Understanding The Leahy-Smith America Invents Act

1. Understanding The Leahy-Smith America Invents Act Denise L. Loring Practising Law Institute November 14, 2011

2. Historical Overview

3. Historical Overview • June 8, 2005 –109th Congress began to consider patent reform • 110th and 111th Congresses followed suit, but no legislation was passed • January 25, 2011 – Senate introduced S. 23, the Patent Reform Act of 2011 (later renamed, the “America Invents Act”) • Main goals: • Improve the patent application process by adopting a first-to-file system • Improve the quality of patents issued by the USPTO by adopting broader post-grant review procedures • Increase certainty in litigation

4. Historical Overview • March 7, 2011 – FTC published The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition • Recognized: • Importance of innovation • Vital role of well-defined patents in promoting innovation • Harmful effect of “patent market” • Role of non-practicing entities (NPE’s) in increasing litigation • Two Main Foci: • Notice function of patents • Remedies for patent infringement 27989303

5. Historical Overview • FTC recommendations: 27989303

6. Historical Overview • March 8, 2011 – Senate passed S. 23 • June 23, 2011 – House of Representatives passed H.R. 1249, the “Leahy-Smith America Invents Act” • September 8, 2011 – Senate adopted H.R. 1249 without amendment • September 16, 2011 – President Obama signed the Act into law

7. Overview • First-inventor-to-file • Inventor declarations and non-inventor application filings • Validity and infringement defenses • Third-party intervention • Supplemental examination • Federal court jurisdiction • Impact on patent infringement litigation

8. First-Inventor-To-File

9. Section 102 – First-Inventor-to-File • 35 U.S.C. §102 wholly rewritten • Two classes of prior art: • Patents and published patent applications, and • all other public disclosures • Prior art inquiry now keyed to effective filing date, rather than date of invention • First to file, not first to invent

10. Section 102(a) – Novelty, Prior Art • Removes territoriality – no “in this country” restriction on prior art • Foreign applicants no longer need to rely upon a “section 102(e)” date – foreign priority dates treated on a par with U.S. filings

11. Section 102(b) – Grace Period • Provides two exceptions to prior art • One-year grace period for filing if inventor or assignee makes public disclosure • A company’s own applications are not prior art against its later applications • Applications filed pursuant to joint research agreements are not prior art against each other • Similar to current system, but protects only against inventor’s own disclosures or patent applications

12. Section 102(b) – Grace Period • Once an inventor discloses invention, that disclosure may be used as a shield against later disclosures and patent filings • Open question: do “public disclosures” encompass sales, public use? • Potential strategy: disclose early as a sword against others’ filings, a shield against others’ disclosures • But only if foreign rights are not important

13. Section 102(b) – Derivation • Also provides protection from earlier disclosures and patent filings if the information was obtained directly or indirectly from the actual inventors • Grace period only one year for public disclosures, but unlimited for patent filings

14. Section 102(d) – Prior Art Dates • Affirms that any priority date is the effective filing date of a U.S. patent or application cited as prior art • whether prior art is a provisional application, a utility application, or even a PCT or foreign patent application • Still requires adequate disclosure in the priority document

15. Section 102 – Timing • Provisions generally take effect 18 months after enactment • Applies to applications filed on or after effective date • Later-filed applications claiming priority to earlier applications are governed by first-to-invent system

16. Section 103 – Obviousness • Essentially unchanged, except that prior art status based on filing date instead of invention date

17. Section 135 – Derivation Proceedings in the PTO • A later applicant may assert that an earlier applicant derived the claimed invention and filed without authorization • Effectively replaces interference proceedings • Question now revolves around single act of invention, rather than competing acts of invention • Remedy is cancellation/refusal of derived claims

18. Section 135 – Derivation Proceedings • Timing: petition must be filed within one year of publication of a competitor’s application • Pays to monitor competitors’ applications early in the filing process

19. Section 291 – Derivation Actions • Similar provision for patent owners to sue in court, alleging that a third-party patent was derived from the inventors’ work • Must sue within a year of patent issuance

20. Inventor Declarations And Non-Inventor Application Filings

21. Section 115 – Inventor Declarations • Requires statement that inventor authorized filing • Companies may want to obtain blanket authorizations from potential inventors to avoid problems • All required statements can be included in assignment document – no need for separate declaration • Effective one year from date of enactment

22. Section 118 – Assignee Filing of Patent Applications • Non-inventors may apply for patents: • Persons to whom the inventor has assigned or is under an obligation to assign the invention • Persons who show “sufficient proprietary interest” in the subject matter “on behalf of and as agent for” the inventors • Patents granted to “real party in interest”, upon notice to inventor • Effective one year after date of enactment • Applies to any patent application filed on or after the effective date

23. Validity And Infringement Defenses

24. Section 282 – Best Mode • Best mode is no longer available as basis for invalidity or unenforceability of an issued patent • Obligation to disclose best mode in application remains • Effective upon date of enactment • Applies to all proceedings filed on or after enactment

25. Patent Marking • False patent marking greatly curtailed • Response to recent surge in qui tam litigation • No statutory damages for private litigants; can only obtain actual damages • Marking a product with expired patent number that once covered the product is not a violation • Virtual marking permitted • Marking may be achieved by posting patent information online • Effective upon date of enactment • Applies to any case pending or commenced on or after date of enactment

26. Section 273 – Prior User Rights • Defense to infringement if: • defendant had been commercially using a patented process, or machine, manufacture, or composition useful in that process, • at least one year before patentee’s effective filing date or earlier publication (i.e., grace period) • No longer just for business methods • Burden on prior user to prove use by clear and convincing evidence

27. Section 273 – Prior User Rights • Regulatory review periods and non-profit laboratory use count as commercial use • Defense is personal, and can be transferred only with transfer of entire enterprise or line of business protected by defense • Scope of defense is limited after transfer • Downstream purchasers of accused product protected by patent exhaustion

28. Section 298 – Willful Infringement • Failure to obtain advice of counsel with respect to an asserted patent does not create an inference of willful patent infringement • Codifies Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1336 (Fed. Cir. 2004) • Effective one year after date of enactment • Applies to any patent issued on or after the effective date

29. Third Party Intervention

30. Third Party Intervention • Preissuance submission • Post-grant review • Inter partes review • Post-grant submission

31. Section 122(e) – Preissuance Submission • Any person may submit patents and printed publications for review before the earlier of: • date of allowance; or • later of: • six months after the patent application publishes, or • first rejection of any claim • Effective one year after date of enactment

32. Sections 321-29 – Post-Grant Review • A third party may petition the USPTO to institute post-grant review of a patent • Petition must name real party in interest • Petitioner may request cancellation claims as unpatentable on virtually any ground: • E.g., prior art, written description, enablement, utility, or patentable subject matter • Heard by Patent Trial and Appeal Board

33. Sections 321-29 – Post-Grant Review • Petition must be filed within nine months of patent grant • Or within nine months of reissue, if claims were broadened • Review standard: • Petition, taken alone, would make it more likely than not that at least one claim is unpatentable; or • Petition raises novel or unsettled legal question that would be important to other patents or applications

34. Sections 321-29 – Post-Grant Review • Effective one year after date of enactment • Applies only to patents subject to first-to-file rules

35. Transitional Post-Grant Review for Business Method Patents • Special program creates eight-year period during which a person charged with infringement of a business method patent may file a petition for post-grant review • Applies to any business method patent, regardless of its filing date • Effective one year after date of enactment

36. Sections 311-15 – Inter partes Review • Challenges to validity based on patents or printed publications only • Replaces inter partes reexamination • Review standard • There is a reasonable likelihood that petitioner would prevail with respect to at least one claim • Heard by Patent Trial and Appeal Board (not examiner)

37. Sections 311-15 – Inter partes Review • Post-grant review and litigation affect availability of inter partes review • May not be filed before the deadline to file a post-grant review petition or during a post-grant review proceeding • Not available if petitioner previously filed a lawsuit challenging the validity of the patent • Not available if the petition is filed more than 12 months after the petitioner is sued for infringement of the patent

38. Sections 311-15 – Inter partes Review • Effective one year after date of enactment • In the interim, standard for instituting inter partes reexamination is changed to new, inter partes review standard • Applies to all existing patents, subject to timing restrictions

39. Post-Grant and Inter Partes Review • Common provisions • USPTO required to make final determination within one year, with six-month extension for good cause • Estoppels bar any defense that was or reasonably could have been raised during review • No review may be filed if petitioner files an action challenging patent validity • Any declaratory judgment action challenging validity filed after the petition is automatically stayed, unless patentee moves to lift the stay or files its own action

40. Section 301 – Post-Grant Submission • Any person may submit to USPTO at any time patents or printed publications believed relevant to patentability of any patent claim • Optional statement of relevance • Becomes part of official public file if it explains how the prior art is applicable to at least one patent claim • Optional request for confidentiality • Does not trigger any proceeding

41. Supplemental Examination

42. Section 257 – Supplemental Examination • New procedure for patentees • Patentees may request examination to consider, reconsider, or correct information relevant to patentability • USPTO must conduct examination within three months to determine whether substantial new question of patentability is raised • If so, reexamination is ordered • Newly disclosed information may not be used as a basis for asserting inequitable conduct

43. Section 257 – Supplemental Examination • Protection from inequitable conduct claim does not apply: • To allegations pleaded with particularity in litigation before examination request is filed • If patentee files patent infringement suit before supplemental examination is concluded • Effective one year after date of enactment • Can be applied retroactively to existing patents

44. Effective Dates of AIA Provisions

45. Federal Court Jurisdiction

46. Section 299 – Joinder of Parties • A patent owner may only join multiple defendants in one action if: • the right to relief arises out of the same events relating to the infringement;and • there are questions of fact common to all of the defendants • Effective upon date of enactment • Applies to any court action filed on or after enactment • Exception for ANDA litigation

47. Impact Of AIA On Patent Infringement Litigation

48. Impact on Patent Quality • Hasty filing of applications may result in inadequate disclosures • Adverse effects on small businesses and sole inventors • Burden on patent examiners to review more and greater variety prior art • Strain on USPTO resources resulting from new post-grant proceedings 27989303

49. Impact on Litigation – First-to-File • Expands prior art available to invalidate patent claims • Patentees may no longer antedate third party prior art before a patent’s effective filing date • Patents, printed publications, prior public use, prior sale or offer for sale • Public use and sales outside of the U.S. are now available as prior art • This could lead to increased litigation costs as defendants engage in third party discovery to prove up prior art

50. Impact on Litigation – Validity • Eliminates some invalidity defenses in litigation • Prior invention (old Section 102(g)) • Failure to disclose the best mode • False marking defense reserved for those suffering actual injury