Publications: Impact of the Patent Reform Act

For the past 31/2 years, the patent world has been teetering on the brink of significant change. Proposed modifications to the U.S. patent laws — now embodied in pending legislation known as the Patent Reform Act of 2010 — would alter the patenting process and transform the way patent practitioners (qualified patent attorneys and patent agents) handle applications, from filing through issuance to enforcement.

From a first-to-invent system to a first-to-file system and from the elimination of interference practice to the creation of post-issuance opposition proceedings, the Patent Reform Act appears designed to bring U.S. patent laws closer in harmony with international practices. The Reform Act also will affect patent marking and patent damages, and provide patent owners with the ability to cure problems in their patents.

The U.S. is presently a first-to-invent system, meaning that inventorship as well as ownership rests in the first inventor to conceive and reduce to practice an invention.

This can be a complicated, factually intensive issue to determine. Currently, first-to-invent is determined by an interference in the U.S. Patent and Trademark Office (PTO), an administrative process and proceeding before the PTO, similar to litigation.

In an interference, the PTO decides which of two or more inventors truly was the first to invent the subject matter of the patent application. While it is relatively rare that two or more applications for the same invention are pending at the same time, the change to a first-to-file system will create a psychological need to rush to the PTO and file a patent application.

This need will affect how patent practitioners, businesses and individual inventors act in creating inventions and filing patent applications. Specifically, everyone and everything in the inventive process and preparation of the patent application process will need to speed up their activities: Inventors will need to quickly move from an inventive conception to a well-written invention disclosure; businesses will need to quickly obtain such disclosures and then review and approve them for filing; and patent practitioners will need to rapidly turn the disclosures into applications.

To this end, patent practitioners will rely more on filing provisional patent applications, informal patent applications neither searched nor examined by the PTO but held by the PTO for a year. An inventor is granted the filing date of the provisional application if the application meets certain requirements. This filing date can later be used if and when a utility patent application is filed.

Unlike utility patent applications, provisional patent applications are informal and less expensive than a utility patent application and will hold the inventor’s place (filing date) for up to one year, giving the inventor or his or her assignee time to decide whether to proceed with a more formal utility patent application.

The Reform Act also will put more pressure on patent practitioners and patent owners to more vigilantly monitor competitors’ issued patents and published patent applications and to take certain actions when warranted.

Similar to European practice, the Reform Act provides a nine-month window to file either an inter-parties review or a post-grant review of someone else’s issued patent. Under both review options, one can request cancellation of all or part of the patent. If the request for a review is granted, a quasi-judicial proceeding is initiated before a new board in the PTO.

In those proceedings, the patent owner is given at least one opportunity to cancel or substitute any challenged claims. Any outcome from the board can be appealed to the Court of Appeals for the Federal Circuit. The opportunity to appeal a decision by the board is significant because the party requesting the review will be forever stopped from raising such grounds again in any subsequent actions, such as litigation.

The Reform Act also affects a patent owner’s actions upon discovery of an infringing product. Under the act, it will no longer be sufficient to show the accused infringer simply had knowledge of the patent as a sole basis supporting a finding of willful infringement (such “willful” infringement allows a court to award up to three times the amount of any damages as well as the patent owner’s attorney fees against the infringer).

Moreover, the patent owner cannot rely on pre-suit notification of infringement to prove a defendant’s willfulness at trial, unless such notification includes an identification of the patent at issue and the accused product or process along with an explanation as to how such product or process infringes one or more claims of the asserted patent. One significant downside to providing such a detailed notification is that it enables the accused infringer to bring a declaratory judgment action against the patent owner regardless of whether the patent owner wanted to litigate or was prepared to litigate.

Following recent case law, the Reform Act codifies an “objectively reckless” standard for proving willfulness. It also changes the requirement for pleading willful infringement in a complaint, now requiring the patent owner to specifically state the allegations of willfulness. The expected result of these changes is that a finding of willful infringement will be more difficult to obtain and its role in patent infringement litigation will be reduced.

The act further attempts to limit the recent rash of false marking cases based upon products being marked with expired patent numbers or with the patent numbers not actually covering the products.

If the Reform Act is enacted, only those who have suffered a competitive injury due to false marking would be able to bring such actions. Additionally, the act provides a new mechanism for virtually marking products with their patent numbers. A product will simply have to be marked “patented” and include a freely accessible website address. The website can identify and list the products and their applicable patents. Under this approach, a company would no longer have to contemplate obtaining a new mold (which for certain industries can cost hundreds of thousands of dollars) when a patent is granted or expires. Instead, a simple change can be made at the specific website.

Considered in its entirety, the proposed Patent Reform Act will significantly alter how patent practitioners, patent applicants and patent owners interact and handle patent-related matters. In certain instances, it will increase pressure on everyone to diligently ensure rights and opportunities to obtain and attack patents are not lost.

In sum, the patent landscape is expected to significantly change if the Patent Act is adopted and those involved with patents directly or indirectly would be well served by talking to their patent attorney.

Reprinted with permission from Law Bulletin Publishing Company.