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Patent law overhaul starting to show its effects

Portions of the Leahy-Smith America Invents Act of 2011, or the “AIA,” took effect earlier this month. It’s been called the most significant overhaul of U.S. patent law in decades.

The changes are sweeping, said Kirk Deheck, with Boyle Fredrickson in Milwaukee, but won’t require “as extensive a response from innovators’ current practices that a lot of people are concluding.”

“Many of the changes are geared primarily to harmonizing our practices to those of most of the rest of the world,” Deheck said. “Although the terminology of some of the tools has changed, the majority of the objectives associated with the use of the previous tools can still be pursued.”

The AIA’s goals, according to Linda E. B. Hansen, a patent attorney at Foley & Lardner in Milwaukee, are to encourage innovation and job creation, improve patent quality and reduce the existing backlog.

But to Appleton patent lawyer Tom Wilhelm, the AIA simply adds more complexity to what was already a very complicated body of law.

“The changes are substantial,” he said. “Whether they are changes for the better depends upon whom you represent. For the patent owner, the changes are not particularly beneficial. For the competition, they are great news.”

First to file replaces first to invent

A major change under the AIA is the shift from a first-to-invent system to a first-to-file system.

The new system grants the right to patent an invention to the first person to file an application for protection of that invention — not necessarily the first person to conceive of the invention and reduce it to practice. Starting March 16, the U.S. will join most of the rest of the world with a first-to-file system.

Hansen said the old, first-to-invent system allowed the filing of a request for an interference, a highly technical, time-consuming procedure where two inventors trying to patent the same invention would each try to prove they actually invented it before the other. Filing dates don’t control in interference.

“It is not uncommon for more than one inventor to come up with the same idea at or near the same time. This is particularly true in high-tech fields,” Hansen said.

With the new, first-to-file system, derivation proceedings will replace the interference process. In a derivation proceeding, an inventor who can prove that an earlier filed application was derived from their efforts will be entitled to the patent, even though they have a later filing date.

Another change in the AIA relates to prior art — the body of science, art or technology available for patent examiners to consider when deciding if an invention can be patented. If something is already patented or available in the public domain anywhere in the world, it can’t be patented.

“Inventors will need to be very careful to make sure that there is no public use or public sale prior to the filing of the application for a patent,” Hansen said.

If a description of something a person wants to patent is available to the public before that person applies for a patent, that description counts as prior art for the patent examiner to consider, and can be used to prevent the applicant from getting a patent.

This is a particularly important concern in large corporations, where the inventor isn’t necessarily involved in marketing decisions, and may not be aware of what public use is being made of the invention, she said.

An important exception is that the inventor may publish information about the invention up to one year prior to filing without that publication counting as prior art. This permits inventors to try to prevent others’ attempts to apply for a patent for a similar invention, because the inventor-published information will count as prior art against other applicants, but not against the inventor.

But it’s not clear whether practicing the invention, sometimes called “beta-testing,” is authorized under the AIA, Deheck added.

That means a client with multimillion-dollar investments in a potentially patentable device might bypass beta-testing to run to the Patent Office, only to later discover through post-filing testing that more work on the invention is needed. Meanwhile, by filing and then making changes after that date, the inventor has risked the patentability of the subject-matter of the improvement as being deemed obvious, due to the disclosure of the earlier filing. It’s also unclear whether private sales are authorized under the AIA.

“Inventors are going to have to be proactive and more fleet-of-foot when it comes to making decisions regarding when to file patent applications and what they want to protect,” Deheck said. “And, if a decision is made not to file a patent application, they can make proactive disclosures that will bar other people from patenting the same thing.”

The public policy, Wilhelm said, is supposedly to make inventors, or their companies, take action sooner.

“I predict that the loss here will fall more heavily on smaller companies and individual inventors than on large companies,” he said. “Namely, smaller companies have fewer resources, and typically file for their patents later in the development process.”

Administrative post-grant challenges to increase

There’s a brand-new procedure that took effect Sept. 16, which will permit others to challenge the validity of a patent for reasons other than obviousness and anticipation.

Hansen said it’s expected that more post-grant challenges will be filed using this procedure because it should be faster and less expensive than traditional patent lawsuits. While lawsuits can take years to resolve, the new post-grant challenges are supposed to be completed within a year. Although some discovery is allowed with the new procedure, it’s anticipated there will be less discovery and less expense under this process.

Petitions for a post-grant review must show that at least one of the challenged claims is more likely than not unpatentable, or raise a new or unsettled legal question regarding other patents or pending applications. The petitioner’s standard for proving the claims invalid is a “preponderance of the evidence,” which is a lower standard than the “clear and convincing evidence” required in litigation.

The Patent Office already is seeing some changes in the filing of post-grant challenges. After Sept. 16, inter partes reexamination requests are no longer available to someone wanting to challenge an existing patent.

Hansen said that in the week prior to the September deadline, a flood of reexamination requests were filed — more than 300 in just five days.

“That’s about nine or 10 months’ worth using statistics for 2011,” she observed, hypothesizing that one reason for the late surge in filings might be increased fees.

The new inter partes review requires a filing fee of at least $27,200. The old inter partes reexaminations had a filing fee of $8,800. Ex parte reexaminations cost $2,520 under the old system, and the fee jumped to $17,750 after Sept. 16.

Many patent holders and their attorneys will be watching to see how the first cases are handled under the new provisions. In some scenarios, Wilhelm explained, there are estoppel consequences. Namely, if a party is unsuccessful in challenging a patent in the Patent Office using some of these new procedures, that result will also apply in any subsequent litigation.

Looking ahead

“As with all legislation,” Hansen said, “the AIA may have some unexpected consequences that will need to be sorted out later. Some challenges may be made to parts of the law, both legislatively and in the courts.

It will be a while before its clear what problems, if any, there are with the new procedures, she said.

“Most large corporations with significant patent portfolios have been watching this law, and are ready to handle the new elements of it,” Hansen said. “Small companies without legal departments and individual inventors may have more problems.”

Cady McGovern of the Idaho Business Review also contributed to this report.

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