ropes & gray llp understanding the leahy-smith america invents act denise l. loring practising...

ROPES & GRAY LLP

Understanding The Leahy-Smith America Invents ActDenise L. LoringPractising Law InstituteNovember 14, 2011

ROPES & GRAY

Historical Overview

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ROPES & GRAY

Historical Overview

• June 8, 2005 –109th Congress began to consider patent reform

– 110th and 111th Congresses followed suit, but no legislation was passed

• January 25, 2011 – Senate introduced S. 23, the Patent Reform Act of 2011 (later renamed, the “America Invents Act”)

– Main goals: 1. Improve the patent application process by adopting a first-

to-file system

2. Improve the quality of patents issued by the USPTO by adopting broader post-grant review procedures

3. Increase certainty in litigation3

ROPES & GRAY

Historical Overview

• March 7, 2011 – FTC published The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition– Recognized:

• Importance of innovation

• Vital role of well-defined patents in promoting innovation

• Harmful effect of “patent market”

• Role of non-practicing entities (NPE’s) in increasing litigation

– Two Main Foci:• Notice function of patents

• Remedies for patent infringement

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Historical Overview

– FTC recommendations:

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Notice Function of Patents Remedies for Patent Infringement

• Stricter enforcement of 35 U.S.C. § 112 ¶ 2

• Increase level of detail in prosecution history record

• Publish patent applications after 18 months

• Shorten review period

• Improve patent searches (especially in high-tech sector)

• Align lost profit and reasonable royalty awards with patent value

• “Entire market value” rule: hypothetical negotiation focusing on the time alleged infringement began to calculate reasonable royalty damages

• Discourage use of reasonable royalties to deter infringement

• Discourage use of unproven lost profit claims to increase reasonably royalty awards

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Historical Overview

• March 8, 2011 – Senate passed S. 23

• June 23, 2011 – House of Representatives passed H.R. 1249, the “Leahy-Smith America Invents Act”

• September 8, 2011 – Senate adopted H.R. 1249 without amendment

• September 16, 2011 – President Obama signed the Act into law

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Overview

• First-inventor-to-file

• Inventor declarations and non-inventor application filings

• Validity and infringement defenses

• Third-party intervention

• Supplemental examination

• Federal court jurisdiction

• Impact on patent infringement litigation7

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First-Inventor-To-File

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Section 102 – First-Inventor-to-File

• 35 U.S.C. §102 wholly rewritten

• Two classes of prior art: – Patents and published patent applications, and

– all other public disclosures

• Prior art inquiry now keyed to effective filing date, rather than date of invention– First to file, not first to invent

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Section 102(a) – Novelty, Prior Art

• Removes territoriality – no “in this country” restriction on prior art

• Foreign applicants no longer need to rely upon a “section 102(e)” date – foreign priority dates treated on a par with U.S. filings

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Section 102(b) – Grace Period

• Provides two exceptions to prior art– One-year grace period for filing if inventor or

assignee makes public disclosure

– A company’s own applications are not prior art against its later applications

• Applications filed pursuant to joint research agreements are not prior art against each other

• Similar to current system, but protects only against inventor’s own disclosures or patent applications

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Section 102(b) – Grace Period

• Once an inventor discloses invention, that disclosure may be used as a shield against later disclosures and patent filings– Open question: do “public disclosures”

encompass sales, public use?

• Potential strategy: disclose early as a sword against others’ filings, a shield against others’ disclosures– But only if foreign rights are not important

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Section 102(b) – Derivation

• Also provides protection from earlier disclosures and patent filings if the information was obtained directly or indirectly from the actual inventors– Grace period only one year for public disclosures,

but unlimited for patent filings

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Section 102(d) – Prior Art Dates

• Affirms that any priority date is the effective filing date of a U.S. patent or application cited as prior art– whether prior art is a provisional application, a

utility application, or even a PCT or foreign patent application

– Still requires adequate disclosure in the priority document

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Section 102 – Timing

• Provisions generally take effect 18 months after enactment– Applies to applications filed on or after effective

date

– Later-filed applications claiming priority to earlier applications are governed by first-to-invent system

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Section 103 – Obviousness

• Essentially unchanged, except that prior art status based on filing date instead of invention date

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Section 135 – Derivation Proceedings in the PTO

• A later applicant may assert that an earlier applicant derived the claimed invention and filed without authorization

• Effectively replaces interference proceedings– Question now revolves around single act of

invention, rather than competing acts of invention

• Remedy is cancellation/refusal of derived claims

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Section 135 – Derivation Proceedings

• Timing: petition must be filed within one year of publication of a competitor’s application

• Pays to monitor competitors’ applications early in the filing process

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Section 291 – Derivation Actions

• Similar provision for patent owners to sue in court, alleging that a third-party patent was derived from the inventors’ work

• Must sue within a year of patent issuance

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Inventor Declarations And Non-Inventor Application Filings

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Section 115 – Inventor Declarations

• Requires statement that inventor authorized filing– Companies may want to obtain blanket

authorizations from potential inventors to avoid problems

• All required statements can be included in assignment document – no need for separate declaration

• Effective one year from date of enactment

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Section 118 – Assignee Filing of Patent Applications• Non-inventors may apply for patents:

– Persons to whom the inventor has assigned or is under an obligation to assign the invention

– Persons who show “sufficient proprietary interest” in the subject matter “on behalf of and as agent for” the inventors

• Patents granted to “real party in interest”, upon notice to inventor

• Effective one year after date of enactment

• Applies to any patent application filed on or after the effective date

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Validity And Infringement Defenses

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Section 282 – Best Mode

• Best mode is no longer available as basis for invalidity or unenforceability of an issued patent

• Obligation to disclose best mode in application remains

• Effective upon date of enactment

• Applies to all proceedings filed on or after enactment

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Patent Marking

• False patent marking greatly curtailed– Response to recent surge in qui tam litigation

– No statutory damages for private litigants; can only obtain actual damages

– Marking a product with expired patent number that once covered the product is not a violation

• Virtual marking permitted – Marking may be achieved by posting patent information

online

• Effective upon date of enactment– Applies to any case pending or commenced on or after

date of enactment25

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Section 273 – Prior User Rights

• Defense to infringement if: – defendant had been commercially using a

patented process, or machine, manufacture, or composition useful in that process,

– at least one year before patentee’s effective filing date or earlier publication (i.e., grace period)

• No longer just for business methods

• Burden on prior user to prove use by clear and convincing evidence

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Section 273 – Prior User Rights

• Regulatory review periods and non-profit laboratory use count as commercial use

• Defense is personal, and can be transferred only with transfer of entire enterprise or line of business protected by defense– Scope of defense is limited after transfer

• Downstream purchasers of accused product protected by patent exhaustion

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Section 298 – Willful Infringement

• Failure to obtain advice of counsel with respect to an asserted patent does not create an inference of willful patent infringement– Codifies Knorr-Bremse Systeme Fuer Nutzfahrzeuge

GmbH v. Dana Corp., 383 F.3d 1336 (Fed. Cir. 2004)


• Applies to any patent issued on or after the effective date

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Third Party Intervention

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Third Party Intervention

• Preissuance submission

• Post-grant review

• Inter partes review

• Post-grant submission

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Section 122(e) – Preissuance Submission

• Any person may submit patents and printed publications for review before the earlier of:– date of allowance; or

– later of:

• six months after the patent application publishes, or

• first rejection of any claim


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Sections 321-29 – Post-Grant Review• A third party may petition the USPTO to

institute post-grant review of a patent– Petition must name real party in interest

• Petitioner may request cancellation claims as unpatentable on virtually any ground: – E.g., prior art, written description, enablement,

utility, or patentable subject matter

• Heard by Patent Trial and Appeal Board

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Sections 321-29 – Post-Grant Review• Petition must be filed within nine months of

patent grant – Or within nine months of reissue, if claims were

broadened

• Review standard: – Petition, taken alone, would make it more likely

than not that at least one claim is unpatentable; or

– Petition raises novel or unsettled legal question that would be important to other patents or applications

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Sections 321-29 – Post-Grant Review


• Applies only to patents subject to first-to-file rules

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Transitional Post-Grant Review for Business Method Patents

• Special program creates eight-year period during which a person charged with infringement of a business method patent may file a petition for post-grant review– Applies to any business method patent,

regardless of its filing date


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Sections 311-15 – Inter partes Review

• Challenges to validity based on patents or printed publications only

• Replaces inter partes reexamination

• Review standard – There is a reasonable likelihood that petitioner

would prevail with respect to at least one claim

• Heard by Patent Trial and Appeal Board (not examiner)

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• Post-grant review and litigation affect availability of inter partes review– May not be filed before the deadline to file a post-

grant review petition or during a post-grant review proceeding

– Not available if petitioner previously filed a lawsuit challenging the validity of the patent

– Not available if the petition is filed more than 12 months after the petitioner is sued for infringement of the patent

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• In the interim, standard for instituting inter partes reexamination is changed to new, inter partes review standard

• Applies to all existing patents, subject to timing restrictions

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Post-Grant and Inter Partes Review

• Common provisions– USPTO required to make final determination

within one year, with six-month extension for good cause

– Estoppels bar any defense that was or reasonably could have been raised during review

– No review may be filed if petitioner files an action challenging patent validity

– Any declaratory judgment action challenging validity filed after the petition is automatically stayed, unless patentee moves to lift the stay or files its own action

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Section 301 – Post-Grant Submission• Any person may submit to USPTO at any time

patents or printed publications believed relevant to patentability of any patent claim

• Optional statement of relevance– Becomes part of official public file if it explains how

the prior art is applicable to at least one patent claim

• Optional request for confidentiality

• Does not trigger any proceeding

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Supplemental Examination

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Section 257 – Supplemental Examination• New procedure for patentees

• Patentees may request examination to consider, reconsider, or correct information relevant to patentability

• USPTO must conduct examination within three months to determine whether substantial new question of patentability is raised– If so, reexamination is ordered

• Newly disclosed information may not be used as a basis for asserting inequitable conduct

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Section 257 – Supplemental Examination

• Protection from inequitable conduct claim does not apply:– To allegations pleaded with particularity in

litigation before examination request is filed

– If patentee files patent infringement suit before supplemental examination is concluded


• Can be applied retroactively to existing patents

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Effective Dates of AIA Provisions

Immediate – 9/16/2011 One Year – 9/16/2012 18 Months – 3/16/2013

•Joinder restrictions

•Change in standard for initiating inter partes reexamination

•Limits on false marking suits

•Virtual marking

•Prior user rights

•No best mode defense

•Post-grant review • Except for business

method patents and pending interferences; only for patents subject to first-to-file rules

•New inter partes review

•Preissuance submissions

•Supplemental examination

•Willful infringement

•First-to-file

•New §102; changes in prior art status

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Federal Court Jurisdiction

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Section 299 – Joinder of Parties

• A patent owner may only join multiple defendants in one action if:– the right to relief arises out of the same events relating

to the infringement; and

– there are questions of fact common to all of the defendants

• Effective upon date of enactment

• Applies to any court action filed on or after enactment

• Exception for ANDA litigation

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Impact Of AIA On

Patent Infringement Litigation

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Impact on Patent Quality

• Hasty filing of applications may result in inadequate disclosures

• Adverse effects on small businesses and sole inventors

• Burden on patent examiners to review more and greater variety prior art

• Strain on USPTO resources resulting from new post-grant proceedings

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Impact on Litigation – First-to-File

• Expands prior art available to invalidate patent claims– Patentees may no longer antedate third party

prior art before a patent’s effective filing date• Patents, printed publications, prior public use, prior sale

or offer for sale

– Public use and sales outside of the U.S. are now available as prior art

• This could lead to increased litigation costs as defendants engage in third party discovery to prove up prior art

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Impact on Litigation – Validity

• Eliminates some invalidity defenses in litigation– Prior invention (old Section 102(g))

– Failure to disclose the best mode

– False marking defense reserved for those suffering actual injury

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Impact on Litigation – Infringement

• Expansion of prior user defense to all patents, not just business method patents– Effectively replaces prior invention invalidity

defense with personal non-infringement defense

• Codifies existing restrictions on availability of willful infringement claim

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Impact on Litigation – Inequitable Conduct

• Attempts to curtail inequitable conduct in prior bills were eliminated from Act– Recent Federal Circuit decision in Therasense

may eliminate need for statutory reform

• Supplemental examination may provide limited means to cure alleged inequitable conduct – But only if examination is sought before the

defense is raised in litigation

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Impact on Patent Infringement Litigation – Damages

• No changes to damages calculation– Once a hot issue, now widely considered to

have been resolved by the courts

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Impact on Patent Infringement Litigation –Post-Grant Reviews• Expansion of grounds for invalidity that USPTO may

consider in post-grant review

– Absence of live testimony before USPTO limits nature of evidence to be considered

• Reduction in ability to use reviews as tactic to delay district court litigation

– Reviews must be completed within one year, vs. three years for inter partes reexamination

– Ban against filing petition for inter partes review 12 months after commencement of litigation

• May further strain already limited resources of the USPTO

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Impact on Litigation – District Court vs. USPTO Proceedings• Post-grant and inter partes reviews may shift

validity challenges to USPTO– Estoppels barring litigation in court of questions that

could have been raised during post-grant or inter partes reviews

– Transitional post-grant review of business method patents, regardless of date of issuance

• Restrictions on joinder of unrelated parties in a single litigation aimed at curtailing non-practicing entity litigation– Federal courts still have discretion under Federal

Rules to join parties for efficiency55

ROPES & GRAY

Thank You

Denise L. LoringRopes & Gray LLP

1211 Avenue of the AmericasNew York, NY 10036

[email protected]

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ropes & gray llp understanding the leahy-smith america invents act denise l. loring practising...

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