United States: Patent Reform Takes A Big Step Forward As The Senate Passes The America Invents Act

On March 8, 2011, U.S. patent reform moved one step closer towards becoming a reality when the Senate passed the America Invents Act (S. 23) (http://tinyurl.com/4n4m8gv) in a bipartisan, 95-5 vote. The bill includes some modification to the "first-to-file system" and removes the damages and venue provisions that were present in earlier versions of the bill.

Now the House of Representatives will have to craft its own version of patent reform, which is expected to have at least some differences vis-à-vis the Senate bill. If and when the House approves its patent reform bill, House and Senate leadership will have to reach a compromise. Although the House is expected to vote in support of a compromise bill, final passage could be blocked by a late-stage "hold" in the Senate. Thus, patent reform likely still has a long road ahead.

Key Provisions of the America Invents Act

• Changes to 35 U.S.C. § 102 would move the United States closer to a first-to-file system, but retain a limited one-year grace period for filing an application after a public disclosure made by the inventor, made by another who obtained the disclosed information from the inventor, or made after such an inventor-derived public disclosure.
• Changes to 35 U.S.C. § 135 would replace current interference proceedings germane to the first-to-invent system with derivation proceedings to determine whether the inventor named in an earlier-filed application derived the claimed subject matter from the inventor of a later-filed application.
• The Act creates two different procedures for post-grant review:
• • Inter Partes Review: Under revised versions of 35 U.S.C. §§ 311-319, patents could be challenged on the basis of patents or printed publications only, by a petition filed at least nine months after the grant or re-issuance of a patent, or following the conclusion of any post-grant review, whichever occurs later.
  • Post-Grant Review: Under new 35 U.S.C. §§ 321-329, patents could be challenged on any ground, including 35 U.S.C. § 112, by a petition filed within nine months of the grant or re-issuance of a patent.
  • Both statutes include procedural limitations intended to safeguard patentees from improper use of the review procedures, such as barring a petitioner from seeking review if it already has filed a district court action challenging validity, and imposing procedural limitations if an infringement action already has been filed by the patentee. Additionally, estoppel provisions would bar the petitioner in an inter partes review proceeding from raising during a subsequent district court action or ITC proceeding any ground of invalidity that actually was raised or reasonably could have been raised during the review proceeding, and would bar the petitioner in a post-grant review proceeding from raising any ground of invalidity that actually was raised.
  • The Act also provides for the creation of a transitional post-grant review procedure for business-method patents that was not included in the original version of the bill proposed by the Senate Judiciary Committee.
• The Act creates new 35 U.S.C. § 298, which provides that the failure of an accused infringer to obtain an opinion from counsel, or to produce such an opinion during litigation, cannot be used to prove willful infringement.
• As with previous version of the bill, the Act would change 35 U.S.C. § 292 to restrict standing to bring a claim for false marking to person(s) who have suffered a "competitive injury as a result of the violation," and damages would be limited to those "adequate to compensate for the injury." The United States would retain its current authority to bring false marking claims and recover up to $500 per article.
• The Act would exclude from patent-eligible subject matter tax strategy patents claiming "any strategy for reducing, avoiding, or deferring tax liability."
• The Act gives the USPTO fee setting authority, including the authority to offer a 50-percent fee reduction to small entities and a 75-percent fee reduction to micro entities. The Act also provides that the fees collected by the USPTO would be deposited into a new United States Patent and Trademark Office Public Enterprise Fund, for use by the USPTO, effectively ending fee diversion to the U.S. Treasury's general fund.

Litigation Provisions Removed

• The final version of the Act does not include the damages or venue transfer provisions that were present in earlier versions of the bill.

Conclusion

Overall, the America Invents Act is largely similar to earlier versions of patent reform legislation, but without many of the litigation-related provisions that some viewed as controversial or unnecessary in view of recent case law. If enacted, the law would bring significant changes to the U.S. patent system, but patent reform still has to make its way through the House, which may have different ideas on patent reform.

Earlier this week, the FTC issued a 300-page report that outlines its views on the patent system. As summarized in our March 7, 2011 Legal News Alert (http://tinyurl.com/49r4yvx), the Report, The Evolving IP Marketplace: Aligning Patent Notice And Remedies With Competition, recommends improvements to two areas of patent law policies: how well a patent gives notice to the public of what technology is protected, and the remedies available for patent infringement, in order to better align the patent laws with competition policy. None of its proposals are reflected in the America Invents Act, but some could make their way into a House patent reform bill.

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