Wealth of Ideas, October 2011

The America Invents Act: What changes now, and what changes down the road?

Many changes ushered in by the recently enacted-into-law America Invents Act (AIA), including the new post-grant review procedures, will happen in a year or more. For example, post-grant review (an additional system for challenging a patent) takes effect September 26, 2012. And one of the most controversial changes in the bill takes effect after March 16, 2013: The change to a first-to-file patent system.

So what impact will the AIA have in the near term? Some changes are either already in place or soon will be:

• “Micro entities” applying for patents will have a 75% reduction in patent application fees.
• A 15 percent surcharge will be added to general statutory fees and patent maintenance fees.
• As of November 15, 2011, an additional $400 fee will be applied to all patent applications that aren’t electronically filed. However, this fee will be reduced by 50% for small entities.
• As of September 26, patent applicants can opt for a “Prioritized Examination” for a fee of $4,800 (reduced by half for small entities). This is the Track One expedited patent examination option that was supposed to begin in May 2011, but was put on hold indefinitely when Congress slashed the Patent Office’s budget earlier this year.
• As of September 16, two types of inventions became unpatentable: tax strategies and human organisms (i.e. the products of cloning—although the processes for cloning would still be patentable).

False Marking Lawsuits and Multi-Defendant Litigation

What other effects will the new law have? A number of changes are taking place with regard to litigation. Among them, the “false marking” provisions will require that any party suing another for false marking of patented products (either with an expired patent number or an irrelevant one) must have suffered some competitive injury in order to have standing to bring suit. A third-party can no longer bring a “qui tam” false marking lawsuit.

And, as we wrote in our Wealth of Ideas blog, the “anti-joinder” provision of the AIA will limit a plaintiff’s ability to file suit against multiple unrelated defendants. That change prompted a flurry of lawsuit filings in early September, when it became obvious that the bill would become law: 32 new multi-defendant lawsuits were filed, 16 of which had 10 defendants or more.

However, it looks like the District Courts might find a way to apply the law retroactively to existing lawsuits, as some District Courts have severed defendants from multi-defendant lawsuits when the defendants have not “engaged in the same transaction or occurrence.”

Gearing Up for First-to-File

Although the AIA’s most draconian change – the switch from the American first-to-invent to the European first-to-file – takes effect in 2013, inventors would do well to prepare themselves for it and other features of the AIA that may be detrimental to smaller entities.

Alec Schibanoff, executive director of American Innovators for Patent Reform (AIPR), said in an interview with Entrepreneur that the change to first-to-file will not only be very expensive (considering that it can cost $7,000-10,000 or more to file for and prosecute a patent application), it will likely result in many more patent applications being filed, but poorer quality patent applications as filers rush to get their applications in first, creating a flood of patent applications when the Patent Office is already facing a huge patent application backlog!

Many inventors will be forced to file a Provision Patent Application. Under the current first-to-invent system, an inventor has one year from the date that the invention is first published or offered for sale in which to file a patent application. Without that grace period, an inventor now needs to file as soon as possible since the actual date of the conception of the invention is no longer the issue, but on what date the patent application was filed.

Roadblocks to Innovation?

Despite its “small entity” and “micro entity” discounts on patent fees, the stumbling blocks the new law has created for inventors and small businesses has some patent experts speculating that more innovators will opt for trade secret protection instead of patenting their inventions, defeating the Founding Fathers’ concept of patents as a method to “promote science and the arts.” But trade secrets are only effective until a competitor reverse-engineers the product to discover the invention. The irony here is that if a competitor reverse-engineers an invention, and then files a patent application for that invention, the original inventor could be liable for infringement of his own invention!

The revamped patent system has the potential to make life (and patent protection) more difficult for individual inventors, entrepreneurs, universities, small businesses and patent owners of almost all stripes. With that in mind, American Innovators for Patent Reform is working with several patent attorneys to produce a comprehensive White Paper that addresses what innovators need to know about the new patent laws and – more importantly and practically – what they need to do differently under the new law – in terms of both patent prosecution and the licensing and enforcement of their patents.

The White Paper will be sponsored by General Patent Corporation, and it is projected to be completed in late October or early November.