Wealth of Ideas, November 2011

Last month, we gave a partial timetable of some of the changes that the America Invents Act will make to U.S. patent law as we know it, and when they take effect. In this month’s follow-up article, we’ll explore how the AIA is likely to affect the unique contingency patent enforcement business model that General Patent pioneered and has fine-tuned over the last 24 years.

First-to-File
The biggest change in U.S. patent law – the switch from a first-to-invent to a first-to-file regime – will have the greatest impact on the independent inventors, small businesses, engineers and scientists, universities, hospitals, research labs and others that are seeking patents for their inventions. Since GPC doesn’t prosecute patents – and deals primarily with issued patents that have been infringed – this change will have a significant effect on our clients, but little direct impact on our patent licensing and enforcement services.

Many IP experts have predicted that the AIA’s change to a first-to-file system will result in a flood of new patent applications, many of which will be of relatively poor quality. And as retired Federal Circuit Judge Paul Michel put it, the America Invents Act will likely create “heightened uncertainty for the rest of the decade” because of its many “poorly written or ambiguous” sections.

When General Patent manages and finances a patent enforcement campaign, we take responsibility for the client’s total patent portfolio, and that sometimes includes managing patent applications, filing for continuations or divisionals, or even filing for new patents. So the impact of the change to first-to-file will affect General Patent with just a small number of clients.

The change to first-to-file will adversely affect inventors, small businesses, universities and other organizations that do not have large, in-house legal departments. To this end, General Patent is sponsoring a White Paper, “What Innovators Need to Know – and Need to Do – under the America Invents Act,” that is being published by American Innovators for Patent Reform, an association that advocates for the innovation community in regard to patents and patent enforcement.

Post-Grant Review and Supplemental Examination
General Patent Corporation faces many challenges when we undertake a patent enforcement campaign on behalf of a patentee whose patent or patents have been infringed. One of the most common challenges we face is when the infringer responds to a patent infringement lawsuit filing by claiming that our client’s patent is invalid. Prior to the AIA, infringers could do this by requesting an ex parte or inter partes reexamination from the U.S. Patent and Trademark Office (USPTO). The America Invents Act gives infringers an additional avenue for challenging the validity of a patent: Post-grant review.

Post-grant review will allow a third party to request a review of a patent issued within the last nine months, and the basis for challenging the patent can be any kind of prior art (not just issued patents and printed publications) and almost any grounds, excluding the best mode requirement. Post-grant review differs from the current reexamination procedure which could only be based on prior art in issued patents and printed publications.

Ex parte reexamination was not affected by the AIA, but inter partes reexamination – now renamed “inter partes review” – had only required that the challenger raise a “substantial new question of patentability.” Under the new law, it goes so far as to require that “there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.” Inter partes review will not be allowed until nine months after a patent has issued or the date of termination of a post-grant review, whichever is later.

A patentee can initiate a review of his (or her or its) own patent, known as a “supplemental examination,” to correct defects in an issued patent. GPC has voluntarily put patents into reexamination in the past to resolve prior art issues and essentially strengthen the patent before launching an enforcement campaign, so we will likely be using supplemental examination for this purpose.

Post-grant review, inter partes review and supplemental examination go into effect September 16, 2012.

Change in Best Mode
Although existing patent law still requires a patent applicant to disclose the “best mode” of practicing the invention, failure to do so will no longer be a litigation defense for infringers, so it cannot be used to invalidate or cancel any patent claims. This change took effect September 16, 2011 when the AIA was signed into law.

End to Third-Party False Marking Claims
The America Invents Act ends false marking claims (claims against companies that sell products with invalid or expired patent numbers) by third parties. Only a party – such as a competitor of the company selling falsely marked products – that can claim it was harmed can now file such claims. General Patent is not involved in false marking issues, so this change in the law has little effect on the contingency enforcement model.

Other Changes to Patent Law
There are several other changes that the AIA makes to patent law – such as a ban on patenting tax avoidance schemes or patenting human organisms – that will have no impact on patent enforcement, but may affect the various types of clients we serve.

Greatest Effect of America Invents Act
Of all of the changes to U.S. patent law, the one most likely to have an impact the GPC contingency patent enforcement model is the new post-grant review procedure, which gives infringers yet a third procedure by they can assassinate a patent they are infringing! And General Patent will address those challenges as part of the comprehensive patent enforcement campaign we finance and manage on behalf of our clients.

The other longer-term effect could be fewer issued patents as the change to first-to-file will make it more difficult and more expensive for innovators to secure patents for their inventions, and it’s likely that many businesses will take the route of protecting their new technologies as trade secrets.

AIA Bottom Line
Prosecution: It could be more expensive to secure a patent for an invention, and it will probably take longer to receive new patents as the Patent Office will very likely be flooded with poor quality patent applications.
Innovation: Some businesses will opt to keep their new technologies as trade secrets, rather than file for patents.
Enforcement: It will be more expensive (but General Patent will bear that cost as part of our contingency patent enforcement model) to enforce a patent, and it could take longer for some patent infringements claims to be resolved.
Patent Office: The most needed reform to U.S. patent law – full funding for the USPTO – is not included in the new law!