First to File: Trading a Small Problem for a Host of Big Ones

The America Invents Act (S. 23 & H.R. 1249), previously called the Patent Reform Act of 2011, has gotten further than other recent attempts at amending the current patent laws. The Senate passed the bill on March 8, 2011, by a vote of 95–5. The equivalent Act was passed by the House Judiciary Committee on April 14, 2011, by a vote of 32-3. It is going to be raised before the House in this session.

One of the major changes introduced by the America Invents Act is the switch to “first to file” from “first to invent.” The first person to file a patent application will be entitled to the patent. An earlier inventor, who delays too long, will not be able to have any rights to their invention. The rest of the world has had a first to invent system, and this change is in part to harmonize U.S. law with international law.

Why was this Law Passed

The primary problem that is addressed by changing to first to file is the issue of interferences. Interferences are procedures in which “first to invent” conflicts are resolved. The Board of Appeals publishes interference statistics, and in 2010, a total of 52 interference cases were filed, in 2009 it was 55, in 2008 it was 66, in 2007 it was 59. (http://www.uspto.gov/ip/boards/bpai/stats/process/fy2011_mar_b.jsp). Compare this with a total number of patent infringement cases of 2,896 in 2008, a rate which is increasing at 5.6% per year.

Unfortunately, the proposed solution of changing to First to File has a number of very serious problems, for inventors as well as for attorneys. These problems are likely to include a change of incentives, a cost and timing, a significant malpractice exposure, and an increase in litigation expenses. Solving the problem of interferences by switching to First to File is swatting a mosquito with a howitzer.

What are the Disadvantages

The first to file system will alter incentives and significantly skew the system. Because there is requirement to file early, and the best mode requirement is effectively removed, incomplete early filings are heavily advantaged over later, more complete filings. Filing the patent application before testing the product, and certainly before determining whether the invention has value in the market place, is required. While this is not a significant burden for a larger company it can be a problem for smaller start-ups or individual inventors. Many useful contacts, including venture capitalists and prototype makers, do not sign non-disclosure agreements. Without a grace period, and with the risk that someone could file first, the inventors should file prior to approaching VCs for funding, or proto-typers for making their invention. In biotechnology, the incentives are even more skewed, since it usually takes clinical testing to know the value of a potential invention.

Given that only the first to file receives a patent, there will be a strong incentive to file early and often. It is likely that companies that can afford it would switch to a system like the one in Japan, where many short and incomplete provisionals are be filed, to preserve priority and set a date, and then these provisional filings are combined in one large utility filing. Right now, 18% of cases filed claim priority to provisional applications. (http://www.patentlyo.com/patent/2009/07/priority-claims-in-issued-patents.html)

From the inventor perspective, there is a significant increased cost in having to file multiple provisional filings, to preserve rights. Even if the attorney spends less time preparing and filing a provisional application, it will increase costs significantly. Keep in mind that in order to get that initial date, the provisional filing must have a detailed enough disclosure to enable the claims.

From the attorney’s perspective, there will be an increased exposure to malpractice. It will be a potential malpractice suit if it takes an attorney three weeks to file a patent application, and the inventor is beaten out by two weeks, or if the attorney files fast but the patent application is not sufficiently definite, or fails to enable, or if the attorney files fast, but during litigation the filing date isn’t provided to the final utility application because the provisional did not include all the features in the claims. I’m not sure there is a way around this risk. To minimize it, though, getting the client’s informed consent up front about the length of time it will take to file the patent application is going to be necessary.

As to the increase in litigation expenses, while the risk of interference as such will be eliminated, the necessity to find support in the original provisional filing for claims will be magnified. Imagine a scenario in which a first inventor files three provisional applications over six months, and then a final utility application within a year of the first provisional filing. A second inventor files a utility filing at the six month date, well after the initial provisional filing, but prior to the utility filing. Who has priority? The tentative answer is that the first inventor would have priority, since her filing date is earlier. But what if those original provisional filings do not provide enablement for the claims? Then, one would suppose, the second inventor would receive the patent. Potentially, the patent rights would be split between inventors, based on exactly what is in each filing. While there have been less than 70 interference filings per year over the last decade, the issue of proving priority based on provisional application’s disclosure comes up much more often. Overall, I expect litigation costs to increase, as a result of the law.

Saving Grace

If you agree that this change would harm American inventors, and would likely cause problems, contact your House of Representatives member, and urge them to vote against the America Invents Act. You can find your representative here: whoismyrepresentative.com/
And keep in mind that even in the case that the America Invents Act is passed, it would likely not become law immediately. There are a number of groups who are likely to challenge it in court. The most interesting criticism is that it violates the underlying authorization by the Constitution, which addresses “inventors” to whom the exclusive Right to their Discoveries is granted, since the inventor is the first to to think of or make something, not the first to file a patent application on something. Nevertheless, it’s worthwhile to keep in mind the disadvantages of a first to file system.

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