TTO Commentary: The America Invents Act

After 6 years of debate, negotiation, arguments and compromises, both houses of the U.S. Congress have passed a bill to reform the United States’ patent laws, a reform that is generations in the making and which was signed into law by President Obama on Friday.

Called the America Invents Act (H.R. 1249), the bill reforms Chapter 35 of the United States Code (which governs the rights to patent) in a way that changes the patent laws more fundamentally than at any time in the last 50 years. The two driving forces for this bill’s passage were (a) reforming the U.S. patent laws to be more congruent with the laws of the rest of the world, and (b) improving a system that is seen as damaged (if not broken) in a way that will encourage more inventiveness and entrepreneurship to help stimulate the struggling American economy.

First Inventor to File
The America Invents Act makes a number of major changes to patent law, the most fundamental being the conversion from a first-to-invent to a first-inventor-to-file system (FITF), which brings the United States more closely in alignment with the rest of the world (most of which operates on a strict first-to-file (FTF) system). Prior to the passage of this bill, the U.S. had a system unique in the world where an inventor had the ability, through an expensive and time consuming process, to prove to the United States Patent and Trademark Office (USPTO) that he or she was the first person to make an invention, even if that inventor was not the first to publish on it or to file something with the USPTO. Under FITF (which is essentially a first-to-publish system), that process is replaced by a system that incentivizes inventors to get something on file with the patent office more quickly. The U.S. will retain a form of protection for inventors that isn’t offered elsewhere: a one year grace period whereby an inventor may publish and still file in the patent office within the 12-month window.

The new system will be phased in slowly over the first 18 months after the bill is signed into law, but applications filed before enactment will be treated under the old laws. This means the USPTO will be required to use two different standards for applications filed pre- and post-enactment for quite some time (which has occurred before, notably when the patent term was modified under NAFTA/GATT).

Prior User Rights
Another significant change is the clarification or modification of “prior user rights.” During the debate over the bill, some industry representatives were concerned that a FITF system could lead to a potential infringement liability for first inventors who might have reasons not to file a patent application but who have already commercialized their inventions. Section 5, “Defense to infringement based on prior commercial use,” was added to the final bill, expanding the prior user rights infringement defense for such inventors under 35 U.S.C. §273 (which currently applies only to prior uses of business method patents). Prior user rights will now apply to any technology, with commercial activity also including “premarketing regulatory review” for drugs and “nonprofit laboratory use” such as in a university or hospital. However, the revised Section 273 generally will not allow that defense to be used against patents owned by institutions of higher education, under the argument that universities are never “prior users,” and therefore it wouldn’t be reasonable or fair to allow this defense to be asserted against university-owned intellectual property.

Other Key Changes

• Post-grant proceedings creating an EU-like opposition are instituted, and existing post-grant proceedings are expanded and clarified in an attempt to lower litigation costs to defend or attack patents. Section 6 of the bill will provide a new “first window” post-grant review procedure allowing challenges within nine months of an issued patent on any ground of patentability (a change that expands third party rights to challenge patents). 

• Pre-grant submission of prior art is enhanced. Section 8 of the bill creates a process whereby third parties may submit prior art for consideration and inclusion in the record of a patent application after it is published, provided this is done before an examiner has made a decision on patentability. 

• The bill adds a new procedure called “supplemental examination” for dealing with inequitable conduct.

• Section 15 of the bill eliminates an alleged infringer's ability to claim that the patent owner failed to identify the ‘best mode’ for enablement. The USPTO may still reject a patent application for this reason, but this is anticipated to be a rarely-used criterion. 

• Section 10 gives the USPTO the authority to engage in its own fee setting, and Section 11 creates a priority examination protocol at a premium price. The priority exams will be expedited and (it is hoped) lead to a patent decision or allowance 2-3 times faster than the current system. 

• The bill also creates a new “micro-entity” category of reduced fees for applicants for individuals and small businesses that don’t file a high volume of applications, or have earnings or profits lower than some predetermined threshold. 

• Fee diversion, a controversial process whereby excess fees obtained by the USPTO are diverted by Congress instead of retained by the USPTO, was partially changed by creating an oversight committee in Congress that can determine how these fees can be used.

David Poticha is a senior licensing manager in TTO's University of Colorado Denver | Anschutz Medical Campus office.