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America Invents Act: A Summary of Revisions to US Patent Law

By Wendy Marsh

As you may be aware, the America Invents Act ("Act") was signed into law by President Obama on September 16, 2011.  This Act has created and will continue to create sweeping changes in U.S. patent laws.  We have prepared a summary below to inform you of some of the most significant provisions of this law.

First to File System

Arguably, the most significant change provided by the Act is to change the United States from a "first to invent" system to a "first to file" system, which is to take effect eighteen months after enactment, or on March 16, 2013.  This change will put the U.S. in closer alignment with the rest of the world in determining priority of invention, which will soon be based on the earliest date a patent application was filed with the U.S. Patent and Trademark Office (USPTO) rather than by determining the first person to conceive the invention.  The new law will not change existing law providing inventors with a limited one-year grace period in which to market and publicize their inventions prior to seeking patent protection.

In addition, the long-standing interference procedure that has previously been used to determine first-to-invent will be replaced with a "derivation hearing" that will be used instead to determine whether the inventor of a first-filed patent application derived the claimed subject matter of the invention without authorization from the inventor of a later-filed patent application.  Under these circumstances, the inventor of the later-filed application would be given the superior right to pursue patent protection on the invention at issue.

Post Grant Review

Twelve months following its enactment (being September 16, 2012), the Act provides a post-grant patent review procedure allowing third parties to challenge a patent on any ground.  The USPTO may grant review upon a showing that it is more likely than not that at least one of the challenged claims of the patent is invalid.  Once the nine-month window of post-grant review has passed, patents may only be challenged on the basis of prior patents or printed publications. 

New Scope of the Prior Art

The Act further expands the scope of "prior art" that may be considered when determining the patentability of an invention.  Specifically, the Act provides that the prior art that may be considered not only encompasses patents, printed publications, and inventions in public use or on sale, but also inventions "otherwise available to the public" prior to the effective filing date of the patent application.  This "otherwise available to the public" language literally expands the scope of the prior art to public uses and commercial activities, either by the inventor or third parties, whether they occur in the U.S. or anywhere else in the world.

Inter Partes Review

On September 16, 2012, the procedure which is currently known as inter partes reexamination practice will become known as "inter partes review".  Compared to the reexamination process, which requires a demonstration of a "substantial new question of patentability, " the new procedure will require the third party to make the more difficult showing that "there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition" in order to invoke the procedure.  The new procedure is also limited in that it cannot be initiated if the petitioner or real party in interest has already filed a civil action challenging the validity of the patent.  Further, while the ruling from a post-grant or inter partes review proceeding may be appealed by the petitioner, the petitioner and/or real party in interest will be estopped from asserting any ground for invalidity raised in the petition in a later filed civil action.  Thus, in essence, the new procedures will require potential patent challengers to choose between post-grant/inter partes patent review and civil litigation to challenge patent validity.

Prior User Defense

One of the provisions of the Act effective immediately is the provision granting prior users a defense against claims of patent infringement based upon their commercial use of any patented machine, process, manufacture, or composition of matter used in a manufacturing or other commercial process.  The defense may be invoked so long as this prior use occurred at least one year before the earlier of the effective filing date of the patent or the date upon which the invention was first disclosed to the public.  This expansion of prior user rights is tempered by the "University Exception," which prevents the use of the prior user defense against patents that, at the time the invention was made, were owned by or subject to an obligation of assignment to an institution of higher education.

Tax Strategy Exception for Business Method Patents

Effective immediately, people will no longer be able to patent inventions relating to avoiding or deferring tax liability.  The Act, however, does not ban patenting of all tax-related inventions.  Instead, applicants may still pursue patent protection on inventions relating to, for example, financial management or a method of preparing or filing a tax return.

Filing by Other than Inventor

A provision that also places the U.S. in closer alignment with the patent laws of the rest of the world is one that allows someone other than the inventor to file a patent application, namely a person or entity to whom or which the invention has been assigned or will be assigned.  If it issues, the patent is granted to this real party in interest rather than to the inventor.  This provision is intended to eliminate many of the previous obstacles associated with uncooperative or absent inventors by allowing the companies to which the inventors are obligated to assign their inventions to pursue the relevant patent protection.  This provision will take effect September 16, 2012. 

Virtual Marking and False Marking

In an attempt to modernize and simplify the patent marking procedure, it will now be sufficient for patent owners to mark their patented products by affixing to the product the internet address for a website that provides the status of patents covering the product.  The Act also amends the false patent marking statute such that it is no longer a violation for patent owners to have their products marked with a patent number that, though once legitimately covering the product, has since expired.  This amendment to the false patent marking statute is intended to curb the wave of lawsuits that have recently been filed by plaintiffs whose sole purpose has been to seek out entities having products marked with expired patent numbers and reap financial benefit from what is often a simple oversight.

Micro Entity Status

Parties that can qualify as "micro entities" under the Act will be entitled to a 75 percent reduction in patent fees effective immediately.  This provision is intended to spur filings by individual inventors and small businesses for whom patent protection may have otherwise been cost prohibitive.  However, the qualifying factors for micro entity status are quite onerous, and require the entity to not have been named as the inventor on more than four patent applications, not have a gross income exceeding three times that reported median household income (as reported by the Bureau of Census), and not to have assigned or agreed to assign the invention to an entity having a gross income exceeding three times the reported median household income.  This 75% fee reduction is also being made available to public and non-profit universities and other "institutes of higher education."

Fee Increases

Finally, and hardly surprising to anyone, the Act allowed the USPTO to apply a 15 percent surcharge to most of the fees collected by the USPTO, effective 10 days after enactment.

Conclusion

Enactment of the America Invents Act has been characterized as the greatest overhaul of patent law since amendments made to the patent laws in 1952.  The enactment is viewed by many in the patent community as a substantial step towards allowing the USPTO to retain the fees it has collected and use those towards hiring more examiners and thereby expedite the patent examination process.  The Act also brings the U.S. in closer harmony to the patent laws of foreign jurisdictions.  Others believe certain provisions of the Act and, specifically, the first-to-file provision, will place independent inventors and small businesses at a competitive disadvantage with large companies and corporations.  All can agree, however, that the American Invents Act significantly changes the manner in which parties will seek and obtain patent protection for their inventions. 



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