Famous for nuanced comments, Alan Greenspan is very clear about the future of intellectual property in his recently published memoir, The Age of Turbulence: “How appropriate is our current system — developed for a world in which physical assets predominated — for an economy in which value increasingly is embodied in ideas rather than tangible capital?”
Since the time of the ratification of the U.S. Constitution, which vests in Congress the power “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries,” Congress has sought to improve the patent system about every 50 years. With the passage of the would-be Patent Reform Act of 2007 (H.R. 1908) in the House of Representatives, the Senate is now on the brink of deciding similar legislation.
First-to-File System
On September 26, 2006, the United States, Japan and 41 other countries acceded in principle to grant patents based on a first-to-file system, though no treaty was signed. Unlike first-to-file, the existing first-to-invent principle is unique to the United States.
The first patent statute of 1790 required a patentee to be “the first and true inventor.” The 1836 Patent Act specifies a procedure to address the “question of priority of right of invention,” so as to determine the true inventor between two competing patentees. Courts have interpreted the procedure to allow a patentee, who was the first to invent, to be the true inventor, notwithstanding the fact that a later “inventor” may have first reduced the invention to practice.
In implementing the first-to-file system, H.R. 1908 defines the “effective filing date” of a claimed invention as the filing date of the patent or the application for patent containing the claim to the invention. The term “claimed invention” is defined to mean the subject matter defined by a claim in a patent or an application for a patent. (A claim is a paragraph appearing at the end of a patent or a patent application that describes the boundaries of the intellectual property.)
Several amendments were made to a section of the Patent Act redefining what is old and what is new. A claimed invention that is old cannot be patented. H.R. 1908 somewhat reaffirms the statutory bar in that a claimed invention cannot be patented if it was already patented, described in a printed publication, is in public use or was on sale more than one year before the effective filing date of the claimed invention.
A one-year grace period is given to file a patent application after public disclosures made by the inventor. The one-year grace period also is given to the inventor to file the patent application if the public disclosures were made by others who obtained the subject matter either directly or indirectly from the inventor.
Provisional Patent Applications
By coupling the effective filing date of a patent application with the presence of a claim to the invention, H.R. 1908 diminishes the power of provisional patent applications. Provisional patent applications are not required to contain claims. Thus, provisional patent applications are typically filed without claims, which due to the exigency of a variety of situations means that insufficient time is available to fully flesh out the scope and bound of the claimed invention.
Patentees can perfect provisional patent applications by preparing and filing corresponding non-provisional patent applications before the filing anniversary expiry of the provisional patent applications. The filing date of provisional patent applications can be used to defeat prior art that arises after the filing date, maintaining the “newness” of the invention. Given that the effective filing date of a patent application is tied to the presence of a claim in H.R. 1908, presumably a provisional patent application without a claim lacks an effective filing date, exposing the invention to prior art that postdates the application.
Patent Derivation
Congress reasoned that the first-to-file system would streamline the U.S. patent process; it would be simple, unambiguous and user friendly; and it would remove contentiousness about who invented something first. H.R. 1908 removes from the Patent Act the section pertaining to interferences, which contains procedures to determine the true inventor under the present first-to-invent principle; but in its place, H.R. 1908 adds procedures for determining whether a patentee derives his invention from another inventor.
More specifically, the procedures allow the Patent Trial and Appeal Board (formerly the Board of Patent Appeals and Interferences) to determine the right to a patent based on derivation — not on interference; to correct the naming of the inventor in any patent application or patent at issue; and to render a final decision on the right to patent, which effectively is the final refusal of a patent by the U.S. Patent and Trademark Office. H.R. 1908 facilitates settlement between parties to a derivation proceeding by the joint filing of a written settlement statement or by referring such a proceeding to arbitration.
Interferences
H.R. 1908 does not address the situation where two different patentees file an identical claimed invention on the same day in two different patent applications. If a derivation proceeding were to ensue and were inconclusive about whether one patentee derives from the other, it would seem that courts would be likely to resort to the familiar interference system, which has been jettisoned by H.R. 1908, to determine the first inventor. It is unlikely that U.S. courts would adopt the uninterested approach of other countries in withholding the grant of a patent altogether if multiple patentees can claim the right to an invention based on the same filing date.
Patent Review Proceedings
H.R. 1908 establishes opposition procedures for canceling any claim of an issued patent on the grounds of invalidity. Currently, invalidation is typically pleaded and proved as part of a mandatory counterclaim in patent infringement litigation. The canceling proceeding may be another avenue separate from litigation to preemptively attack the validity of patents.
Unlike a reexamination proceeding, which is also a form of post-issuance opposition, under H.R. 1908 a canceling proceeding must be filed within 12 months after the issuance of a patent. A reexamination request may be filed at any time. No canceling proceeding may be requested based on the best mode requirement of the Patent Act, which requires a patent to teach one with ordinary skill in the art a preferred embodiment — the best way to make and use the invention.
Interestingly, H.R. 1908 allows a patent owner to amend the claims to avoid a cancellation attack. However, no new matter and no enlargement of the claim scope are allowed. A timely written settlement before the rendering of a decision of the Patent Trial and Appeal Board will terminate the canceling proceeding.
Patent Infringement Litigation
Currently, damages for patent infringement cannot be less than a reasonable royalty for the use made of the invention by the infringer. H.R. 1908 prescribes that a reasonable royalty should be based on a portion of the economic value contributed by the patent’s specific contribution over the prior art.
H.R. 1908 requires courts to exclude from the analysis the economic value attributable to other parts or steps of the infringing product or process. However, a reasonable royalty can be based upon the entire market value of the infringing product or infringing process if the patent’s contribution is the predominant basis for market demand of the infringing product or infringing process.
Miscellaneous
H.R. 1908 makes a multitude of further changes to the Patent Act:
- Patent litigants are restricted to pursuing litigation in a venue that has a direct relationship to the defendant and the plaintiff.
- An immediate appeal is permitted to the Court of Appeals for the Federal Circuit from an interlocutory order or decree construing claims in patent infringement cases.
- Tax planning methods (such as a strategy, technique or scheme that reduces, minimizes or defers individual tax liability) are unpatentable subject matter.
- Inequitable conduct is a defense to patent infringement.
- The failure of an inventor to comply with the best mode requirement is no longer a defense to patent infringement.
- Regulations promulgated by the United States Patent and Trademark Office (USPTO) are to be approved by Congress. Critics are quick to point out that such oversight is necessary, as evidenced by the recent adoption of controversial regulations by the USPTO to limit patent continuations, which were enjoined by a federal court in GlaxoSmithKline v. Dudas, No. 1:07cv1008 (E.D. Va. October 31, 2007).
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Peter Chu is a member of Christensen O’Connor Johnson Kindness PLLC, focusing on patents and other intellectual property assets in formulating business strategies. He is the founder of the Vietnamese American Bar Association of Washington and is also on the Board of Directors for the University of Washington School of Law Alumni Association. Chu left Saigon in 1978 and made his first journey back to Vietnam in May 2007 as a delegate with the Washington Secretary of State’s Trade Mission. After the mission, Chu was invited to Dallas to speak to Vietnamese government officials regarding U.S. laws connected with software.
