Inventors take note of changes in patent law

The America Invents Act was signed into law by President Obama on Sept. 16, 2011. In addition to a number of technical and procedural changes, the Act makes several significant substantive changes to American patent law:

  • The Act changes from our traditional and uniquely American "first to invent" system to the "first inventor to file" system used in most of the rest of the world.
  • It includes a substantial increase in almost all patent fees and gives the Patent and Trademark Office substantial leeway to implement additional increases.
  • It creates several new procedures for reviewing and challenging patents.
  • It eliminates the ability for uninterested third parties to sue for penalties for falsely marking products as patented.
  • It eliminates as patentable subject matter certain tax avoidance strategies, and subjects certain financial institution methods to a heightened level of scrutiny.

Since very early in the history of patents in the U.S., the system has awarded the patent to the first to invent. That is, if two inventors filed patent applications covering basically the same invention, the system was set up to award the patent to the inventor who was the first to invent it. That was true even if the second inventor filed an application earlier than the first inventor. In applications where this was an issue, expensive and complicated "interference" litigation was often necessary to resolve the question of who invented first. Under the new system, the patent will be awarded to the first inventor to file the application.

It will still be illegal, as before, to file an application based on someone else’s invention. The effect of this change will be to put more pressure on developing new inventions faster, and on filing applications sooner in the product development process. We expect that provisional patent applications, already growing in use and popularity, will see even more prominence, as it is a quick and inexpensive way to get a patent application on file as soon as possible once an invention is made or realized. A regular application can then later be filed, and still rely on the early filing date of the provisional, at least for the information is included in the provisional. This provision will go into effect 18 months after the bill was signed into law.

The Act also transfers responsibility for setting patent fees to the Patent Office, whereas before, most of the fees were set by act of Congress. For a number of years, Congress had transferred money from the fees collected by the Patent Office into the general treasury. This practice is ended by the law, and the Patent Office is directed to set its fees at a level to recover its expenses. At the same time, the new law includes a surcharge of 15% on all fees currently established. That surcharge will be effective September 26, 2011. So it would be best if any fees that are due in the next few months were paid now, before the surcharge takes effect.

The Act establishes several new procedures for reviewing and challenging the validity of patents. The procedures include the ability for third parties to submit prior art to the Patent Office for consideration during examination of an application, new post-grant review procedures, and a supplemental examination procedure.

A further change involves false marking of products with "Patent Pending" or with the patent number. There has been much litigation in past few years over whether a particular product that carried a patent notice was truly covered by a patent, particularly when the patent marking was not removed when the patent expired. Some cases held that any private person could sue for damages up to $500 (splitting the final award equally with the government) for each item that bore the improper patent notice, resulting in the possibility of judgment in the millions of dollars for high volume items such as foam coffee cups. Some companies had gone as far as to eliminate all patent marking entirely, so as to avoid this liability, even though their ability to collect damages from an infringer would be limited by such lack of notice. The new law permits false marking suits only by the government or by competitors who can show that they actually suffered damage due to the false marking, and prohibits such suits altogether for patents that covered the product but have simply expired.

The technical and procedural changes include the creation of a new entity status, some changes regarding business method patents, and a new prioritized examination. A newly created "micro entity" is permitted a 75-percent reduction compared to large entity fees, and is defined as one who qualifies as a small entity, has not been named as an inventor in more than four previous patent applications, and does not have income exceeding three times the median household income for the preceding year. As to business methods, including certain tax strategies, certain financial or banking inventions, and certain other business methods, such inventions were deemed no longer the type of inventions that can be patented. A new "prioritized examination" is established for examination of a patent application ahead of all regular applications, on payment of a $4800 fee (less for small or micro entities), but the number of such fast track applications that will be accepted is limited to 10,000 per year.

For more information on any of these changes, or any question on patents, you can contact
Attorney Nick Kees is a member of Godfrey & Kahn’s Intellectual Property Team in Milwaukee.

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