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Major Reform of US Patent Law: The Leahy-Smith America Invents Act

September 19, 2011

© 2011 Bereskin & Parr LLP

President Obama has now signed into law the America Invents Act (AIA) – the largest reform of U.S. patent law in over half a century. The legislation was passed by wide margins in both the House of Representatives and the Senate, reflecting the very broad bi-partisan support for long overdue reforms. The reforms can be characterized in four major groupings:

  1. “First-to-file” replaces “First-to-invent”
  2. Improving patent quality: Making corrections and getting rid of bad patents
  3. Improving fairness: Ending abusive practices
  4. Changes to USPTO fees and funding, including a 15% surcharge

The AIA also contains a number of other miscellaneous provisions.

1. “First-to-file” Replaces “First-to-invent”

The United States is the last industrial country to adopt “First-to-file” (Canada did so on October 1, 1989). In a first-to-file system, the first inventor to submit an application for an invention to the patent office has the right to claim that invention. Subsequent applicants, even though they may have invented the same invention slightly earlier, are too late. Under the former “first-to-invent” system there was an uncertain, expensive, and time consuming process (“Interference Proceedings”) to determine amongst competing inventors which one had invented first, and was therefore entitled to claim the invention. A first-to-file system is intended to eliminate this process and replaces it with public notice of an inventor’s priority filing date and serial number: easily verified, objective, public information printed on the face of the document.

The law retains a one-year grace period for an inventor’s public disclosure prior to the first filing, so that an inventor’s own disclosures in the grace period will not be prior art that will prevent a patent from issuing. The term, “effective filing date,” is now statutorily defined as meaning the date on which the inventor first filed an application for the invention in the US or elsewhere. A peculiar feature of the new US law is that independent disclosure by third parties in the one-year grace period after the inventor’s own disclosure but before the effective filing date, will not prevent the inventor from obtaining a patent. In Canada, independent disclosure of the same invention by an unrelated third party any time before the claim date would end the inventor’s opportunity to file.

Under the previous law, “public use, sale or an offer for sale” and making the invention “known or used by others” were only relevant to patentability, or as a basis for establishing prior invention, if the activity occurred “in this country”, meaning the US. Under the new law, other than the inventor’s own disclosures, patenting, description in a printed publication, public use, putting on sale, or otherwise making the claimed invention available to the public before the effective filing date anywhere in the world will bar the grant of a patent. Formerly, a public use, sale or offer for sale, outside the US (e.g., in Canada) more than a year before filing might not have prevented an applicant from seeking a US patent.

For all applicants, American or otherwise, the grace period under the AIA and the one-year international priority period permitted under US law or treaty, are additive. By contrast, in Canada, an inventor is entitled to either the one-year grace period or the one-year international priority period whichever expires first. That is, a US (or other) applicant who has publicly disclosed the invention anywhere, must file in Canada within one year of that disclosure in all circumstances. There is no additional year permitted based on a first filing, such as a US provisional application. In the great majority of countries there is no grace period: any public disclosure before filing counts as prior art.

The details can be quite subtle – and unexpected. For example, it is apparently possible for applications filed after March 16, 2013 on the priority of earlier filed cases to have some claims that could be governed by first-to-invent, and other claims entitled to be governed by first-to-file. Since filing of the pertinent claims may by itself amount to a de facto, irrevocable, election, applicants desiring to rely upon first-to-invent may wish to be careful.

To combat feared misappropriation of inventions in the grace year, the newly-named Patent Trial and Appeal Board (PTAB, formerly the Board of Patent Appeals and Interferences) has the duty to determine who disclosed what to whom first in “Derivation Proceedings.”

In summary, the date of first disclosure – a date prior to the effective filing date – may determine both entitlement to apply for patents, and applicability of prior art, and may therefore have an importance in some ways similar to the former importance of inventorship and date of invention. It is unclear whether disputes over “first-to-disclose” may then yield similar evidentiary problems to those of the former interference proceedings, or whether this potential importance may cause increasingly prompt and frequent filings of provisional applications as a way to reduce exposure to uncertainty. The first-to-file provisions come into effect on March 16, 2013.

2. Improving Patent Quality: Making Corrections and Getting Rid of Bad Patents

The AIA includes many changes directed toward improving the quality of patents and toward permitting third parties to challenge the validity of their competitors’ claims much more quickly and easily, with the benefit of the better technical expertise of the USPTO (as opposed to non-specialist courts) at considerably less expense than through litigation.

(a) Right to Expedite Examination, and to Obtain Supplemental Examination

The law also provides a new mechanism for prioritized examination at the request of the applicant. Further, in addition to existing examination procedures, there will be new opportunities for patent owners to have corrections made in their patents through supplemental examination if new information comes to light. A patent owner will continue to have the same opportunities as before to seek re-examination or re-issue of a patent.

(b) Third Party Right to Submit and Explain Relevant Prior Art

The AIA includes significantly improved ways for third parties to submit relevant information to the USPTO during prosecution of a competitor’s applications, or to submit that information after the competitor’s patent has issued. In either case the third party may explain how the additional information pertains to the claims. The Director of the USPTO may institute re-examination of any patent if the Director considers that there is a “substantial new question of patentability” raised.

(c) New Ways for Challenging Patent Claims After Grant

The formerly problematic Inter Partes Re-examination (i.e., re-examination where both the patent owner and a third party challenger had opportunities to make written submissions, and even then only on the basis of patents and other printed publications) is replaced by two new procedures.

First, Post Grant Review may be initiated by any third party and is applicable within nine months of grant. It permits a challenge to issued claims on a wide variety of bases. Second, Inter Partes Review may be initiated by any third party after the expiry of the period for Post Grant Review. Inter Partes Review may only be requested on the basis of patents, printed publications, and submissions of the patent owner before the USPTO or Federal Court. Both types of review will be by the PTAB not the examining corps, as under previous Inter Partes Re-examination.

In either case respective higher threshold standards will apply: that it is more likely than not that at least one challenged claim is unpatentable or that there is a reasonable likelihood that the petitioner would prevail. There is no presumption of validity. The burden of proof is the preponderance of evidence. There are to be rights of reply, right to an oral hearing, rights to stays of co-pending civil litigation, and rights of appeal to all parties. Both procedures are subject to explicit, short, time limitations to yield an outcome within, at most, eighteen months.

Many of these changes greatly improve a third party’s opportunity to participate and to make sure that its arguments are fully and properly considered. The ability of a third party to obtain a stay of civil proceedings by a non-specialist court while the issues are being considered by a body of specialist technical expertise (i.e., the USPTO) is new and important. The ability of the third party to appeal the decision also overcomes one of the major disincentives of the old Inter Partes Re-examination procedure.

(d) Other Provisions

Finally, the AIA includes a controversial provision that would deem tax planning strategies to be obvious, and authorizes continuation of a pilot programme that reviews the patentability of the claims of business method patents.

3. Improving Fairness: Ending Abusive Practices

(a) During Prosecution

(i) Filing by Non-inventors Facilitated

The AIA aids patent owners in filing and prosecuting patent applications where an inventor under an obligation to assign is either unavailable or unwilling to co-operate. The AIA facilitates the filing of applications based on groups of inventors, and provides better protection against the possibility that parts of their own work may be cited as prior art against their pending claims.

(ii) “Micro entity” Filings

A definition of “micro entity” has been introduced to permit an even greater reduction in fees than for “small entities”. The definition is very complicated, and may hold great potential to give rise to an allegation that the status was improperly claimed. A similar provision in Canadian law proved problematic, and eventually required legislative amendment.

(b) Post-Grant

(i) Elimination of Abused Technical Grounds for Unenforceability

Many old, much-abused grounds for holding claims unenforceable were removed. These include the requirement for a description of the best mode of practicing the invention (still required for grant, but no longer a ground of unenforceability); the requirement for an independent opinion to avoid claims for punitive damages; and several sections of the old law pertaining to intention that were formerly used for dubious, vexatious, and frequently meritless allegations of inequitable conduct.

(ii) Marking Made Easier and Safer

The current law was amended to permit virtual patent marking to be implemented on the Internet, and also to end abusive and opportunistic third party enforcement of the false marking provisions.

(iii) New Prior User Defence

A new prior user defence, particular to prior use by the defendant, is provided in the context of infringement. It requires the defendant to show that it carried out the activity of which the patent owner complains more than one year prior to the effective claim date, whether or not that activity was made public. This defence already exists in other countries.

(iv) Curtailment of Litigation Conduct

New provisions have been added to prohibit poorly pleaded, general allegations against a multitude of defendants in a single action. A related provision requires the naming of all plaintiffs having an actual interest in litigation. The object is to discourage the filing of infringement actions against a host of defendants in a manner designed perhaps less to vindicate patent rights than to extract settlements from defendants. An example is those in the pharmaceutical and communications industries, who might prefer the certainty of settlement to the costs and risks of patent litigation, without regard to substantive merit. These amendments mesh well with recent Federal Circuit case law that requires allegation of inequitable conduct be pleaded with particularity, and that the evidence meet the traditional standards of fraud.

4. Changes to USPTO Fees and Funding: 15% Surcharge

The USPTO generates a surplus in fees, that surplus being diverted to Congress. At the same time the USPTO has the largest backload of work in its history. The USPTO has long requested more funds to hire and train examiners, and thereby to raise quality and reduce delay times. There were strong, though ultimately unsuccessful, efforts to end fee diversion entirely.

Instead the USPTO is being allowed to charge a “temporary” 15% fee charge on almost all standard fees, and the Director is being given the power to adjust fees. The 15% surcharge will become effective on September 26, 2011.

Further, since electronic filing is more efficient, there will be a $ 400 penalty for applications that are not electronically filed.

The America Invents Act may not be the end of the USPTO fee diversion issue.

Miscellaneous Provisions

(a) Four satellite offices are to be created. The first USPTO regional office is to be in Detroit.

(b) Statutory Invention Registration has been repealed. The provision was little used, and was largely obsolete in view of routine publication of applications.

(c) Establishment of a “Patent Ombudsman Program” for small business concerns.

(d) Establishment of studies related to various patent issues.

(e) An amendment to prohibit the patenting of claims directed to or encompassing a human organism.

Endnotes

1. First-to-File – Main Statutory Provisions:

- 35 USC 102(a) – Implements First-to-File
- 35 USC 100(i) – US “Effective Filing Date” = Canada “Claim Date”
- 35 USC 102(b) – Absolute one year grace period
- 35 USC 115 – Changes to Oath or Declaration
- 35 USC 135 and 35 USC 291 – Derivation Procedure replaces Interference
- 35 USC 6 and 35 USC 134 – Board of Patent Appeals and Interferences (BPAI) replaced by Patent Trial and Appeal Board (PTAB)
- 35 USC 103 – Obviousness test amended to conform to first-to-file

2. Improving Quality – Main Statutory Provisions

- 35 USC 2(b)(2)(G) – Right to obtain prioritized examination A.I. Act s. 11(h) - $ 4800 large entity; limit 30 claims, 4 independent
- 35 USC 257 – Supplemental Examination at Request of Patentee
- 35 USC 122 – Third Party Submission of Prior Art – Pending Applications
- 35 USC 301 – Third Party Submission of Prior Art – Granted Patents
- 35 USC 302 – Retains ex parte re-examination by patentee or any other person
- 35 USC 303 – Right of re-examination initiated by Director, on “substantial new question of patentability”.
- 35 USC Ch. 31 – Inter Partes Review replaces Inter Partes Re-examination
35 USC 311(c)(1) – By third party, no earlier than 9 months after grant
35 USC 311(c)(2) – Not before end of 35 USC 32 post grant review
35 USC 311(b) – Anticipation or Obviousness, on basis of patents and printed publications only
- 35 USC Ch. 32 - Post Grant Review
35 USC 321(c) – By third party; within 9 months of issue
35 USC 321(b) – Any statutory ground of invalidity under 35 USC 101, 102, 103, 112

3. Improving Fairness – Main Statutory Provisions

(a) 35 USC 118 – Filing by Other than an Inventor
- A person to whom inventor has obligation to assign
- A person who otherwise shows “sufficient proprietary interest”
- 35 USC 115 (d) – Substitute Statement - Alternate to Oath or Declaration
- Addresses problem of recalcitrant former employees
- 35 USC 115(d)(3) – Form and content of substitute statement

(b) 35 USC 102(c) – Filing By Non-Inventors, co-inventors, and parties to a “joint research agreement”: related work is less likely to self-conflict.
- Use of “Joint Research Agreements” under 35 USC 102(c) for commonly owned applications.
- 35 USC 100(f)(g)(h) Inventor definition --- includes inventors, co-inventors, joint inventors, and people working under a joint research agreement.

(c) 35 USC 123 – Micro Entity Defined

(d) 35 USC 282(3) – Removal of lack of best mode as ground for unenforceability

(e) 35 USC 289 – Lack of Attorney opinion not to be used as a basis for enhanced damages for wilful infringement or intentional inducement of infringement

(f) 35 USC – Several Places - Removal of “without deceptive intention” from
- 35 USC 116 – Joint Inventions
- 35 USC 184 – Filing in Foreign Country
- 35 USC 185 – Foreign Filing License
- 35 USC 251 – Re-Issue
- 35 USC 253 – Disclaimer
- 35 USC 256 – Correction of Named Inventors
- 35 USC 115((h)(3) – Saving clause for substitute to oath or declaration

(g) 35 USC 287(a) – Amendment to allow virtual marking on internet sales sites

(h) 35 USC 292(a) – Elimination of false marking enforcement by third parties
(1) only the US Gov’t can sue for civil penalty;
(2) Only a person who has suffered commercial injury can sue for damages.

(i) 35 USC 273 – Enhancement of prior commercial use defense to infringement for activities by defendant more than one year prior to effective filing date.
- Non-transferable right; not grounds for invalidation of claims
- Includes work done in preparing submissions to gov’t bodies

(j) 35 USC 299 – Joinder requires pleadings of common specific facts of infringement against all infringers. No more omnibus allegations that all defendants infringe patent X.

(k) 35 USC 282(A) - Change requiring naming of all Plaintiff parties in interest.

(l) AIA: - s. 14 – Tax Strategies
AIA: - s. 18 – Transitional program re: Validity of business method patents

4. Changes in Fees and Fee Powers – Main Statutory Provisions

- A.I. Act s. 11(i) – 15% surcharge to apply to most regular PTO Fees
- 35 USC 123(h) – $ 400 surcharge if electronic filing not used
- 35 USC 41(a)(1)(a); 35 USC 41(h)(3); 75% reduction in fee for micro entity - effective immediately 35 USC 41(i).

5. Miscellaneous Provisions

- AIA: - s. 23, 24 – Satellite Offices; Creation of Detroit Office
- 35 USC 157 – Statutory Invention Registration – Repealed
- AIA: - ss. 26, 27, 29, 31, 34 – Establishment of studies
- AIA: - s. 33 – Limitation of issuance of patents for human life forms

Effective Dates

The dates upon which these provisions come into force are provided on the UPSTO website at: America Invents Act Effective Dates

Ken Bousfield, B.A.Sc. (Mech. Eng.), LL.B., is a partner with Bereskin & Parr LLP's Patent Practice group. Ken can be reached in Toronto at 416.957.1650 or kbousfield@bereskinparr.com.

 

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