grant review,” or PGR,
which will provide an additional avenue of
challenging the validity of a patent in addition
to ex parte and inter partes re-examination.
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 29
The AIA also provides that a new, albeit
similar, proceeding titled “inter partes
review,” or IPR, will replace the current inter
partes re-examination proceeding beginning
Sept. 16, 2012.
difference as estoppel is attainable within
12 to 18 months, rather than the roughly sixyear time frame an appeal takes to navigate
the PTO and get a final decision from the
Federal U.S. Circuit Court of Appeals.
While both the PGR and IPR proceedings
will allow parties to challenge the validity
of a patent, they also have an estoppel
effect such that anything that was raised or
reasonably could have been raised during
the proceeding cannot be raised in a future
litigation by the challenger if the challenger
loses in the IPR or PGR. Of course, other
defendants will not be estopped, unless
they themselves requested an IPR or PGR.
As IPR proceedings allow a requester to
challenge the validity of a patent as only
being anticipated or obvious over patents
and printed publications, the estoppel effect
is not too encompassing and, therefore, not
as worrisome for future proceedings.
In spite of these estoppel concerns, parties
facing patent litigation are expected to rely
on the new PGR and IPR provisions. A PGR
and IPR may be strategically preferred over
an expensive litigation, which can be stayed
pending the PGR and IPR. The chances of
success for invalidating an asserted patent
may be greater in front of the administrative
judges of the Patent Trial and Appeal Board
handling the PGR and IPR, as compared
to a jury in a district selected by the patent
holder. The Patent Trial and Appeal Board
judges are experts in patent law and have
technical backgrounds, and are thus perfectly
positioned to make a fair assessment of the
validity of a patent relatively quickly and
Practitioners should be wary that foreign priority
could still be challenged during litigation if the priority
document does not disclose the best mode
of carrying out the invention.
However, PGR proceedings allow a requester
to challenge the validity of a patent using all
grounds of invalidity except for best mode.
Therefore, a requester needs to be extremely
careful and prepare a well-laid-out case,
including the hiring of technical experts,
as the estoppel arising out of the PGR
proceeding could effectively eliminate any
chance of an invalidity defense on issues that
were raised or that reasonably could have
been raised during the PGR.
Further, practitioners should inform clients
that there is potential rebuttal evidence
that can be raised during these proceedings
and that they should weigh the likelihood of
success of the rebuttal evidence defeating
the invalidity challenge creating the estoppel
effect arising out of the PGR and IPR.
Another important change with respect
to the post-grant proceedings that
practitioners should take note of is that
PGR and IPR estoppel attaches upon a
final written determination of the newly
formed PTO Patent Trial and Appeal
Board, rather than at the exhaustion of all
appeals as was previously the case in inter
partes re-examination. This is a significant
without requiring the millions of dollars
typically spent on litigation.
These estoppel concerns may be mooted
by the action of the patent owner, however,
as the AIA provides that patent owners in a
PGR or IPR can file a preliminary response
challenging the validity of a third party’s
request for PGR or IPR. In such case no
estoppel would arise. Patent owners will be
able to bolster their chances that the Patent
Trial and Appeal Board will not initiate a postgrant proceeding at a third party’s request
by presenting reasons why the proceeding
fails to meet PTO requirements. Of course,
in such circumstances the third party would
have to petition for the denial of the order or
forego the post-grant challenge.
that occur during the original prosecution of
the patent. This proceeding also provides
an added statutory protection in that the
patent can no longer be held unenforceable
if it has survived a supplemental examination
proceeding, as opposed to the standard
recently set forth in Therasense v. Becton6 for
determining the enforceability of the patent.
Practitioners should be warned, however,
that while the statutory protection provided
via supplemental examination does prevent
a patent from being held unenforceable
based on inequitable conduct relative to
the information submitted in requesting
the supplemental examination, it does not
prevent anyone involved in the prosecution
of the patent from being charged with
inequitable conduct and being investigated
for possible disciplinary action.
Another benefit arising out of supplemental
examinations is the ability to let one’s
application go to issue despite receiving
material information after payment of the
issue fee. In other words, if known material
information is received after payment of the
issue fee, an applicant can allow the patent
to be issued without submitting the material
information in an information disclosure
statement and having to pay for a request
for continued examination. The material
information can then be used to establish
a substantial new question of patentability
required under supplemental examination to
initiate a re-examination that will ultimately
cure the failure to submit the material
information before patent issuance.
Further, the recently instituted PTO
docketing rules move cases in which a
request for continued examination was
filed to the end of the line in their docketing
system. Consequently, although the price
structure of supplemental examination is
unknown, supplemental examination could
prove to be quicker than withdrawing from
issue and paying for a request for continued
examination.
SUPPLEMENTAL EXAMINATION
CONCLUSION
Supplemental examination is a new
proceeding created by the AIA that allows
the patent owner to avoid unenforceability of
a patent by consideration, reconsideration or
correcting known information material to the
patent via re-examination. Under this new
proceeding, patent owners have the ability to
cure false statements or misrepresentations
The examples discussed above represent
only a few of the changes resulting from the
AIA that will greatly affect the practice of U.S.
patent law.
30 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
Many aspects of the AIA will remain in
question until the PTO issues regulations
and guidelines to implement the variety of
the legislative initiatives introduced by the
© 2012 Thomson Reuters
AIA. In addition, the Federal Circuit will be
busy interpreting the controverted language
of such a comprehensive reform. Therefore,
patent practitioners should be more vigilant
than ever when giving clients advice in the
years to come.
NOTES
The opinions expressed in this article are those
of the authors and do not necessarily reflect those
of Oblon, Spivak, McClelland, Maier & Neustadt
LLP. This article does not constitute legal advice
to any particular person or entity and should
not be treated as such by readers. Reliance on
this article does not create an attorney-client
relationship with Oblon Spivak or any individual
attorney in the firm.
1
Philippe Signore is a partner at the intellectual
property law firm of Oblon, Spivak, McClelland,
Maier & Neustadt LLP in Alexandria, Va. He
is the chair of the firm’s mechanical patent
prosecution practice group and co-chair of the
opinion and counsel practice group. He can be
reached at psignore@oblon.com.
H.R. 1249 § 3(a)(1) (2011) (emphasis added).
2
See In re Hilmer, 424 F.2d 1108 (C.C.P.A. 1970)
(Rich, C.J., delivering the opinion of the court).
3
H.R. 1249 §15(b) (2011).
4
Memorandum from Robert W. Bahr, PTO Senior
Patent Counsel, to Patent Examining Corps
(Sept. 20, 2011) (on file with authors), available
at http://www.uspto.gov/aia_implementation/
best-mode-memo.pdf.
5
Jonathan Parthum is an associate with the firm and
has been actively involved in following patent reform
efforts over the past several years. He can be reached
at jparthum@oblon.com.
Therasense Inc. v. Becton, Dickinson & Co.,
649 F.3d 1276 (Fed. Cir. 2011) (en banc).
6
Stephen Kunin is a partner, general counsel
and management committee member at the
firm. He is the former deputy commissioner for
patent examination policy at the U.S. Patent
and Trademark Office and the current director
of intellectual property law at George Mason
University Law School. He can be reached at
skunin@oblon.com.
© 2012 Thomson Reuters
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 31
COMMENTARY
Obtaining Commercial Advantage Through
Understanding the Post-Issuance Review
System of the America Invents Act
By James Mullen, Esq.
Morrison & Foerster
The America Invents Act creates a number
of new administrative procedures that
allow the public to challenge issued patent
claims without having to resort to timeand resource-intensive patent litigation.
Understanding the features of these postissuance review procedures is an important
first step to leveraging the new features of
the AIA to obtain a commercial edge in the
marketplace.
CHANGES TO THE SYSTEM:
WHAT’S IN, WHAT’S OUT AND
WHY YOU SHOULD CARE
Prior to passage of the AIA, a party seeking
to challenge an issued patent had limited
options.
The issued patent could be
challenged through costly patent litigation
in court or through an ex parte or inter partes
re-examination proceeding conducted by the
U.S. Patent and Trademark Office. The AIA
expands this menu of options.
Passage of the AIA phases out inter partes
re-examination, replacing it with the new
inter partes review proceeding. The AIA
also creates the new post-grant review
proceeding. The new law leaves ex parte
re-examination
proceedings
largely
unmodified. All patent owners should be
aware of these new procedures, regardless
of whether they intend to use them, because
at a minimum their competitors will be
considering the new options.
EX PARTE RE-EXAMINATION
The AIA made few changes to ex parte
re-examination
practice,
the
oldest
procedure available to challenge an issued
patent outside of court. Any person — patent
owner, third party or the PTO itself — may
use ex parte re-examination at any time
during the period of enforceability of a patent
to challenge a patent claim.1 As such, there
is essentially no time limit to bringing an ex
parte re-examination against an enforceable
patent. In fact, an ex parte re-examination
can even be used in the period immediately
after a patent has expired.
Ex parte re-examinations are relatively
limited in scope. To initiate the procedure, a
petitioner must rely upon prior-art references
limited to patents or printed publications that
undermine the validity of an issued claim.2
These references must raise a substantial
new question of patentability based on
an allegation of anticipation, obviousness
or double patenting to initiate an ex parte
re-examination proceeding.3 This standard
remains unchanged under the AIA.
The ex parte nature of this type of
re-examination also limits the ability of
third-party requesters to participate in the
process once initiated. This feature tends
to favor patent owners, giving them control
over the direction patent prosecution takes
during the course of the re-examination. The
limit on third-party participation is especially
apparent when it comes to examiner
Patent owners will most likely continue to
use ex parte re-examinations to address
damaging prior art that comes to light after
issuance of a patent, in part because the
procedure allows the patent owner to control
prosecution. It also seems likely that, in light
of the new procedures created by the AIA,
this procedure will be used less frequently by
third parties when the alternative inter partes
re-examination, inter partes review and postgrant review post-issuance procedures are
available.
INTER PARTES RE-EXAMINATION
The original inter partes re-examination
procedure provided a powerful alternative to
ex parte re-examination. The procedure has
become a popular tool to challenge issued
patents issued from patent applications filed
on or after Nov. 29, 1999. Enactment of the
AIA is producing big changes for inter partes
re-examination challenges to patents.
Before the AIA, the standard for an inter
partes re-examination was the same as that
for ex parte re-examination: A petitioner
had to show a substantial new question of
patentability based on prior art references.
The AIA has changed the standard to a
“reasonable likelihood that the petitioner
would prevail with respect to at least one of
the claims challenged in the petition” test.
This change was effective as of the day of
enactment of the AIA.4
There is essentially no time limit to bringing an ex parte
re-examination against an enforceable patent.
interviews. Patent owners involved in ex
parte re-examination can and frequently do
use examiner interviews to advance their
cases. The third-party requestor does not get
to participate in this exchange and can only
read about it later on the record when notes
from the interview are entered into the file.
There are other features of the ex parte
re-examination procedure that favor thirdparty requestors. For example, this type of
re-examination does not require identification
of the real parties in interest. Perhaps the
greatest advantage of the procedure to the
requestor is that, unlike other post-issuance
proceedings, no estoppel effect attaches
to the use of the ex parte re-examination
procedure.
32 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
Perhaps its most attractive feature, inter
partes re-examination allows for the thirdparty requestor to participate actively in the
re-examination process. This heightened
level of control comes with a price. Unlike
ex parte re-examination, inter partes
re-examination requests require the real
parties in interest to be identified.5 This
requirement is tied to the estoppel effects
that attach to inter partes re-examinations
after a “final decision” is reached.6
Beyond altering the threshold test to
institute an inter partes re-examination,
the AIA ends the availability of the inter
partes re-examination in September 2012
and substitutes inter partes review in its
place. Given the effective date for the new
procedures, it is likely that third-party
© 2012 Thomson Reuters
petitioners will continue to use inter parte
review until its expiration.
INTER PARTES REVIEW
The AIA replaces inter partes re-examination
with the new inter partes review procedure.
The new procedure becomes available for
use one year from the enactment of AIA for
any patents issued before, on or after the
effective date this AIA provision.
There are a number of timing elements that
will be important to the future inter partes
review practice. For example, a petition for
inter parties review can be filed only nine
months after the issue date of a target patent
or after the termination of a post-grant review
proceeding. Another interesting limitation
on inter partes review proceedings is that they
must be filed within one year of service of an
infringement action.
There was a spate of district court actions
filed prior to the enactment date of the
AIA. These actions were likely filed so that
the patents underlying the actions would
be immune from the new inter partes review
procedures, which will not be available for
more than one year after those filings.
Both inter partes review and re-examination
procedures share many of the same features.
For example, both proceedings require that
a challenge be based on prior-art patents or
printed publications. Both proceedings allow
the petitioner to participate actively in the
exchange that occurs between the patentee
and the PTO, and both of the proceedings
share an estoppel effect. The AIA adds the
feature of limited discovery to the inter partes
Inter partes re-examination allows for the third-party
requestor to participate actively
in the re-examination process.
review procedure, which may serve to make
this an attractive option for parties who
wish to know more about their competitors’
intellectual property but do not wish to incur
the full costs of litigation.
Like inter partes re-examination, petitioners
seeking inter partes review must show a
reasonable likelihood that they will prevail
against at least one of the claims challenged
in the petition. This new standard may be
interpreted to be higher than the former
“substantial new question of patentability”
requirement. Legislative history indicates
that Congress intended this language to
present a higher standard, in part to assuage
critics of post-issuance review procedure seen
to impose an undue burden on patentees.
Whether the new standard actually imposes
a higher threshold to petitions for postissuance review become apparent until the
PTO implements rules that govern the new
procedure and those rules are actually tested.
POST-GRANT REVIEW
The post-grant review procedure is a new tool
added by the AIA to challenge newly issued
patents. The procedure will be available one
year after the enactment date of the statute,
and petitions must be filed within nine
months after patent issuance.
The new procedure expands the scope of
Post-Issuance Review Procedures
Ex Parte Re-examination
An existing procedure, relatively unchanged under the new act, that can be
used by any person, including the patent owner, to challenge a patent claim.
Inter Partes Re-examination
Will be replaced by inter partes review in September 2012.
Inter Partes Review
New procedure limited to challenges based on prior-art patents or printed
publications.
Post-Grant Review
New procedure allowing a person other than the patent owner to challenge
newly issued patents. It expands the grounds for challenging patent claims
and applies a lower standard than that applied to inter partes review petitions.
© 2012 Thomson Reuters
post-issuance review. A person other than
the patent owner may seek post-grant review
by alleging invalidity under 35 U.S.C. §§ 101,
102, 103, 112 and 251 (for reissue patents).
As such, the public will be able to challenge
patent claims even if they do not possess a
prior art reference.
The standard to initiate a post-grant review
proceeding is lower and more flexible than
that for inter partes review. To initiate a postgrant review the petition must “demonstrate
that it is more likely than not that at least
one of the claims challenged in the petition
is unpatentable.” This standard appears
to be lower than the reasonable likelihood
of success standard applied to inter partes
review petitions.
This new procedure provides another
threshold standard with which to initiate
post-grant review. Specifically, post-grant
review can be also initiated by raising “a novel
or unsettled legal question that is important
to other patents or patent applications.”
This additional avenue for review potentially
represents a significant expansion in the
grounds for review, making post-grant
review more like the post-grant opposition
procedures of Europe and Japan.
Parties who intend to use post-grant review
will be well-served to be stay abreast of their
competitors’ intellectual property as it works
its way through the PTO. Given the relatively
short nine-month time period within which to
initiate a post-grant review, parties who wait
until a competitor’s patent issues to realize
the existence of a threat may be caught flatfooted in the face of a potentially crippling
patent claim. Far better to plan ahead,
gather prior art if available and prepare
strong arguments to force the threatening
patent into post-grant review immediately
upon issuance. Adequate planning will be
a must, particularly in view of the estoppel
provisions imposed by the statute that apply
to any ground raised or that reasonably could
have been raised with the petition.
The new post-grant review has the potential
to be a powerful business tool. In theory it
can be used to keep issued patents from
being enforced, invalidate or alter the scope
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 33
of a competitor’s claims after they issue
and avoid litigation or at least delay it by
injunction. As such, the procedure has great
potential to provide an important competitive
advantage.
BE PREPARED FOR POST-ISSUANCE
REVIEW
The AIA ushers in some of the most important
and expansive changes to patent law in recent
decades. The law alters and expands the
avenues by which issued patent claims can
be challenged without having to go to court.
With a solid understanding of the procedures
and diligent monitoring of the competition’s
intellectual property, careful use of the new
post-issuance review provisions of the AIA
can help companies secure a commercial
advantage in the marketplace.
NOTES
37 C.F.R. §§ 1.501(a) and 1.520.
1
37 C.F.R. § 1.510(a), citing 37 C.F.R. § 1.501.
2
37 C.F.R. § 1.515(a).
3
America Invents Act of 2011, Section 6,
35 U.S.C. § 311 (2011).
4
35 U.S.C. § 311(b)(1).
5
35 U.S.C. § 317(b).
6
James Mullen is a partner in the
San Diego office of Morrison & Foerster
where his practice focuses on patent
counseling and prosecution, intellectual
property due diligence, and venture
intellectual property. He counsels clients
pursuing innovation in areas including cancer
therapeutics and diagnostics, cleantech,
infectious-disease therapeutics and smallmolecule screening protocols. He can be
reached at jmullen@mofo.com.
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34 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
© 2012 Thomson Reuters
COMMENTARY
Patent Reform Bill Hurts Small Business
By Todd McCracken
National Small Business Administration
The National Small Business Association,
the nation’s longest-running small-business
advocacy organization, opposed the patent
reform bill, the America Invents Act of 2011,
due to its potential to harm America’s small
businesses.
a “first to conceive” system to the “first to
reduce to practice” system.
The new law, signed by President Obama
Sept. 16, offers nothing to benefit small
businesses, startups, individual inventors or
university innovators, and fails to improve
the way the patent system serves the NSBA’s
small-business members.
Unlike the American first-to-conceive system,
a first-to-file system awards patents to those
who are better equipped with resources to
achieve the latter reduction to practice steps
after conception, or to those who can afford
to file many applications at every stage of
development. Hence, favored under this firstto-file system are entities having financial
and staffing resources that are generally not
available to startups, individual inventors or
small-business innovators.
Instead, the AIA takes away the key legal
provisions that small businesses and
startups have used for decades, adds risk and
promises to increase the cost of obtaining,
maintaining and enforcing patents.
Where the 1952 patent law allowed startups,
small business and disruptive innovation
to flourish, the AIA repealed the most
important provisions and replaces them
with features that favor large businesses
and multinational firms. This new law will
lead to large, lumbering, entrenched market
incumbents, much as we see in Europe to
the detriment of America’s entrepreneurial
business community.
The patent reform law reduces the incentive
for risk investments in new inventions — it
tips the balance in favor of big business
over early-stage innovators, and that will
ultimately reduce innovation.
The AIA casts heavy clouds of legal
uncertainty over patent rights for decades
to come because of ambiguous drafting and
dubious constitutionality. The reform under
the AIA includes the most significant changes
to the U.S. patent law in over a century — and
they are not good changes. The NSBA is
concerned with five major changes.
First, the AIA moves the U.S. patent system
from a first-to-invent system to a firstinventor-to-file system. Moving to a first-tofile system favors large businesses, foreign
corporations and well-financed multinational
market incumbents over small-business
innovators. In patent parlance, this transition
is more accurately described as moving from
© 2012 Thomson Reuters
For a patent application to be effective in
protecting a new invention, it can only be
written after the invention has been fully
vetted, reduced to practice and tested.
The patent reform law
reduces the incentive
for risk investments
in new inventions.
Second, the AIA weakens the grace period
that has been an important and valuable
right for U.S. inventors since 1839. That is, it
shortens the deadlines for how early a patent
application must be filed, and reduces the
options that inventors have to develop an
invention before filing an application. The
old patent law granted patent rights based
on who invented an invention first — the mere
fact that an inventor was first to conceive an
idea was sufficient to lock down patent rights,
without the expense and delay of consulting
with lawyers.
The American grace period has been
particularly important for small-business
inventors. This feature of the old law
permitted startup companies, small
companies, university inventors and the like
to initiate discussions with third parties such
as outside investors, outside subcontractors
or potential outside strategic partners for
manufacturing or marketing. This same
feature of the old law allowed an inventor to
test and perfect an invention, to show that it
is technically feasible and marketable, before
being forced to pay $10,000 or more to a
patent attorney.
Under the patent law before the AIA, all
these business activities were possible, and
available at low cost, because patent rights
were reasonably secure (subject to small
but manageable risks) simply because the
inventor invented.
Under the new law, an inventor faces the
same difficulties that have prevented a
vibrant startup or venture-capital ecosystem
from arising in Europe. The AIA gives an
inventor a Hobson’s choice: either file a
patent application before beginning outside
discussions, or publish all details of an
invention before beginning to discuss with
outsiders. But publishing a full roadmap
to an invention just as a project begins is
commercial suicide, and several prematurely
filed patent applications are prohibitively
expensive.
The new law creates a catch-22 for startups:
An inventor cannot start discussions with an
investor before filing a patent application,
but usually does not have the money to file a
patent application before landing an investor.
The old law permitted the discussions that
allowed entrepreneurs and investors to find
each other; the new law suppresses them.
The old law created an even playing field
that treated small companies and large
companies alike. The new statute gives
a huge preference to large companies, by
strengthening the advantages to companies
that can do all of their financing, research
and development, testing, manufacturing
and marketing in-house. In contrast, the AIA
takes away the legal provisions that allowed
easy consultation with third parties and
cross-company collaboration.
Similarly, the new law strengthens rights
for companies that invent the same things
twice, allowing them to extend patent rights
far beyond the normal 20-year patent term,
while providing no analogous advantage
that has any meaningful value to small
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 35
The National Small Business
Association is concerned
that the following five
changes under the America
Invents Act will harm
small businesses:
• Switching from a first-toinvent system to a firstinventor-to-file system.
• Weakening the one-year
grace period that had
benefited small companies,
startups and university
inventors.
• Eliminating the
longstanding law under
which an inventor who
chose to use an invention in
secret forfeited the right to
obtain a patent after a year.
• Expanding prior-user rights,
thus favoring trade-secret
holders.
• Adding more opportunities
to challenge the validity of
patents.
companies. The law was designed by big
companies for the benefit of big companies,
to protect themselves from the next
generation of innovators that might displace
them. It does that quite effectively.
Moreover, if the purpose of the AIA is
harmonization with the rest of the world,
then the disclosure grace period is effectively
non-existent. A disclosure before filing acts
as an absolute bar in jurisdictions outside
the U.S. and the inventor would have to
forfeit any foreign patent rights to benefit
from the weakened grace period of the AIA.
This makes obtaining foreign patents more
difficult for small business inventors — not
easier, as proponents of the AIA contend.
Third, the AIA effectively shifts the
constitutional balance between trade secrets
and patents to favor those who hoard secrets.
For more than 170 years, U.S. law held that if
the inventor chooses to use an invention in
secret, the inventor abandons the right to
obtain a patent after a year. The AIA does
away with these provisions, and now provides
that companies can use an invention for
many years, and seek a patent years later.
This effectively extends their competitive
advantage by an additional 20 years.
This provision is retroactive, enabling
incumbent companies to “evergreen” or
extend a soon-to-expire patent, or patent
trade secrets for which they have previously
forfeited the right to a patent under the old
law. It favors established older firms over
startups and early-stage small businesses
that have no trade-secret accumulation
history.
Fourth, the AIA further shifts the
constitutional balance in favor of trade
secrets by expanding prior-user rights. Prior
to the AIA, the first inventor that provides a full
written description of an invention receives in
return a patent that allows that first inventor
to exclude others, or obtain a royalty, from all
others that use the invention. Under the AIA,
the motivation to disclose is sharply reduced:
One who uses an invention in secret obtains
a right to circumvent the patents of others
who do disclose. In essence, the trade-secret
holder receives a free ride on the rights of the
patent owner.
The “exclusive right” required by the
Constitution becomes a right that has to be
shared. This favors large companies, which
often can rely on factors other than patents
to protect their markets from competitors,
but will be fatal to many small companies
that live or die by the patent system. This
AIA provision shifts risks onto those who
participate in the patent system, and
favors those who keep trade secrets. This
disadvantages small-business innovators
that must rely on the patent system for their
survival in the market.
Fifth, the AIA adds more opportunities to
challenge the validity of patents. Strong
patents are critical to start-up companies
trying to obtain investments. The AIA,
however, adds several new paths by
which an infringer can tie up a patent in
legal proceedings in the U.S. Patent and
Trademark Office, even if the patent owner
had no intent to enforce the patent.
The new law shifts much of the economic
decision making to the infringer — and given
the dynamics of the market, this generally
36 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
means a shift of legal and market power
from small companies and startups to large
firms and market incumbents. The net
result is that valuable patents will be more
subject to challenge, which increases costs
for the patent owner, weakens the value of
the patent and makes it more difficult to
license or raise capital necessary to starting a
company and creating jobs. NSBA members
repeatedly attempted to be heard on these
matters.
However, the Senate spent six years avoiding
testimony from any person from a startup,
an early-stage small business, an individual
inventor, or venture capital. The infirmity
of the AIA and its legislative process is
manifested by its provisions that call for
studies of the very issues on which Congress
should have been informed prior to enacting
the provisions of the AIA at which the studies
are to be directed.
For example, the AIA requires a U.S. Small
Business Administration study regarding
alternatives to the first-to-file system and
its likely effect on small-business patent
applicants. But these first-to-file and weak
grace-period provisions in the AIA go into
effect regardless of the results of the study.
The new law
strengthens rights
for companies that
invent the same things
twice, allowing them to
extend patent rights far
beyond the normal
20-year patent term.
Similarly, the AIA directs the PTO to study
and report to Congress on international
patent protection for U.S. small businesses —
while the relevant provisions that harm small
business’s ability to obtain international
patent protection go into effect regardless
of the results of that study. The AIA also
directs the PTO to study, report and make
recommendations to Congress on the
operation of prior-user rights.
This includes the effects of prior-user rights on
small businesses, universities and individual
inventors, as well as its effects on innovation
rates in selected countries, and an analysis of
legal and constitutional issues that may arise
© 2012 Thomson Reuters
from placing trade-secret law in patent law.
Regardless of the results that obtain from
this study and recommendations, the related
AIA provisions went into effect on the day of
its enactment.
counter to the constitutional purpose of our
patent law — to promote the progress of
the useful arts by securing for a limited time
exclusive rights to the inventor in return for
disclosure of the invention.
The new patent law is the perfect example
of legislating first and asking questions later.
Any patent reform that runs counter to the
constitutional text and underlying purpose
surely will face legal challenges that will
call into question the validity of any patents
granted under that legislation.
These
concerns decrease the value of patents, make
it more difficult to license and increase the
cost of enforcement, which impacts smallbusiness innovators disproportionately more
than large companies.
Each of the changes described above
acts to weaken our patent system to the
disadvantage of small-business innovators.
Taken together, these changes strike a
terrible blow to innovation in the United
States and will saddle our patent system with
unprecedented legal uncertainty.
This uncertainty is enhanced by legitimate
questions of the constitutionality of the
AIA. In shifting the constitutional balance
away from the patent system’s disclosure
purposes, in promoting the hoarding and
evergreening of trade secrets and the broad
expansion of prior-user rights, the AIA runs
Enactment of the AIA has, at every turn, put
small-business innovators at a disadvantage,
and to describe it as anything other than a
massive blow to entrepreneurial innovation is
simply untrue.
Todd McCracken is president and CEO of the
National Small Business Administration.
Dr. Ron Katznelson, NSBA member and
president of Bi-Level Technologies, contributed
to this commentary.
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Stetson University College of Law
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PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 37
COMMENTARY
Why the America Invents Act is Bad for
Entrepreneurs, Startups and for America
By David Boundy, Esq.
Cantor Fitzgerald
As a patent attorney, I have helped many
early-stage
inventors,
entrepreneurs
and investors build successful American
companies that offer good jobs. While the
2011 Leahy-Smith America Invents Act was
pending, I discussed the needs of startups
and investors with many knowledgeable and
influential proponents of the act, including
key legislative staffers and members of
the relevant committees of the American
Bar Association and American Intellectual
Property Law Association.
After I laid out two typical startup scenarios,
every proponent of the 2011 act that I spoke
with conceded, “Oops, we didn’t think
about those; the bill doesn’t work in those
two scenarios.” My two scenarios are very
common — almost every startup goes
through one of them and many endure both.
If the 2011 act does not allow companies to
get through these two scenarios, it will not
work for America, American innovation or
American jobs.
SCENARIO NO. 1: SEEKING VENTURE
CAPITAL, BUSINESS PARTNERS
An entrepreneur with a great idea almost
always needs to find an investor, and
usually also needs one or more partners for
manufacturing, marketing or some other
function. Almost all entrepreneurs have to
present their idea to several dozen investors
and potential partners before a new company
can form.
Often new companies begin when an inventor
makes a presentation in an open “inventor’s
forum” meeting, where many potential
investors not bound by confidentiality
agreements hear from many inventors. In
these settings, the inventor has to disclose
confidential information to many people with
only a “handshake” level of confidentiality.
Even though there is some risk of a leak, these
meetings happen often anyway because past
law gave adequate protection to both sides.
SCENARIO NO. 2: THE TRIAL-ANDERROR OF REAL-WORLD R&D
Once the company is formed, the hard
work of research and development (R&D)
begins. Many high-tech products require
extensive trial-and-error: the inventors
conceive and discard dozens of ideas before
hitting the magic combination that works
technologically and commercially.
The work-and-rework R&D often takes many
years. Dozens of approaches are considered.
Sometimes a hundred iterations of an
invention are tried, explored and discarded.
A company may pursue one for a year or
more before finding that it does not work,
then go back and retry one of the discarded
approaches based on an insight from other
work. The final product may embody only a
tiny fraction of all the inventions.
PRIOR LAW ACCOMMODATED BOTH
SCENARIOS; 2011 ACT DOES NOT
For 180 years, U.S. patent law provided a
grace period with several prongs. The most
relevant prong, Section 102(a), allowed
inventors talk to potential investors and
strategic partners; conduct trial-and-error
innovation; deal with departing employees,
leaks (both benign and malicious) and secrets
that aren’t kept, trash that isn’t shredded and
students’ needs to publish; and to discuss
their research at job interviews and the like.
Under prior Section 102(a), commercially
important patent rights were determined
based on ordinary, non-burdensome business
activities (the legal jargon was “conception”
and “diligence”). That is, a company’s
pursuit of an invention with normal business
diligence gave a reasonable-risk course for
the company to conduct ordinary business
for a reasonable period of time before
bearing the costs of patent filings. The
previous Section 102(a) gave everyone time
to talk, think and perfect the invention before
the patent system started to levy costs.
38 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
Inventors turn useful ideas into patented products that boost
the economy.
Prior Section 102(a) allowed inventors to
wait until they had quality inventions to
file quality patent applications. Quality
patents only emerge after iterative design
and testing, and valuable patents emerge
only after enough information exists to sort
good ideas from bad. America’s unique
and strong right to file in the future, after
the inventor and investor knew whether the
invention was valuable, made business easy,
prevented wasted costs for inventions that
proved worthless, and gave inventors and
attorneys time to put care and quality into
patent applications.
In contrast, the 2011 act eliminates the
Section 102(a) part of the grace period.
Activities undertaken in the ordinary
course of business are no longer legally
relevant. Instead, rights turn solely on
legal technicalities controlled by corporate
and government patent bureaucrats — the
interests and efficiency of business have been
sacrificed for the convenience of in-house
patent counsel at Fortune 150 companies
and the U.S. Patent and Trademark Office.
Under the 2011 act, scenarios 1 and 2 are
death marches for new companies.
First, entrepreneurs and investors can
no longer speak freely — in scenario 1
conversations are too risky. Inventors will
have to file patent applications before
beginning to talk to investors and potential
partners.
Investors will have to insist
that patent applications be filed before
opening discussions, let alone investing.
But many inventors cannott afford to file
© 2012 Thomson Reuters
patent applications until they already have
investment in hand. Prior Section 102(a)
gave options for evading this catch-22:
everyone could talk to each other and get
new companies going. The 2011 act takes
these options away; scenario 1 will prevent
people from finding each other to start new
companies.
The 2011 act imposes huge costs on
scenario 2: a company must protect its
invention by filing premature, hasty and
expensive patent applications on every babystep idea along the way, because no one can
know in advance which baby step will turn out
to be critical. Companies that face multi-year
trial-and-error have formed and thrived in
the U.S. under the previous law but will face
ruinous patenting costs under the 2011 act.
Ironically, the Patent Office also will face
huge new costs, because the number of
applications filed will go up, while the
average preparation quality will go down.
SCENARIO NO. 3: THE COMMERCIAL
IMPRACTICALITY OF THE 2011 ACT
A third scenario shows that the remnant
of the grace period in the 2011 act is too
tenuous to be useful to a company. Suppose
a company invents something in January
2013, gets a prototype working in July 2013
and intends to rely on the grace period to
delay patent expenses during R&D and
testing. Suppose someone else invents
something similar, but not identical, and
publishes an article in early 2014 describing
a similar idea. (Identical reinvention is rare,
while reinvention with slight difference is
common enough to present commercially
unacceptable risks.) The first inventor files
a patent application covering a fully tested
invention in June 2014 as planned.
Under the old law, this all works. The first
inventor’s patent rights and investment
in R&D are safe. Companies — especially
startups — used the grace period in the
previous Section 102(a) for this purpose all
the time, and the relatively low risks and low
costs in a test-first, patent-later plan were
crucial to the company’s ability to obtain
R&D capital, both initial rounds and further
rounds as the company matured.
However, under the 2011 act, the company
will only be able to obtain a patent so narrow
that it covers only the company’s exact
prototype, not the subsequent product, and
not the second inventor’s reinvention. That
Losers (better off pre-2011 law)
patent has little or no commercial value, and
the company will find it all but impossible
to secure later funding rounds. Many
companies and first investors will be wiped
out.
Once a few examples become generally
known to the investment community, venture
capital will flee the U.S. startup market,
just as it has in Canada. It will take only a
few years for today’s startup ecosystem to
collapse and decades to rebuild it — unless
Congress passes corrective legislation by
spring 2013.
EMPIRICAL DATA SHOWS HOW 2011
ACT WILL DETER INNOVATION
We know that these consequences will follow
from repeal of the prior Section 102(a) grace
period, because that is the system Europe has
had for decades. European patent attorneys
counsel their inventor and investor clients not
to talk to each other until after applications
are filed. Of course that means that most
meetings never happen. “Inventor’s forums”
are scheduled monthly in many American
cities but are essentially unknown in Europe.
Similarly, in Europe, applications have to
be filed shortly after an idea is conceived
Winners (better off under 2011 Act)
Inventions that take time to develop, test, perfect and
require bigger patent applications
Inventions that can be conceived, tested,
perfected and prepared for filing in very little time
Foundational discoveries that open new fields, e.g.,
universities or startups
Specific products based on the foundational
discovery (“downstream innovators”), e.g., drug
companies’ specific molecule or slow-release
formulation
Startups that need to team with outsiders to obtain
financing, manufacturing and marketing
Large companies that integrate financing, R&D,
manufacturing and marketing in-house
New market entrants
Market incumbents
Inventors
Aggregators that use others’ technology;
re-examination and post-grant review specialists;
litigators
American inventors
Foreign inventors
Companies that use their patents to secure investment —
generally higher tech
Companies that have other pools of capital —
generally lower tech
Companies that build themselves around their patented
technologies
Patents and open disclosure of inventions
Companies whose markets are protected by
economic factors other than patents
Trade secrets
© 2012 Thomson Reuters
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 39
— before full vetting — before testing outside
a company’s four walls. The expected
consequence is confirmed by the empirical
data: Europe has R&D investment and new
business formation that are half of American
rates.
I know of three empirical economic analyses of
economic data relating to patent systems. All
three found that the 2011 act would adversely
affect the American economy. In 2009,
economists at McGill University, Canada’s
premier university, studied Canada’s change
in law in 1987, the year Canada switched from
a system very much like the previous U.S.
law to a system very much like the 2011 act.
The McGill study found that the change had
“virtually no positive effect” but that benefits
were reallocated from small firms to large, a
change that will likely harm the U.S. because
of the different mix of businesses.1
A second study, by Dr. Ron Katznelson,
showed how the earlier deadlines of the
2011 act would force inefficient behavior,
and that the costs would fall selectively on
U.S. inventors to the benefit of non-U.S.
inventors.2
A third study, by a Canadian colleague and
myself,3 analyzed data from the U.S. and
Canadian patent offices, and we showed that
if data from the Canadian transition in the
late 1980s and early 1990s extrapolates to
the U.S. in the early 2010s, the costs to U.S
business will be about $1 billion per year.
I know of no similar empirically based
analysis that supports the 2011 act.
A patent system that fosters European
and Canadian levels of entrepreneurship,
innovation and business formation cannot be
good for America, but that is what the 2011
act is modeled on.
CLAIMS IN SUPPORT OF 2011 ACT
DON’T SURVIVE SCRUTINY
First, the 2011 act is supposed to do away
with complex and costly challenges to
patents, called interferences. While the
claim is true, it is irrelevant. Only about
200 patent applications per year — out
of nearly 450,000 — are the subject of
interferences, so eliminating them will
save only tens of millions of dollars per
year. In contrast, the repeal of the previous
Section 102(a) grace period affects
commercial decisions for hundreds of
thousands of inventions per year, and will
cost startups and small business $1 billion
annually. Spending a billion dollars to save
a few tens of millions is obviously a bad
investment..
Moreover, the 2011 act will increase the
number of “derivation proceedings” from
about five per year under the prior law to
many dozen. Whether it arises during the
application process or during litigation,
derivation is the most costly issue in patent
law. Another feature added by the 2011
act, “prior user rights,” is comparable in
complexity to an interference and will be
roughly as frequent as interferences were. To
my knowledge, these new costs were never
acknowledged during the debate over the
2011 act.
Second, the 2011 act neglects several
amendments to procedural law that are
necessary to implement the minimal rights
for small inventors that purportedly exist in
the 2011 act. Rights with no remedy are no
rights at all.
Third, proponents told Congress that the
harms of the 2011 act would be ameliorated
because inventors would be able to file
provisional applications for only $110. Under
old law, inexpensively prepared provisional
applications had business value because they
documented the ordinary-course business
activities discussed above. But under the
2011 act, business activities are irrelevant, so
the legal relevance of provisional applications
changes entirely.
Under the 2011 act, a provisional application
only has value if it is prepared with care
and expense comparable to a full-blown
formal application. Under the 2011 act, a
startup’s typical “provisional” application will
average $10,000 or more in attorney fees
and inventor time — a formidable barrier to
an entrepreneur’s first conversation with an
investor. The $110 provisional is a thing of the
past, a meaningless right.
Fourth, proponents argued that a company
can preserve patent rights by publishing a full
description of the invention. But no business
publishes its future business plans at the very
outset of a project — that’s suicide! Further,
this technique would cause a company to
forfeit patent rights in almost every other
country — a meaningless right.
Fifth, proponents justified the 2011 act to
Congress because it preserves one small
piece of the grace period, a sliver of the prior
law’s Section 102(b). But Section 102(b) was
not the concern of the startup community; the
40 | PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT
concern was Section 102(a). The remaining
sliver of grace period is a meaningless right
because the risks are so much greater than
under old law and impossible to hedge.
Sixth, the 2011 act discriminates against
startups by adding several new provisions
that favor companies with old technology
that they held as trade secrets companies
that are so large that the same invention is
rediscovered multiple times and companies
that can obtain all of their financing, R&D,
testing, manufacturing and marketing
internally.
These provisions transfer
immense wealth to big companies and
market incumbents but offer no benefit at all
to startups and small companies.
Seventh, the 2011 act repeals several features
of American law that favor U.S. inventors
and replaces them with asymmetries that
discriminate against U.S. innovation in favor
of foreign inventors. For example, the prior
statute gave American inventors several
filing date advantages vis-à-vis foreign
inventors. The rules in the two In re Hilmer
cases, 149 U.S.P.Q. 480 (C.C.P.A. 1966),
and 165 U.S.P.Q. 255 (C.C.P.A. 1970), gave
American inventors a “head start” in their
filing dates vis-à-vis non-Americans, typically
by a year. These asymmetries and benefits to
American inventors are repealed.
Eighth, the previous law required that
patent applicants present their cases to the
Patent Office “without deceptive intention”
and without perjury. The 2011 act repeals
requirements for honesty and thereby
creates options that are very attractive to
non-U.S. parties who are exempt from U.S.
attorney ethics rules and practitioners of
state-sponsored industrial espionage.
Ninth, the 2011 act will create immense
legal costs and commercial uncertainty.
The 2011 act disrupts definitions of legal
terms “public use” and “on sale” that have
been stable for 180 years — two legal terms
that affect the vast majority of all patents.
The replacement in the 2011 act is painfully
ambiguous. The ambiguity will take decades
and tens of millions of litigation dollars to
sort out, creating many billions of dollars of
commercial uncertainty.
Further, where old law decided these issues
on black-and-white facts, the 2011 act
introduces new legal tests that can only be
resolved through dueling expert testimony,
which will make litigation settlement far
more difficult.
© 2012 Thomson Reuters
THE ILLUSORY BENEFITS OF
‘HARMONIZATION’
There is nothing inherently wrong with
“harmonization” as a rationale for the
2011 act but only if the benefits exceed
the costs. Partial harmonization creates
almost no benefit: as long as there are even
small differences between the laws of two
countries, an attorney in one country cannot
opine on a patent from the other and there
are no meaningful savings to be had. The
2011 act’s partial harmonization does not
move U.S. law close enough to any other
jurisdiction to create any significant savings.
The transition costs from old law to new
will be immense — and will probably never
be recovered by “harmonization” benefits
— if time value of money is included in the
calculation.
Further, the 2011 act departs from
international norms for obviousness, a
“disharmonization” that affects about
20 percent of patents.
Further, the
anomalous definition of obviousness in the
2011 act discriminates against U.S. inventors
in a way that no other country discriminates
against its own inventors.
2011 ACT WILL HARM AMERICAN
JOBS, REDISTRIBUTE WEALTH,
REDUCE AMERICAN INNOVATION
In 2010, the Kauffman Foundation and U.S.
Census Bureau released two studies on job
creation. Both found that net job growth in
the U.S. occurs only through startup firms.
In many conversations, the proponents
of patent reform have admitted that they
© 2012 Thomson Reuters
“didn’t think about” the needs of startups,
small companies and investors that create
jobs.
In the 109th, 110th and 111th Congresses, the
Senate Judiciary Committee did not invite
a single inventor, small business owner or
investor organization to testify. The major
financial, human resource and administrative
problems that are paralyzing the U.S. patent
system are well known — and the 2011 act did
nothing to address them.
Instead, the 2011 act is tailored to benefit
multinational firms that have been exporting
jobs overseas, market incumbents that
rely on stability instead of innovation and
government bureaucrats. The 2011 act
is based on illusory promises and poor
analysis by its proponents. The unintended
consequences will harm startups and small
business, and the jobs they create. The 2011
act urgently needs corrective legislation.
David Boundy is vice president for intellectual
property and assistant general counsel for
Cantor Fitzgerald in New York. The views
expressed in this article are Boundy’s and not
those of Cantor Fitzgerald. He can be reached
at DBoundy@cantor.com.
NOTES
Shih-tse Lo & Dhanoos Sutthiphisal, Does It
Matter Who Has the Right to Patent, First-To-Invent
or First-To-File? Lessons From Canada (National
Bureau of Econ. Research Working Paper No.
14926, Apr. 2009), available at http://www.nber.
org/papers/w14926.
1
Ron D. Katznelson, The Perfect Storm of
Patent Reform?, Fenwick & West Lecture
Series Symposium, UC Davis School of
Law (Nov. 7, 2008), available at http://
works.bepress.com/rkatznelson/54/.
2
David Boundy & Matthew Marquardt, Patent
Reform’s Weakened Grace Period: Its Effects On
Startups, Small Companies, University Spin-Offs
And Medical Innovators, Med. Innovation & Bus. 2:2
27-37 (Summer 2010)
3
PATENTS IN THE 21ST CENTURY: THE LEAHY-SMITH AMERICA INVENTS ACT | 41
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