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By Otis Littlefield and Mika Mayer, Morrison Foerster
The Leahy-Smith America Invents Act of 2011 (the AIA) will have a profound impact upon patent prosecution and patent litigation. The act itself takes up fifty eight pages, and explaining the meaning of the act would take far more. Here, we aim to highlight the most relevant changes that will impact venture investment decisions in the near and long term.
Time-line
- Prior use defense – The AIA is expanding the scope of the prior use defense. The prior use defense gives companies a new defense against patent infringement as long as that company was commercially using the patented invention in the United States more than a year before the patented invention was filed upon. The expanded scope of the prior use defense applies to patents issuing on or after September 16, 2011.
- Inter partes review – The AIA is creating a new inter partes review proceeding to replace inter partes reexamination. Inter partes review, like inter partes reexamination before it, allows any third party to challenge an issued patent on the ground that the patented invention or an obvious variant of it was disclosed in a printed publication or patent before the patented was filed upon. Inter partes review may be requested as of September 16, 2012 for any patent, regardless of when filed as long as it is nine months after the issuance of the patent and no post grant review proceeding is pending.
- First to File – The new first to file system is a fundamental switch in who is entitled to patent an invention when two or more distinct groups of inventors each file a patent application. Previously, the first group of inventors to actually invent the invention was entitled to the patent. Now, the first group to file (or disclose) the invention is entitled to the patent. This new system applies to patent applications claiming new subject matter filed on or after March 16, 2013.
- Post grant review – The opposition-like proceeding in which any third party may challenge the validity of a patent within the first nine months after issuance. Unlike inter partes review, post grant review is not limited to printed publications and patent. Post grant review can be requested for a wider range of validity challenges including lack of patentable subject matter, utility, enablement, written description, etc. (but specifically excluding lack of best mode). Post grant review is available for patents claiming new subject matter filed on or after March 16, 2013.
Priority Examination
Getting a U.S. patent to issue quickly can be important for a start-up company. This is especially true for technologies that have a short development timeline such as software, diagnostics and certain medical devices. In those technology areas, a company can start selling its first product before its first U.S. patent has issued, or worse, its competitor can start selling a competing product. The AIA has blessed the United States Patent and Trademark Office’s (the USPTO) new expedited patent review or the “Track One” prioritized patent examination. Previous means for speeding up prosecution at the USPTO were either limited to particular technology areas or required a burdensome search report and written analysis of the search results. The new Track One system has only a few requirements, the most onerous of which is the $4,800 fee ($2,400 for small entities). Under the new Track One system, a company should receive within one year of filing a patent application either an indication that the invention is patentable or a final holding by the patent Examiner that invention is unpatentable. If the invention is patentable, the patent will issue shortly after that. If the invention is deemed unpatentable, the company can continue to prosecute the patent, but will at least have gotten an early indication of overall patentability. Thus, in the best case scenario, companies even in technologies with short development cycles will be able to have issued U.S. patents before launch of their first products.
The Expanded Prior Use Defense
The expanded prior use defense provided under the AIA will affect how one reviews issued patents of a target company and how one evaluates a target company’s freedom to operate. Before the AIA, the prior use defense was only applicable against patents claiming “methods of conducting business.” Now, the prior use defense will be available for all technology areas, but will only apply in this expanded scope to patents issuing on or after September 16, 2011. Therefore, patents issued prior to September 16, 2011, will likely be more important for blocking competitors than patents issuing after that date for industries where the prior use defense will be relevant. But such patents will also be more problematic in the hands of a competitor because the target company won’t have a prior use defense.
Finally, the prior use defense is not available against all patents issued after September 16, 2011. It does not apply to patents developed at institutes of higher education or assigned to technology transfer organizations whose primary purpose is to facilitate the commercialization of technologies developed by one or more such institutes of higher education. Thus, patents in-licensed by a company from an institute of higher education will also be more valuable in industries where the prior use defense is likely to be relevant.
Inter Partes Review Replacing Inter Partes Reexamination
The new inter partes review will put more patents at risk of being challenged by competitors and may increase the number of patent challenges in the future. This means that it will be more important in diligence to vet all issued patents of a company for vulnerability to prior art based attacks. Inter partes reexamination has become a powerful tool for challenging the validity of an issued patent without the expense of litigation, especially for larger and better funded companies. However, inter partes reexamination was not available for patents issuing from patent applications filed before November 29, 1999. As a result, such patents harder to attack on prior art grounds than patents issuing on patent applications filed on or after November 29, 1999. The AIA mandates the replacement of inter partes reexamination with inter partes review as of September 16, 2012. Inter partes review applies retroactively to all issued patents. Therefore, the filing data of the original patent application will no longer be relevant in reviewing issued patents at least for challenges based upon prior art printed publications or patent. Also, inter partes review has a lower estoppel standard, which could encourage more third parties to challenge issued patents.
First to File
The change to a first to file system (or more accurately a first to disclose system) and the introduction of post grant review of issue patents are two components of the AIA that are likely to have the most significant long term impact. However, these two changes won’t be significant in the near term.
The first to file regime only applies to patent applications claiming subject matter filed on or after March 16, 2013 and patents issuing from such patent applications. Companies will need to adapt their patent filing strategies before that date. After that date, companies will likely balance earlier filing versus disclosure versus later filing with a prior use defense as back-up if a competitor gets to the USPTO first. The impact of a company’s filing strategy won’t be felt for around three and a half years from now since on average Examiner don’t even pick up a patent application to examine them for twenty eight months.
Post Grant Review
The new post grant review will put even more patents at risk of being challenged by competitors. Post grant review allows a third party to challenge a patent in the first nine months after it issues for a much wider range of grounds than were available inter partes reexamination (or going forward under inter partes review). Thus, patents and patent application of a company at risk of post grant review will need to be reviewed more carefully for many more validity challenges. Also, companies will need to monitor their competitors’ patent portfolios so they can be ready to challenge problematic patents within nine months after issue if needed. Post grant review will only be available for patents examined under the first to file system (i.e., new subject matter filed after March 16, 2013), so the true impact likely won’t begin to be felt until five or more years from now.
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