Senate Passes Historic, Sweeping Patent Reform Legislation

The U.S. Senate Thursday passed historic legislation making the first comprehensive reforms to the nation’s patent system in nearly 60 years.  The bill is named for Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) and House Judiciary Committee Chairman Lamar Smith (R-Texas).  Patent reform was first introduced in Congress in 2005.

The Senate passed the bill by a vote of 89-9.  The House overwhelmingly approved H.R. 1249 by a vote of 304-117 on June 23 this year.

The House Judiciary Committee explained that the America Invents Act implements a first-inventor-to-file standard for patent approval, creates a post-grant review system to weed out bad patents, and helps the Patent and Trademark Office (PTO) address the backlog of patent applications.

The bill now goes to a bicameral conference committee of senators and representatives to work out differences in the versions of the bill each chamber approved.  A bicameral conference committee approval will send the legislation to President Barack Obama’s desk for his signature.

The Congressional Research Service of the Library of Congress has come out with a section-by-section summary, which is reproduced below:

Section 3 -
Amends federal patent law to define the “effective filing date” of a claimed invention as the actual filing date of the patent or the application for patent containing a claim to the invention (thus replacing the current “first to invent” system with a “first inventor to file” system), except as specified. Requires the effective filing date for a claimed invention in an application for reissue or reissued patent to be determined by deeming the claim to the invention to have been contained in the patent for which reissue was sought. Establishes a one-year grace period (a prior art exception) for inventors to file an application after certain disclosures of the claimed invention by the inventor or another who obtained the subject matter from the inventor. Revises provisions concerning novelty and nonobvious subject matter (commonly referred to as conditions for patentability). Repeals provisions relating to inventions made abroad and statutory invention registration. Permits a civil action by a patent owner against another patent owner claiming to have the same invention and who has an earlier effective filing date if the invention claimed by the earlier patent owner was derived from the inventor claimed in the patent owned by the person seeking relief. Requires such an action to be filed before the end of a specified one-year period. Sets forth derived patent provisions. Replaces: (1) interference proceedings with derivation proceedings, and (2) the Board of Patent Appeals and Interferences with the Patent Trial and Appeal Board (the Board). Requires reports from: (1) the Small Business Administration (SBA) on the effects of eliminating the use of dates of invention in the patent application process, particularly on small businesses; and (2) the U.S. Patent and Trademark Office (USPTO) on the operation of prior user rights in selected countries in the industrialized world. Expresses the sense of Congress that converting from a “first to invent” to a “first inventor to file” patent registration system will: (1) provide inventors with greater certainty regarding the scope of protection, and (2) promote international uniformity by harmonizing the U.S. patent system with systems commonly used in other countries with whom the United States conducts trade.

Section 4 -
Modifies requirements regarding the oath or declaration required of an inventor. Allows a person to whom an inventor has assigned (or is under an obligation to assign) an invention to make an application for patent.

Section 5 -
Replaces the earlier inventor to file defense to infringement for business methods with enumerated personal defenses available in actions involving validity or infringement, under specified conditions and subject to exceptions, with respect to subject matter consisting of a process, or of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process, that would otherwise infringe a claimed invention being asserted if: (1) the person commercially used the subject matter in the United States, either in connection with an internal commercial use or an actual arm’s length sale or other arm’s length commercial transfer of a useful end result of such commercial use; and (2) the commercial use occurred at least one year before the earlier of either the effective filing date of the claimed invention or the date on which the claimed invention was disclosed to the public in a manner that qualified as an exception from prior art. Sets forth guidelines for assessing commercial use in a premarketing regulatory review period and by nonprofit research laboratories or entities. Prohibits certain institutions of higher education and technology transfer organizations from asserting such defenses. Restricts transfers of the right to assert such defenses. Prohibits deeming a patent invalid on novelty or non-obvious subject matter grounds solely because such prior commercial use defenses are raised or established.

Section 6 -
Allows a person who is not the patent owner to request to cancel as unpatentable one or more claims of patent by filing a petition with the U.S. Patent and Trademark Office (USPTO) to institute: (1) post-grant review on any ground that could be raised under specified provisions relating to invalidity of the patent or any claim, and (2) inter partes review (replaces inter partes reexamination procedures) on specified novelty and nonobvious subject matter grounds based on prior art consisting of patents and printed publications. Limits the filing of petitions for post-grant review to the nine-month period beginning after the grant of patent or issuance of a reissue patent. Requires any petition for inter partes review to be filed after the later of: (1) nine months after the grant or reissue, or (2) the date of termination of a post-grant review. Directs the USPTO to make public data available on the length of time between the institution of, and issuance of a final written decision for, each post-grant and inter partes review. Prohibits the USPTO Director (defined as the Under Secretary of Commerce for Intellectual Property and USPTO Director) from authorizing: (1) inter partes review unless the petition shows a reasonable likelihood that the petitioner would prevail with respect to at least one of the challenged claims; or (2) post-grant review unless information in the petition, if not rebutted, would demonstrate that it is more likely than not that at least one of the challenged claims is unpatentable, or unless such petition raises a novel or unsettled legal question important to other patents or applications. Disallows: (1) post-grant review and inter partes review if the petitioner (or real party in interest) has filed a related civil action before filing the petition, and (2) inter partes review if the petition is filed more than one year after the petitioner is served with a complaint alleging infringement. Prohibits the petitioner from asserting claims in certain proceedings before the USPTO and International Trade Commission (ITC) and in specified civil actions if such claims were raised or reasonably could have been raised in the respective reviews that result in a final Board decision. Allows any person, at any time, to cite to the USPTO: (1) prior art bearing on the patentability of a claim, and (2) statements of the patent owner filed in a proceeding before a federal court or the USPTO in which the patent owner took a position on the scope of any claim of a particular patent. Requires, on written request of the person citing prior art or written statements, that that person’s identity be kept confidential. Sets forth the standards applicable to inter partes reexamination during the intervening period between the enactment of this Act and the effective date of inter partes review.

Section 7 -
Sets forth the Board’s required composition and duties. Allows appeals to the U.S. Court of Appeals for the Federal Circuit (CAFC) from specified Board decisions, including examinations, reexaminations, post-grant and inter partes reviews, and derivation proceedings.

Section 8 –
Allows any third party to submit any publication of potential relevance to a patent application (commonly referred to as preissuance submissions).

Section 10 -
Authorizes the Director, for a seven-year period and subject to conditions, to set or adjust by rule any fee established, authorized, or charged by the USPTO under specified federal patent and trademark laws. Requires the Director to notify Congress of (and publish in the Federal Register) certain proposed fee changes. Reduces certain fees to qualified small entities (including fees for prioritized examination of utility and plant applications) and any micro entity. Defines the term “micro entity” as a certifying applicant who: (1) qualifies as a small entity as defined in regulations issued by the Director; (2) has not been named as an inventor on more than four previously filed patent applications, as specified; and (3) has gross income below a designated level without having transferred ownership interest in the application to an entity with gross income exceeding such limit. Authorizes the Director to impose income, annual filing, and other micro entity qualification limits under provisions related to institutions of higher education. Establishes an additional fee of $400 for original patent applications filed non-electronically.

Section 11 -
Sets forth fees for filing, excess claims, examination, issue, disclaimer, appeal, revival, extension, maintenance, patent search, small entity, national fees (for certain international applications), and other specified fees. Establishes prioritized examination fees and a 15% surcharge for specified fees to be credited to the U.S. Patent and Trademark Appropriation Account, remain available until expended, and used only for specified expenses relating to patent applications. Terminates such surcharges and prioritized examination fees on the effective date of the setting or adjustment of the underlying fee pursuant to the Director’s exercise of authority under section 10 of this Act for the first time with respect to that fee.

Section 12 -
Establishes supplemental examinations to consider, reconsider, and correct information. Requires the Director to order reexamination if a substantial new question of patentability is raised by at least one item of information in the request. Requires the Director to confidentially refer to the Attorney General (DOJ) any material fraud on the USPTO that may have been committed in connection with a patent when the Director becomes aware of such fraud during an ordered supplemental examination or reexamination proceeding.

Section 13 -
Decreases the percentage of certain invention-related royalties and income that must be paid to the federal government and correspondingly increases the percentage that must be given to small business firms when a nonprofit organization has a funding agreement with the government for the operation of a government-owned, contractor-operated facility. (An existing provision defines the term “funding agreement” as a contract, grant, or cooperative agreement entered into between a federal agency and any contractor for the performance of experimental, developmental, or research work funded in whole or in part by the federal government.)

Section 14 -
Deems any strategy for reducing, avoiding, or deferring tax liability insufficient to differentiate a claimed invention from the prior art when evaluating specified conditions of patentability.

Section 15 -
Prohibits using a failure to disclose the best mode as a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable.

Section 16 -
Allows virtual markings (markings that direct the public to a freely-accessible Internet address where a patented article is associated with its patent number) to provide public notice that an article is patented. Requires the Director, within three years, to report to Congress on the ability of the public to obtain information from such virtual marking and related legal issues. Revises provisions addressing false marking actions to: (1) prohibit anyone other than the United States from suing for the applicable penalty, and (2) allow only a person who has suffered a competitive injury to file a civil action for recovery of damages adequate to compensate for the injury. (Current law allows any person to sue for a penalty of $500 for every such offense, in which event one-half is awarded to the person and one-half to the United States.) Exempts from false marking liability virtual markings with matter relating to a patent that covered that product but has expired.

Section 17 -
Bars using an accused infringer’s failure to obtain the advice of counsel to prove that any infringement was willful or induced.

Section 18 -
Requires the Director to establish, with specified standards and procedures, an eight-year transitional post-grant review proceeding for reviewing the validity of covered business-method patents (claiming a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except technological inventions).

Section 19 -
Amends the federal judicial code to deny state courts jurisdiction over legal actions relating to patents, plant variety protection, or copyrights. Grants the CAFC exclusive jurisdiction of appeals relating to patents or plant variety protection. Adds procedural provisions regarding joinder of accused infringers in patent cases. Provides for the removal to a U.S. district court of legal actions involving patents, plant variety protection, or copyrights, and for the remand of unrelated matters.

Section 21 -
Permits the USPTO to pay subsistence and travel-related expenses of persons attending certain USPTO-conducted intellectual property programs who are not federal employees. Authorizes the Director to fix a basic pay rate below a certain level for administrative patent and trademark judges appointed under specified provisions.

Section 22 -
Establishes in the Treasury a Patent and Trademark Fee Reserve Fund in which any USPTO fee collections for a fiscal year in excess of the amount appropriated for that fiscal year must be deposited. Directs, to the extent and in the amounts provided in appropriations Acts, amounts in the Fund to be available until expended only for obligation and expenditure by the USPTO in accordance with provisions requiring: (1) specified patent fees and any related surcharges to be used only for expenses relating to processing patent applications and other activities, services, and materials relating to patents and to cover a share of administrative costs; and (2) specified trademark fees collected under the Trademark Act of 1946 and any related surcharges to be used only for such costs relating to trademarks.

Section 23 -
Requires the Director, within a three-year period using specified criteria, to establish at least three U.S. satellite offices for the USPTO and submit a related report to Congress.

Section 24 -
Designates the satellite office to be located in Detroit, Michigan, as the “Elijah J. McCoy United States Patent and Trademark Office.”

Section 25 -
Authorizes the USPTO to establish regulations providing, at the request of the applicant, prioritized examination of applications for products, processes, or technologies important to the economy or national competitiveness without recovering the aggregate extra cost of providing such prioritization.

Section 26 -
Requires the Director, within four years, to submit a report to Congress assessing federal patent policies, the implementation of this Act, competitiveness of U.S. markets, and access to capital for investment by small businesses.

Section 27 -
Requires the Director to conduct a study and report to Congress on effective ways to provide independent, confirming genetic diagnostic test activity where gene patents and exclusive licensing for primary genetic diagnostic tests exist. Defines “confirming genetic diagnostic test activity” as the performance of a genetic diagnostic test, by a genetic diagnostic test provider, on an individual solely for the purpose of providing the individual with an independent confirmation of results obtained from another test provider’s prior performance of the test on the individual.

Section 28 -
Requires the Director to establish a Patent Ombudsman Program using available resources.

Section 29 -
Directs the Director to establish methods for studying the diversity of patent applicants, including applicants who are minorities, women, or veterans. Prohibits using the results to provide any preferential treatment to patent applicants.

Section 30 -
Expresses the sense of Congress that the patent system should protect small businesses and inventors from predatory behavior that could result in cutting off innovation.

Section 31 -
Requires the Director to study and report to Congress on how the USPTO, in coordination with other federal agencies, can help small businesses with international patent protection and whether a revolving fund loan or grant program should be established to help pay the costs of filing, maintaining, and enforcing such international patent applications.

Section 32 -
Directs the Director to support intellectual property law associations in establishing pro bono programs to assist financially under-resourced independent inventors and small businesses.

Section 33 -
Prohibits issuing a patent on a claim directed to or encompassing a human organism in any application pending or filed on or after the enactment of this Act.

Section 34 -
Directs the Comptroller General (GAO) to submit a report on the consequences of litigation by non-practicing entities, or by patent assertion entities, related to patent claims under specified federal patent laws and regulations.

Section 35 -
Declares that this Act shall take effect one year after enactment and apply to any patent issued on or after that effective date, except as otherwise provided.

Section 37 -
Sets forth a provision concerning calculation of the filing period for patent extension applications related to drug products and certain other items subject to regulation under the Federal Food, Drug, and Cosmetic Act.

Also See:

USPTO and KIPO Announce Launch of Cooperative Patent Classification System Pilot

Strong Growth in Demand for Intellectual Property Rights in 2012 – WIPO

USPTO Updates Professional Conduct Rules and Registration Examination for Patent Attorneys

Expanded SHIELD Act Filed to Combat Patent Trolls

USPTO Publishes Final Rules and Guidelines Governing First-Inventor-to-File