Patent Law Update: The America Invents Act – Part 3: Patent Ownership, Validity & Conflicts

Introduction

In the first two articles in the “Patent Law Update: America Invents Act” series, I discussed the changes to the patent law that affect the patent application process. (Article 1Article 2) In this third newsletter, I will transition my discussion to issues that may arise after your patent application has been filed.  Here, I will cover four critical topics.  First, I will evaluate the new derivation proceedings and how they differ from the existing interference proceedings to resolve conflicts between competing inventors applying for patents on the same invention.  Second, I will examine the expansion of the current procedures for third parties to submit evidence of prior art to the United States Patent and Trademark Office (“USPTO”) to derail a pending patent application.  Third, I will discuss the new supplemental examination procedures and how they can be used to as both an offense and defensive resource related to a patent’s legitimacy.  Finally, I will survey the new procedures developed by the USPTO to resolve the validity of a recently issued patent through formal trial proceedings.

Article 4

Derivation Proceedings

Under the current system, special examiners from the USPTO use interference proceedings to resolve conflicts between competing inventors applying for patents on the same invention.  During these proceedings, inventors are permitted to submit signed and dated notes, prototypes, affidavits and secondary evidence like credit card statements and receipts to prove that he or she was the first to create the disputed invention.  An inventor is also permitted to contest the sufficiency of the other’s inventor’s supporting documentation. Ultimately, interference proceedings are designed to determine who was the first to invent the object or process and/or whether the competing claim is novel or obvious in light of the competitor’s claimed subject matter.

On March 16, 2013, the first-to-file system will eliminate interference proceedings and the practice of “swearing back” (where the inventor submits documentation of a date of conception or reduction to practice prior to the date of the disclosure or filing).  Instead, conflicts between inventors will be entitled to resolution through a derivation proceeding.  However, derivation proceedings will operate differently than the current interference proceedings.  The focus of these new proceedings is to determine whether the subject of a patent application was derived from the invention of someone else.  Although this may seem synonymous to an interference proceeding, there is a subtle difference: an interference proceeding is designed to establish your ownership in an invention, whereas a derivation proceeding is designed to prevent someone else from obtaining the rights to a derivative of your invention.  Under the new system, disputes over the ownership of an invention will be resolved solely based upon the priority and disclosure rules discussed in my first article.  In light of the changes to the disclosure and prior art rules, the new derivation proceedings will inevitably be more complex than the old interference proceedings.

Third Party Submission of Prior Art

Third party submissions of prior art are designed to strengthen the patent system by quickly eliminating patents that are obvious in light of prior art.  The process helps the USPTO identify prior art that is relevant to its evaluations and determinations.  Currently, third parties are permitted to submit prior art to the USPTO they believe are applicable to pending patent applications.  However, third parties are not permitted to explain why the alleged prior art is relevant to the PTO’s evaluation of the subject patent.  As discussed in Newsletter 1, the scope of prior art will be expanded beyond just patents and publications under the America Invents Act (“AIA”) in the Spring of 2013.

On September 16, 2012, third parties will still be permitted to submit prior art believed to be relevant to a pending patent application.  However, the new patent system will also allow third parties to provide statements about the relevance of the prior art that they submit.  Third parties will be permitted to submit prior art before the issuance of the patent or within six months after first publication of a patent application.  Third parties will also be permitted to submit prior art six months after the first rejection of a patent application.

AIA’s expansion of a third party’s ability to submit prior art and explain its relevancy to a pending patent application will be an important tool to ward off potential infringers.  A prior art submission may preclude the need to initiate lengthy review procedures (discussed below) or to file infringement claims in court.  Ultimately, a submission of prior art may prevent infringement before it even starts.

Supplemental Examination Procedure

After September 16, 2012, the supplemental examination procedure will allow a patent owner the ability to request a  supplemental examination of a patent to consider, reconsider or correct information believed to be relevant to the patent.  A patent owner can utilize this procedure to put his or her patent in the best form possible before initiating infringement litigation against an infringer.  Although the scope of the patent cannot be enlarged, the patent can be rewritten to strengthen its claims and protections.  In addition, a supplemental examination may give the perception that the patent has been doubly confirmed by the USPTO.  If modifications/corrections are concluded before litigation is initiated, the infringer cannot use the changes as a basis to support an argument that the subject patent is unenforceable.

The supplemental examination procedure can also be used by a third party to challenge the validity of a patent.  Here, the filing party must demonstrate that a substantial new question of patentability exists with the subject patent.  The new evidence regarding the patentability of the subject invention is limited to existing patents and printed publications.

The USPTO has ninety (90) days from that initial request to decide whether to grant the supplemental examination.  If the supplemental examination is granted, the patent holder is permitted to file a response.  In doing so, the patent holder may rewrite the patent so that the new evidence no longer invalidates the patent.  An ex parte filer is permitted to file a reply to the patent holder’s response.  Then, the USPTO will issue a ruling as to the validity of the patent.  The USPTO’s decision is appealable to the Patent Trial and Appeal Board (“PTAB”) and then to the Federal Circuit.

The supplemental examination process can be a powerful tool for a patent owner to prepare for litigation over the validity of someone else’s patent.  The process can also be a relatively cheap way for a party to challenge the validity of a patent, even though the patent holder may be able to prevent invalidation by amending the patent.  The key aspect to supplemental examinations is that they are administrative in nature.  Unlike the review processes discussed below, supplemental examinations do not mimic trial practices.  As a result, these examinations require less time and resources to reach resolution.

Post-Grant Review Procedures

Although this change will not become effective until September 16, 2012, the new post-grant review procedures will have an important impact on one’s ability to challenge the validity of a patent.  These procedures contain a number of new requirements that affect the nature and scope of the evaluation of process.  Ultimately, these procedures are designed to quickly eliminate conflicting patents that are obvious and provide a speedy alternative to civil litigation when a claimant seeks to invalidate a patent based on prior art.  For the sake of clarity, I will address the new procedures individually.

The Current Review Process:  Reexamination Procedures

The current patent system has a reexamination process.  The process was designed to allow the validity of a patent to be challenged without having to initiate litigation.  However, due to the increased volume of petitions that have been filed over the years, reexaminations routinely take many years to be resolved.  Reexamination procedures often involve multiple Office actions, several rounds of third party and patent owner responses to the Office actions and numerous other petitions.  Although the reexamination is conducted by the USPTO, the process resembles civil litigation in practice.

A reexamination petition can be filed any time during the life of the subject patent.  In order for a reexamination petition to be granted, the petitioner must demonstrate a substantial, new question of patentability exists with respect to the patent.  However, the scope of  the petition is limited to existing patents and printed publications.  A party is permitted to simultaneously pursue a declaratory action related to the validity of the patent in civil court and a reexamination process through the USPTO.  In order to prevail in the reexamination process, the petitioner must prove the unpatentability of the device, plant or process at issue by a preponderance of the evidence.

The Future Review Process:  Post-Grant Procedures and Inter Partes Procedures

Post-Grant Review Procedures

The post-grant review procedure is an entirely new process created under AIA.  A post-grant review is a trial proceeding under the jurisdiction of the PTAB.  Through the post-grant review process, a third party may request a proceeding to challenge the validity of a recently issued patent.  A post-grant review can be initiated under nearly any invalidity defense, including its patentability, novelty, obviousness, evidence of prior sale, prior use or public knowledge.  Post-grant review proceedings may also focus on deficiencies in the patent applicant, including the applicant’s failure to comply with the specification and best mode requirements.  These proceedings are designed to be resolved within twelve (12) to eighteen (18) months after they begin.

A third party can request a post-grant review by filing a petition within nine (9) months after the subject patent has been granted.  In light of this short time frame, I believe that it will be necessary to actively monitor your industry and evaluate the patents registered by your competitors.  As noted above, the scope of the possible grounds that will be available to challenge a competitor’s patent is much broader under the new system.  As such, I believe that it will be important to take advantage of these post-grant procedures in the future.

In order for a post-grant review proceeding to be granted, the petition must demonstrate that it is more likely than not that at least one of the claims challenged in the petition is unpatentable.  However, unlike the current reexamination process, a post-grant review would not be granted if the petitioner has already filed a civil suit challenging the validity of the patent.  If granted, the petitioner has the burden of proving unpatentability by a preponderance of the evidence.  This is the same burden of proof required under the current reexamination procedure and is more favorable to petitioners than the clear and convincing standard faced in the courts.  Once the patentability of a subject matter has been adjudicated by the PTAB, petitioners are precluded from challenging the validity of the patent involved in subsequent federal court or International Trade Commission proceedings on any grounds that were raised or reasonably could have been raised during the post-grant review proceeding.  However, the PTAB’s post-grant review decisions are appealable to the Federal Circuit.

Inter Partes Review Procedures

Under the AIA, the inter partes review process will be available to third party petitioners after the nine (9) month post-grant review period has expired or a post-grant review proceeding has been terminated.  An inter partes review process may be initiated any time during the remaining life of the subject patent.  In many ways, the inter partes review procedures are similar to the current reexamination procedures.

Much like the current reexamination process, the scope of inter partes review is limited to prior art consisting of patents and printed publications.  In addition, the petitioner has the burden of proving unpatentability by a preponderance of the evidence under both sets of procedures.  However, an inter partes review may only be initiated if there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.  This is a much higher standard than required under the current reexamination procedures.

An inter partes review cannot be initiated by a petitioner who has filed a civil suit challenging the validity of the patent.  However, if the petitioner files a civil action to challenge the validity of the patent on or after the date the petitioner files a request for inter partes review, the civil action is automatically stayed.  In addition, if a petitioner is defending an infringement claim, the petitioner cannot request inter partes review more than one year after being served with the complaint.  Taken together, these new timing restrictions will limit a petitioner’s flexibility in instituting a concurrent challenge against an infringer.

Overall, the post-grant review process and the inter partes review process create a new system to contest the validity of a recently issued patents.  Both the post-grant review process and the inter partes review process will make it more difficult to seek patent invalidation before the USPTO.  However, the post-grant review process has significantly broadened the scope of issues that can be considered by the USPTO to invalidate an infringing patent.  While the inter partes review process maintains the safeguards found under the current reexamination process, it also limits your ability to pursue remedies in multiple venues at the same time.  Because of the intricacies involved in the new system, you should meet with your attorney before its implementation to devise a strategy that will allow you to capitalize on its advantages and avoid its pitfalls.

Conclusion

The new patent law involves a number of new and revised procedures that may be applicable to your patent or patent application once it has been filed.  These procedures are designed to resolve disputes faster and reduce the cost associated with enforcing your intellectual property rights.  You should work with your attorney to determine how these new procedures can be utilized to protect your interests in existing and future patents.

My final article will discuss issues under the new patent law related to defending the interest in your patent.  In doing so, I will discuss three important areas of the new law.  These areas include: 1) the prior use defense; 2) the best mode requirement; and 3) advice of counsel.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.

Patent Law Update: The America Invents Act – Part 2: Patent Applications Continued

Introduction

In the first article in the “Patent Law Update: America Invents Act” series (Article 1), I began my discussion of some of the changes to the patent law that will likely affect the timing of your patent applications.  In this second article, I will continue my discussion of the patent application process.  Here, I will cover three critical topics.  First, I will evaluate the new prioritized examination procedures and how they can be utilized to accelerate the process to receive your patent from the United States Patent and Trademark Office (“USPTO”).  Second, I will examine the revised micro entity status and explain how to qualify for its benefits.  Finally, I will discuss the changes to the inventor’s oath of declaration requirement on patent applications and what this may mean for your future applications.

Article 3

Article 4

Prioritized Examination

On September 26, 2011, the new prioritized examination procedures became law under the America Invents Act (“AIA”).  The new procedures are available for original utility or plant patent applications filed after this date.  Patent applications that have already been filed with the USPTO will not be eligible for prioritized examination.  Eligible patent applications may contain, or be amended to contain, no more than four independent claims or no more than thirty total claims.  The request for prioritized examination must be accompanied by a fee of $4,800 for large entities and $2,400 for small entities (defined below under Micro Entities).  This fee is in addition to the normal fees charged by the USPTO as part of the application process.

The goal of a prioritized examination is to resolve a patent application within twelve (12) months of its prioritized status being granted.  To accomplish this goal, applications that receive prioritized status will be placed on the patent examiner’s special docket until a final disposition has been issued to the patent applicant.  The USPTO considers a final disposition to be any of the following courses of action: 1) the mailing of a notice of allowance; 2) the mailing of a final office action; 3) the filing of a notice of appeal; 4) the completion of the patent examination; 5) the filing of a request for continued examination; or 6) the applicant’s abandonment of the application.  If the examination concludes or terminates prematurely as a result of one of these final dispositions, the application will be transferred to the examiner’s regular docket, and the applicant will not be entitled to a refund of the prioritized examination fee.  The USPTO is only permitted to accept 10,000 requests for prioritized examination in any given fiscal year.

The prioritized examination procedures may be an important resource for you to obtain a patent on your invention in an expedited fashion.  If you are interested in obtaining a prioritized examination of your patent application, you should contact your attorney as soon as possible.  If the USPTO has already met its 10,000 request quota and you would still like to utilize the prioritized procedures, you should work with your attorney to develop a strategy based on prior art, prior use and disclosures to protect your interests until the next cycle of prioritized examinations is available for prioritized filing.

Micro Entities

Currently, some inventors may be eligible to file their patent applications as a “micro entity”.  The new micro entity status under AIA provides a 75% discount on fees for certain applicants.  Under the old law, a 50% reduction in fees was available for small entities.  Micro entity status is offered to select individual inventors, small companies and institutions of higher learning.  In order to receive micro entity status, an applicant must file a statement with the USPTO certifying that it has met the appropriate criteria.  There are two ways to qualify for micro entity status with the USPTO.

For individual inventors or small companies, there are four main criteria to be a micro entity.  First, the applicant must qualify as a “small entity”.  A small entity is either a person, a small business having no more than 500 employees, a university or a non-profit organization.  In order to qualify as a small entity, the individual or entity cannot be under an obligation to assign or license the invention to an individual or entity that is not a “small entity”.  Second, the applicant must not have been listed as a named inventor in more than four (4) prior patent applications.  This limitation does not include provisional patent applications, foreign applications or applications owned by a previous employer.  Third, the applicant must have had a gross income in the previous year of less than three times the median household income reported by the Bureau of the Census.  Finally, if the intellectual property is assigned, the new owner must have had a gross income in the previous year of less than three times the median household income reported by the Bureau of the Census.

For individuals or entities that have a relationship with an institution of higher learning, an applicant must fall into one of two categories before micro entity status is granted: 1) either the majority of the applicant’s income must come from employment at the institution of higher learning; or 2) the applicant is under an obligation to assign ownership of the intellectual property to an institution of higher learning.

Micro entity status can help you realize tremendous savings on the cost of your patent applications.  It is worth evaluating your current status and relationships to determine if you are eligible to file your patent application as a micro entity.

Inventor’s Oath of Declaration

Under AIA, there are two substantive changes to the requirement that a patent application be accompanied by the inventor’s oath of declaration.  These changes become law on September 16, 2012.  First, under the current law, the patent application must be executed by the inventor in order to be considered by the USPTO.  Under the new law, a patent application may be filed without the participation of the inventor.  Instead, the owner of the rights to an invention may file the patent application.  AIA changed this rule to make it easier for companies to obtain patents on inventions where an inventor is either no longer available to participate in the application or unwilling to do so.

Second, under the current law, an inventor is required to certify a lack of deceptive intent when he or she seeks to either: 1) reissue a defective patent; or 2) retroactively obtain a license from the Commissioner of Patents for a patent inadvertently filed abroad before he or she was permitted to do so.  AIA will eliminate this requirement.

The changes to the inventor’s oath of declaration under AIA are important.  The removal of the inventor’s necessary participation in the application process will make it easier for companies to file patents for their inventions.  The removal of the certification of a lack of deceptive intent also plays a critical role.  Under the new law, companies will be insulated from claims of deception when they seek to correct errors in the application process.

The changes to the inventor’s oath of declaration in patent applications will likely play an important role in future patent applications.  However, your current employment contracts should be reviewed to ensure that your company is the proper owner of the intellectual property created by your employees.  Without a proper assignment designation, an inventor’s participation is likely still required after the new law comes into effect next Fall.

Conclusion

The changes to the patent law regarding prioritized examination, micro entities and an inventor’s oath of declaration may all play an important role in the filing of future patent applications.

My next article will discuss issues under the new patent law related to patent ownership, validity and conflicts.  In doing so, I will discuss four important areas of the new law.  These areas include: 1) derivation proceedings; 2) the role of 3rd party submissions of prior art; 3) supplemental examination procedures; and 4) post-grant review procedures.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.

 

Patent Law Update: The America Invents Act – Part 1: Patent Applications

Foreword

 On September 16, 2011, President Obama signed the Leahy-Smith America Invents Act (“AIA”).  AIA substantially overhauls the U.S. patent system and includes numerous changes to the current patent law.  This revision is the most comprehensive modification of U.S. patent law since the 1950’s.  It is designed to promote technological progress in the United States, simplify various procedures and harmonize our patent system with the best parts of other major patent systems throughout the world.  As such, AIA includes both minor and major changes to our current system.

I have prepared a series of articles designed to educate you about some of the most important changes made to the patent system by the AIA and illustrate how these changes may affect your intellectual property rights.  Although some of the changes will not become effective for some time, other changes currently affect your intellectual property interests.  It is important for you to begin to develop a strategic plan to address the changes in the patent law to ensure that you are prepared and protected.

Article 2

Article 3

Article 4

Introduction

The first article in the “Patent Law Update: America Invents Act” series focuses on changes to the patent law that will likely affect the timing of your patent applications.  Although these changes do not come into effect until March 16, 2013, it is important to start to evaluate these changes now because of the profound impact they will have on the current patent law.  This article will cover three critical topics.  First, I will examine the new first-to-file system and how the change to this system may affect your current and future patent applications.  Next, I will evaluate the changes to what will be considered “prior art” in determining the novelty and non-obviousness of a proposed invention.  Finally, I will discuss the role of pre-application disclosures under the new patent law.

The First-to-File System

Perhaps the most significant modification to the current U.S. patent law is the change from a first-to-invent system to a first-to-file system.  Under the current law, the right to a patent is determined based on which applicant was the first to create the invention at issue.  Inventors are permitted to submit signed and dated notes, prototypes, affidavits and other evidence to prove that he or she was the first to create a disputed invention.  Under the new system, this process will no longer be permitted.  Instead, the right to a patent will be determined based on which applicant is the first to file a patent application, regardless of who actually created the invention.

Any patent application with an actual or effective filing date prior to March 16, 2013 will be governed by the current, first-to-invent rules.  As such, you will continue to be able to support your right to an invention by demonstrating that you were the first to invent, if you file an application before this deadline.  If you do not believe that you will be ready to file your patent application before the March 16, 2013 deadline, it is important for you to develop a plan to ensure that your rights in your invention are protected.

The Scope of Prior Art

To qualify for a patent in the United States, an invention must be both novel and non-obvious.  Under the current law, there are numerous requirements that must be met for an invention to be considered novel.  Generally though, an invention will be considered novel if: 1) the applicant created it; 2) if it is not known or used by others in the United States; and 3) if it is not patented or described in a publication in the United States or a foreign country prior to the filing date of the application.  In order for an invention to be non-obvious, an ordinary person in the relevant industry must not have been able to conceive the new invention’s improvements over the original invention when the original invention was created.

In both instances, the United States Patent and Trademark Office (“USPTO”) will compare the proposed invention to “prior art” to determine if the invention is both novel and non-obvious.  Under the current law, prior art generally includes things that people have created and that become available to the public, such as patents, published patent applications, treatises, articles, advertisements, websites, designs, products and related materials.

Under the new law, the USPTO will continue to compare proposed inventions to prior art to determine if the invention is both novel and non-obvious.  However, there will be a number of changes from the current process.  First, prior art will only be measured against the filing date of the application and not the date of invention.  Second, AIA eliminates any distinctions between actions or events that take place inside or outside the United States to determine the novelty of the invention.  As such, prior art will include all art that publically exists prior to the filing date.  The impact of this change is significant given our ever-expanding global economy.  Finally, the new patent law adds a new category of prior art.  Prior art will include material “otherwise available to the public”.  After March 16, 2013, patent applications could be denied based on evidence of prior public use, sale or availability of the invention anywhere in the world.  As a result, it will be necessary to drastically widen the scope of prior art searches before filing a patent application or when defending against an accusation of infringement.

The Use of Disclosures

The current patent law has a one-year statutory bar on disclosures.  Here, an inventor is free to disclose anything related to his or her invention during the year proceeding the filing of a patent application.  Disclosures made during this one-year period do not affect the novelty of the invention when the application is filed.  Moreover, because the right to the patent is based on when the invention was created, public disclosures after the date of creation have little effect on an applicant’s patent rights, as long as the application is filed within the one-year window.

Under the new law, disclosures play a critical role.  In fact, the first-to-file system is really a first-to-disclose framework.  The new law will preserve the one-year statutory bar on disclosures.  However, after March 16, 2013, the decisive date in determining who has the right to a patent will be governed by either an inventor’s application filing date or an inventor’s earlier public disclosure, provided that the disclosing inventor files a patent application within a year of that disclosure.  Specifically, the new law provides that an applicable third party disclosure will not be considered prior art if: 1) the inventor had already disclosed the invention prior to the third party’s disclosure; or 2) the third party disclosure was derived from the inventor or a joint venture.  Therefore, an inventor will be able to preserve his or her priority to the right to a patent, before filing an application, by making a public disclosure.

Although the new use of public disclosures appears to allow an inventor to delay filing a patent application for an additional year, the decision to make a disclosure is not nearly as simple.  First, it is unclear how courts will interpret the newly created form of prior art, i.e. materials “otherwise available to the public”.  It is not likely that we will know how broad in scope this new form of prior art will be for some time.  The new law leaves an inventor to speculate over what types of disclosures will constitute making the invention available to the public.

Second, many countries do not have the pre-filing, one-year statutory bar on disclosures found in United States patent law.  To the contrary, most foreign countries have an absolute novelty rule that a pre-filing disclosure of an invention eliminates its patentability.  Therefore, while a pre-filing disclosure may preserve your intellectual property rights in the United States, it may extinguish your patent rights elsewhere in the world.

Third, public disclosures will alert your competitors to your research and development efforts.  If you are trying to be first to market with a new product or process, a public disclosure may not be in your best interest.  Although the disclosure will preserve the patentability of your invention in the United States, it does not prevent others from inventing their own take on the idea.  One only has to consider the proliferation of portable digital music players, smart phones and touch pads that have come to market since Apple introduced their innovative products.

Conclusion

Clearly, the changes to the current first-to-invent system, scope of prior art and use of disclosures will have a profound impact on when you file a patent application and the way you establish your rights to an invention.  Although these modifications do not come into effect until March 16, 2013, the consequences of these changes require advanced planning and consideration.

My next article will conclude my discussion of the changes to the patent application process by focusing on: 1) the new prioritized examination process; 2) the role of micro entities; and 3) the inventor’s oath of declaration.

© 2012 Michael P. James, J.D., M.B.A., CSSGB

Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at mjames@michaeljameslaw.com, (810) 936-4040 or www.michaeljameslaw.com.