America Invents Act – High tech Intellectual Property Legal Blog

Major changes coming to Patent Practice in March: First to File and New Fees

In just over a month and a half, mid-March, two big changes — First to File and the USPTO Fee Adjustment — will shape the future of patent prosecution practice. Oddly, the Patent Office scheduled the change in fees three days after the American Invents Act’s last phase comes into effect on March 16, 2013.

First to File is becoming the law of the land for patents. In addition to granting the patent to the “first inventor to file,” the new rules have a number of other effects.

For the purposes of which law to apply, any case that “ever contains a claim that has an effective filing date on or after March 16, 2013” will be evaluated under the new rules. This means that you should consider very carefully the scope of your claims if you are converting a provisional application which was filed prior to March 16, 2013.

Some of the more important other effects include the expansion of the definition of prior art, to encompass foreign art.

Also, barring actions, such as sales, will also include foreign activity.

It is not clear whether the one year grace period, which does remain for the inventor’s own actions, applies to anything that does not include a “disclosure” of the invention. For example, would a sale or offer for sale that is private be barring? It appears from the language of the act that it would be, since the conditions which would block a patent include the claimed invention being “on sale,” while the exception is only for “disclosures.” The Patent Office has stated that they interpret disclosure as a generic term intended to encompass the documents and activities enumerated in AIA 35 U.S.C. 102(a).”

Furthermore, the Patent Office’s interpretation of the exceptions under 35 USC 102(b)(1)(B) are limited to “identical subject matter disclosed by the third party.” Thus, while nominally the grace period remains, it is only applicable for the inventor’s precise disclosure, and reprints of the same. For example, imagine an inventor that posted an article about their invention in a blog post, prior to filing the application. A blogger posted a link to the article and added an aspect that was not disclosed (e.g. “This could be implemented in way XYZ”). The Patent Office makes very clear that this aspect, e.g. the implementation detail added by the non-inventor blogger would be barred from being claimed as novel, even if the inventor had it in mind but did not include it in the article. Furthermore, potentially the entire disclosure could be removed from the grace period.

In addition to the First to File rules, starting March 16, 2013 (Saturday), the new fees will start on March 19, 2013 (Tuesday).

The new fees will increase second and subsequent RCE fees by $770, to $1700, and will increase the fee for the first RCE by $270 to $1200. The filing fee for a utility patent will also be increased to a total of $1600, while excess claim fees will be increased to $420/$80. National stage entry fees will also be increased, but only by $340, to $1480.

On a practical note, this appears to mean that if the client wishes to file in the PCT, it would be more cost effective to file directly in the PCT, and enter the US through the national phase. It also appears that it may be worthwhile to file a continuation, rather than a second or later RCE, especially given the recent change in priority handling of RCEs.

Impact of USPTO Proposed Fee Increases

The USPTO’s published fee increase proposal is going to have an impact on every patent department in every company. You can find the Patent Office’s discussion and a PDF with the fee increases on the AIA microsite. While some fees are untouched, and a few are even reduced, many fees are significantly increased.

Some of the major fee increases:

Many fees are increased by a small amount, those are not listed in the above table. The only noticeable fee reduction is for issue fees. If an application is publishes, the issue fee will be reduced by 50% compared to an issue fee for a non-published application. While publication will still cost $300, the savings of $1,080 on the issue fee is not insignificant. However, this change is not scheduled to start until January 1, 2014, almost a full year after the new fee increases become effective.

The increases in the filing fees, RCEs, and maintenance fees are going to have a large impact on patent budgets. If you budget for prosecution and maintenance fees separately, and I recommend you do, increase your estimates for both, starting in February of 2013. Since many companies set their budgets annually, make sure your next budget cycle includes the likely increases in patent costs.

For prosecution costs, if you work with an outside firm most of the cost is attorney fees. I would estimate that this fee increase will lead to an increase of overall costs by approximately 15% across the board. Of course, if you are handling prosecution in-house, you should be increasing your budget for PTO fees by at least 60%, given the inflation of filing, RCE, and appeals fees.

More significantly, you will need to increase your budget for maintenance fees. If your portfolio is evenly distributed in terms of status, then you should increase your overall maintenance fee budget by ~50%. If your portfolio is younger, with most of your issued patents at the first or second maintenance fee stage, increase your maintenance fee budget by ~35%. If your portfolio is older, more heavily weighted toward patents in their final maintenance fee stage, you will need to increase your budget by 60%. For an evenly distributed portfolio of 100 issued patents, the additional cost would be ~$45,500, raising the annual maintenance fee budget from ~$96,700 to ~$142,200.

While the Patent Office has not finalized these fees, I attended the public hearing and there appeared to be little interest in discussing changing these fees, or acknowledging their likely impact on innovation.

America Invents Act: Summary of Sections & Effective Times

The America Invents Act is going to be changing many aspects of patent prosecution and litigation. I have divided it into four segments, patent strategy, patent prosecution, post-issue owner’s rights, and post-issue third party rights. Each change to the patent law will impact one or more areas.

These changes have been partially implemented, in September of last year. Another large group of changes will be coming in September of this year. The fee changes proposed by the Patent Office, which appear to be non-negotiable despite the many hearings held, are going to be implemented in February of next year. I will make a longer post about the fee changes, and their impact later. And finally, in March of 2013, the First to File or Disclose rules, and the associated other rules, will be coming into play. As you can see, the September 2012 changes will mostly impact third parties, starting the post-grant opposition, and other changes.

This graph is a summary of the changes, their timing and the segments which they primarily impact.

Do the new Derivation Rules published by the Patent Office include a Catch-22?

The Patent Office has published the new rules for instituting a claim of derivation. Derivation proceedings were part of the shift to First to File, which allows someone who can prove that the first filer stole their idea to obtain the patent, even though they were not first to file. It effectively replaces interferences, but requires not just first invention, but actual demonstration of theft.

The basics are that the petition must state with peculiarity the basis for the charge of derivation, must be filed under oath, and must be supported by substantial evidence. However, the new rules appear to have a built-in Catch-22 with respect to publication.

The petition must be “filed within one year of the first publication by the earlier applicant of a claim to the same or substantially the same invention.” However, “derivation is unlikely to be declared even where the Director thinks the standard for instituting a derivation proceeding is met if the petitioner’s claim is not otherwise in condition for allowance.”

The requirement that inventors monitor the Patent Office publications closely is difficult, especially when the published claims may not reflect the (derived) later claims. But more importantly, the timing can be impossible.

The senior applicant (e.g. the one accused of derivation) may request an early publication. Currently accelerated publication ensures that a patent application is published as early as possible, and generally 14 weeks after receipt of the request.

This could mean that a junior applicant’s case may not even be filed, much less examined, even under the 18 month first action standard, before the petition to initiate the derivation proceeding has its deadline. Even if the junior applicant files shortly after the senior applicant, with accelerated publication it’s unlikely that the junior applicant’s case would be in condition for allowance by the time the one year deadline rolls around.

Am I missing something?

Legal Challenge to End of False Marking Claims in America Invents Act

The first challenge to the America Invents Act is against the termination of the private right to enforce false marking. The end to false marking, providing that the only private litigants with a claim are competitors who can show actual harm, became effective immediately after President Obama signed the America Invents Act. It applied to all cases, including those pending. Since then, numerous cases have been dismissed, including some sua sponte.

Ken Brooks had a pending case against Dunlop Manufacturing, in the Northern District of California, San Francisco for false marking, filed back in 2010. In response to Dunlop’s Motion to Dismiss, under the new America Invents Act rules, Mr. Brooks brings a constitutional challenge to the AIA. In his memorandum Mr. Brooks states that he relied upon the statutory right which existed prior to the passage of the AIA, and that this destroyed an existing property interest. He cites to U.S. ex re. Stevens v. State of Vermont Agency of Natural Resources (162 F.3d 195, 2nd Circuit 1998) which held that qui tam plaintiffs have a private property interest in the outcome of such cases.

While the brief is written rather flamboyantly, and likely to appeal to lay readers not the judge, the point is interesting. Mr. Brooks did in fact invest some amount of money in pursuing this case, in the clear expectation of recovery, if he could prove a violation of the false marking act.

Of course, the Supreme Court held unanimously in the United States v. Carlton that retroactive tax laws were constitutional, thus making it unlikely that Brooks would succeed in his claim.

Furthermore, there are at least two cases that held that qui tam actions for false marking are unconstitutional, prior to the passage of the America Invents Act. This may mean that the court would find the act a mere clarification of an existing standard.

The more interesting question is whether, if any challenge is successful, the entire statute would be thrown out, since the America Invents Act does not include a severability clause.

Via Greg Aharonian‘s eponymous newsletter.

Timing of Changes due to Leahy-Smith America Invents Act

This is a handy table of timings and applicability of the various changes in the Act.

Item

Date of Change and Applicability

Fee Surcharge (15%)

September 26, 2011

For all fees paid after this date

First to File

March 16, 2013

For all patent applications having an effective filing date on or after this date

Prioritized Examinations

September 26, 2011

Applications filed after this date, upon payment of fees, or request based on economy/competitiveness regulations

Public use/on sale bar

international

March 16, 2013

For all patent applications having an effective filing date on or after this date

Derivation Proceedings

March 16, 2013

For all patent applications having an effective filing date on or after this date

Submission Of Art and

Argument by Third Party

September 16, 2012

For all patents, then pending, or later filed

Assignee May File Patent

without inventor signature

September 16, 2012

All patent applications filed on or after this date.

Elimination of Tax Strategy & Human Organism patents

September 16, 2011

Applies to all patents pending on, filed on, or filed after this date.

Prior Commercial Use Defense

September 16, 2011

Applies to all patents issued on or after this date

Post Grant Review for Business Method Patents

September 16, 2012

Applies to all patents, regardless of issue date.

Post Grant Review

September 16, 2012

Applies to all patents issued less than nine months before, on, or after this date.

Inter Partes Review

September 16, 2012

Applies to all requests for inter partes reexam filed after this date.

Supplemental Examination

September 16, 2012

Applies to any patent issued before, on, or after this date

Elimination of Best Mode In Litigation

September 16, 2011

For any proceeding commenced on or after this date.

Restriction of Joinder and Venue

September 16, 2011

For any proceeding commenced on or after this date.

Virtual Marking and restriction of

Marking cases

September 16, 2011

For any proceeding pending on, or commenced on or after this date.

Some Scenarios Exploring First to File or Disclose

I’m trying to figure out corner cases under the new America Invents Act rules. In most cases, people won’t be directly affected by the rule change, but I can see the below four scenarios coming up.

• Scenario #1: Inventor A invents and immediately discloses (by publishing in obscure journal). Inventor B invents, and files a patent application, but does not disclose. Inventor A files a patent application, after Inventor B. Who if anyone gets a patent?
• Scenario #2: If Inventor A and Inventor B both disclose at the same conference. Both then file a patent, Inventor A files before Inventor B. Who if anyone gets a patent?
• Scenario #3: Inventor A discloses X. Inventor B files a patent for X+Y. Subsequently, Inventor A files a patent for X+Y. Who, if anyone, gets a patent, on X, Y, and X+Y.
• Scenario #4: Inventor A has a non-enabling disclosure. A third party C publishes an enabling disclosure. Inventor B files a patent on the invention. Subsequently, Inventor A files a patent. (Timing is A disclosure, C publication, B filing, A filing). Who, if anyone, can get a patent?

Timing of Enactment of New Rules in America Invents Act

I’ve pulled together a list of each change, and categorized it in terms of timing. I highlighted those items that will likely change the way we practice.

Effective immediately

Prior commercial use defense (any patent issued on or after date of enactment)
Venue moved to District Court for Eastern District of Virginia
Funding agreements of government with non-profit organizations
Tax strategies are part of the prior art (all patents issued after the effective date)
Best mode may not be the basis for canceling or holding invalid a patent (all proceedings commenced on or after date)
Marking statutory damages only available to US, actual damages suits available to competitors. (to all cases, including those pending)
Joinder: Restriction of joint litigation only if it’s the same product (all civil actions commenced after date)
Prohibition against human organism patents (for all pending or later filed applications)
+1 day for extension of patent term (Wilmer-Hale Act, for applications for extension of time pending, filed after, or subject to judicial review)
Inter partes review update (applicable to all patents, regardless of filing date)

Effective one year from the enactment

Post-grant review (applies to all patents, regardless of filing date)
Pre-issuance submissions to the patent office (applies to all patent applications)
Supplemental Examination (applies to all patents)
Lack of Advice of Counsel cannot be used to prove willfulness
Business Method patents available for post-grant review (valid for 8 years only)

Effective 18 months from the enactment

First inventor to file
Change in grace period (requires inventor disclosure)
Inventor’s oath and declaration changes, changes allowing entity having sufficient proprietary interest to file without inventor
Derivation proceedings
Repeal of statutory invention registration

If you see any mistakes, or items missing, please let me know so I can correct it.

America Invents Act (HR 1269) has been passed by the Senate with no changes

The act now goes to the President, who has said he will sign it. Some of the changes of the law will go into effect immediately, while some will be delayed by up to 18 months after the President signs it into law. I will be posting a detailed analysis of the law, and what changes will be effective now, and later.

You can find the final version of the law, as passed by the Senate at Thomas.gov.

The Implementation of the new Patent Rules

David Kappos, Director of the USPTO recently participated in an hour and a half of Q&A with Eileen McDermott of Managing IP (webcast available here) , discussing how implementing the new patent rules will change Patent Office practice.

He was overall quite positive about the changes. Below I summarize some the aspects of his comments that I thought were particularly relevant. My comments are in italics.

Continue reading “The Implementation of the new Patent Rules”