In what is being described as the most substantial overhaul of U.S. patent law in nearly 60 years, Congress passed the Leahy-Smith America Invents Act, patent reform legislation that has been years in the making. The act will have long-term impact on the processes for filing patent applications, the granting and re-examination of patents, particularly business method and technology patents, and the funding of the U.S. Patent and Trademark Office (PTO). The act has been presented to President Barack Obama for his signature, and he is expected to sign the act within days.
Patent reform has seen a long and arduous journey through Congress with several detours dictated by decisions of the U.S. Supreme Court. The need for restructuring the patent application, review, and enforcement processes became critical as controversial new technology and business method patents were granted throughout the 1990s and early 2000s. Patents granted for both legitimate and questionable new technologies were often being used by inventors and so-called “patent trolls” to impede the development and use of technologies. A classic example of this occurred when RIM, the maker of the BlackBerry mobile device, paid $600 million to a small company for allegedly infringing on one of the company’s patents. A determination of infringement could have shut the BlackBerry network down. However, even while this was occurring, the PTO was reviewing the patent in question to determine whether it had been validly issued.
This, along with a backlog reportedly reaching as high as 700,000 patent applications and inconsistencies between the U.S. patent process and other processes used around the world, triggered the beginnings of the reform process in 2005. Proposals were introduced in Congress in 2005, 2007, and 2009 but to no available. Congress regrouped and started a new push in 2011.
Some changes in the courts may have helped by clearing up some of the more controversial provisions of earlier reform bills. The Supreme Court restructured a controversial damages provision that allowed a victim of patent infringement to get an injunction against any use of his or her patent. (Supreme Court decision in eBay v. MercExchange LLC, on patent injunctions.) As in the BlackBerry case, this potentially allowed the owner of one patent among the dozens or hundreds of patents used in a particular device or service to shut down the entire device or service. The court’s decision now allows judges to take into consideration the proportion of the infringing patent to the device/service as a whole before determining an injunction. A second Supreme Court case permitted the continued use of controversial business method patents, but imposed some additional requirements that were seen as restraining the worst abuses (Supreme Court decision in Bilski v. Kappos, on business method patents).
The new act, being politically presented as supporting American technology and creating jobs, addresses several key problems that remained a part of the patent process. One of the most significant changes is the establishment of a “First to File” standard for patent applications.
Previously, the patent would go to the “First to Invent,” regardless of who filed the patent application. While at first blush, a first to invent standard seems fairer to competing or simultaneous inventors, the result put a significant burden on the PTO to determine who was the first to invent, resulting in costly delays and “inventorship fights.” Now the burden is on inventors to file their patent applications promptly. This provision is also more consistent with the patent process in many other countries and will make it easier for U.S. patent owners to obtain foreign patents for their inventions.
As a trade-off for those inventors who may have a competitive or commercial reason to delay the filing of their patent application, the act also gives a grace period if an invention is disclosed publicly. Their application would still be considered “first to file.” In addition, people who invent and use their invention in commerce but do not file a patent application were given additional protection against a subsequent inventor who does file. The prior inventors now have several additional defenses against a later patent applicant who would claim the earlier invention infringes on his or her patent.
A final trade-off, and a second major change, is an extension of the process of post-grant review of patents. These changes allow persons who oppose new patents for any reason—the invention wasn’t novel (a claim that could be used by an inventor who was not the first to apply for a patent) or did not meet the standard for “non-obvious”—to file an objection within the first 9 months after a patent is issued. Additional new processes and procedures will allow further reviews of patent application during and prior to patent infringement claims. The expectation is that questionable patents will have a harder time being granted and/or surviving patent infringement claims and other litigation.
The funding of the PTO also received a major overhaul. The PTO is supposed to be funded by the fees that it charges for patent applications. However, those fees have often been diverted for other government uses. Critics claim that this fee diversion left the office underfunded, resulting in both backlogs and questionable patents. The act stops short of an outright ban on fee diversion, but places the fees into a reserve fund that would be available to the PTO for “support services and activities” without being tied to appropriations limits. Supporters say that this revenue security will allow the hiring of more patent officers and quicker review of patent applications.
Additional provisions of the bill provide for additional review of some business method patents involving financial products or services, a fee reduction for some individuals and small businesses, limits on lawsuits involving the use of expired patent numbers, and changes in the deadlines to file for a patent term extension.
The act was supported by a number of technology companies and trade groups including Microsoft and Google, and the Intellectual Property Owners Association. Some concerns were expressed about the impact on small businesses and the possibility of continued delays while the PTO adjusts to the new rules and procedures. However, Congress’ ultimate strong support of the final bill after years of debate would seem to indicate that the processes are expected to result in stronger patents and a stronger patent system.