Patent Law Reform: What It May Mean for Inventors

May 2007

There has been a growing consensus for some time that patent reform is necessary, but there has not always been a consensus as to which aspects of our current patent system need to be changed. That debate is currently being played out before the United States Congress. On April 18, 2007, identical bills entitled "Patent Reform of 2007" were introduced in the House and Senate. As of May 20, the Senate had not yet taken any action on the Senate bill, and the House bill had been favorably reported without amendment out of the House Subcommittee on Courts, the Internet and Intellectual Property and sent to the full Judiciary Committee. This article summarizes key provisions of the bill and explains their significance to inventors.

1. First-Inventor-to-File Rule. Under the proposed legislation, the first inventor to file would own the patent rights to an invention, in contrast to the present system, under which the patent rights are granted to the first person to invent an invention. We have become so accustomed in this country to assuming that the first person to invent something owns the patent rights to that invention that a first-inventor-to-file system would require a significant change in our thinking. In layman's terms, it would mean that someone who invented something first might lose out to someone who invented something second but filed first. What this means as a practical matter is that inventors would need to be more diligent than ever in filing patent applications for their inventions as expeditiously as possible. The main reason for the first-inventor-to-file system is that it would harmonize U.S. patent laws with those of most other countries around the world.

As of May 20, the U.S. Patent and Trademark Office (PTO) had announced that it opposes the First Inventor to File rule. It remains to be seen whether this provision-one of the most significant in the patent reform bill-will pass Congress given the PTO's recently announced opposition.

2. Pre-Grant Submissions. The bill includes provisions that would allow any member of the public to submit patents and/or publications to the patent office for consideration in connection with a pending patent application, as long as the submission is made prior to the earlier of: (a) the date on which a notice of allowance is mailed; or (b) either (i) six months after the date on which the application is published or (ii) the date of the first rejection of any claim, whichever occurs later. In most cases, the first Office Action will be mailed more than six months after publication, which means that the window for making a pre-grant submission will remain open until issuance of the Notice of Allowance or the first Office Action rejecting a claim, whichever occurs first. The submission must include a concise description of the asserted relevance of each submitted document.

The proposal differs from current practice in that descriptions of relevance are not allowed in third-party submissions of prior art under Rule 99, which is currently the sole avenue for a third party to submit prior art during the examination process subsequent to publication of the application.

3. Post-Grant Opposition. The bill includes provisions for post-grant review pursuant to which anyone who is not the patent owner may file with the PTO a petition for cancellation seeking to institute a post-grant review proceeding to cancel any claims as unpatentable. Any member of the public may file a petition within 12 months after the patent is granted. Alternately, it may be filed any time during the pendency of the patent if the petitioner can establish a substantial reason to believe that the continued existence of the challenged claim causes or is likely to cause the petitioner significant economic harm, that the petitioner has received notice from the patent holder alleging infringement of the patent by the petitioner, or that the patent owner has consented in writing to the cancellation proceeding. Significantly, the presumption of validity that attaches to all patents when they issue would not apply to a challenge brought pursuant to this section of the statute.

If an accused infringer asserts invalidity of one or more claims in a patent infringement case brought in federal court, and if the court holds the claims to be valid, the accused infringer may not subsequently file a petition for post-grant review. Similarly, if a challenger files a petition for post-grant review and the challenged claims are held to be valid, the challenger may not thereafter file a request for reexamination or assert the invalidity of such claims in federal court litigation.

4. Prior User Rights. The proposed legislation would expand the rights of prior users of the patented invention. Under current law, prior user rights (which are a defense to patent infringement) apply only to business method patents and only if the prior user reduced the invention to practice at least a year before the patent application was filed. The bill now before Congress would expand prior user rights to all patents (not just business methods), and it would only require that the prior user commercially used, or made substantial preparations for commercial use of, the invention prior to the filing date of the application.

Prior user rights generally apply to secret prior uses because a public prior use by someone other than the named
inventor(s) would invalidate the patent.

5. Apportionment of Damages. Under the proposed legislation, courts in patent infringement cases would be required to apportion damages so that they reflect the economic value properly attributed to the patent's specific contribution over the prior art. How this will be interpreted and applied by courts is not yet known, but the bill directs courts to "identify all factors relevant to the determination of a reasonably royalty" and "consider only those factors in making the determination." Courts are specifically instructed to exclude from the analysis the economic value properly attributable to the prior art, and other features or improvements that contribute economic value to the infringing product or process. In other words, if the patent holder cannot show that the patent's specific contribution over the prior art is the predominant basis for market demand for an infringing product or process, damages may not be based upon the entire market value of the infringing product or process.

This provision, if enacted, will likely have a significant dampening effect on the magnitude of damages in patent infringement cases.


Amicable photo of Toni

Antoinette M. Tease, P.L.L.C.