Status
Bill has been introduced in the House to the Judiciary Committee.
Analysis
What the Bill does
Changes the U.S. patent system to the “First to File” system
This Bill changes the U.S. patent system from the “first to invent” type to the “first to file” type, and brings it in conformity with the rest of the world.
Under the existing U.S. patent law, the right to patent the invention belongs to the person who was the first to invent, not the one who was first to file for the patent. The rationale is that such provision protects the small individual inventor who cannot rush to the patent office to get a patent. A common criticism of the U.S. system is that in practice this provision gives rise to expensive litigation over who was first to invent, and therefore, favors corporations with big money. Besides it is out of tune with the rest of the world.
The supporters of the existing “first to invent” system argue that, the rush to file will negatively impact the quality of invention disclosures in the patent, and increase patent malpractice suits, since any delay on the part of the patent attorney could result in not getting the patent at all.
Changes the patentability requirement of disclosure of the “best mode”
The bill eliminates the “best mode” requirement. Under the existing law, in order to obtain a patent the inventor must disclose the invention to the public. The disclosure must satisfy three requirements: “written description,” “enablement,” and “best mode.”
First, the inventor must provide a “written description” of the invention to prove that he is in possession of the invention. Second, the disclosure must be in sufficient detail so that it “enables” a person having ordinary skills in the art to practice the invention without undue experimentation. Third, the inventor must disclose the “best mode” for practicing the invention. The rationale is that the patentee may disclose enough detail to enable competitors to practice it, yet give them only the second best embodiment reserving the best for herself. For example, I could give you grandma’s secret recipe for baking a scrumptious rhubarb crisp and tell you that it works at a temperature range of 350-450 degrees, yet not tell you that the crisp comes out best at 430 degrees.
Best mode is a subjective test; the court looks at whether at the time of application the patentee knew about the best mode. Needless to say, it invites much litigation in patent invalidity challenges. Section 4 of the bill eliminates this requirement so that inventors will not have to disclose the best mode.
Imposes duty of candor on all associated with patent proceedings
Inequitable conduct by the patent applicant makes the patent unenforceable. Thus, accusation of inequitable conduct is a defense to patent infringement. The Federal Circuit has described the problem of frivolous accusations of inequitable conduct as a “plague” on the system which drives up the cost of litigation substantially.
To address this issue, Section 5 codifies the law related to inequitable conduct. It requires the PTO to establish appropriate regulations imposing a duty of candor and good faith on all involved with the patent proceedings, including both the patent applicant as well as the opponents. It also makes the PTO the sole adjudicator of misconduct accusations. Thus, there is no longer a defense of patent unenforceability due to inequitable conduct. Only when the misconduct amounts to an actual fraud on the PTO can the court hold a patent unenforceable. Lesser misconduct is referred back to the PTO.
Limits damages for infringement
The bill seeks to limit the amount of damages that a patent holder could collect from an infringer. Under the proposed Section 6, when determining the rate of reasonable royalty courts should consider various factors such as how much profit is attributable to the invention alone, what the business risks are, and whether additional features or improvements were added by the infringer.
Section 6 reduces the scope of “willful infringement” by raising the standard of proof required. Under the proposal, the patentee must prove that the accused infringer either deliberately copied the invention, or that he continued his infringing acts even after being notified by the patentee or by a court. In his defense the accused infringer can present evidence that he had an informed good faith belief that his conduct was not infringing.
This provision is in response to the criticism of the existing standard which discourages people from reading issued patents because of the potential liability for willful infringement.
Limits the patentee’s ability to get injunctions
The bill also addresses the contentious issue of the ability of the patent holder to get an injunction. Injunctions can be deadly for an accused infringer, as they can bring the entire production line of the company to a grinding halt, resulting in huge losses and forcing many companies to completely shut down. In an interesting industry split, software and IT industries appear to oppose injunctions, while biotech and pharmaceuticals seem to be in their favor.
Currently, courts are authorized to grant injunctions “in accordance with the principles of equity … on such terms as the court deems reasonable.” The proposed Section 7 adds that in assessing the fairness of an injunction courts should consider all facts and interests of all associated parties. Furthermore, a court must stay an injunction pending an appeal, if the court finds that the stay will not cause irreparable harm to the patentee and that the balance of hardships from the stay will not favor the patentee.
Regulates continuation applications
Section 8 of the bill addresses the conditions by which inventors may file continuation applications. A continuation application is a patent application that is based on the same information as an earlier-filed application by the same inventor, but contains different claims. It is treated by the PTO as though it were filed on the same date as the original application.
For example, a continuation application may be filed when the PTO makes final rejection of some of the claims in the original application, but the inventor wishes to pursue those claims again under the same priority date. Another common situation is when the inventor develops an improvement of the initially claimed invention and files a continuation to protect the new improvement.
A common abuse of the process occurs when an inventor files continuations just to keep the application pending and then adjusts the claims to cover subsequent products developed by others that are commercially successful. Section 8 purports to address this issue. It authorizes the Director of the PTO to regulate the circumstances under which continuations may be filed and be entitled to the priority date of the parent application.
Makes it easier to challenge bad patents
Section 9 of the bill institutes a “post-grant opposition procedure” to provide an inexpensive and efficient mechanism to handle challenges of patent invalidity, instead of having to resort to expensive litigation. The goal is to bring more certainty in the patent process, as well as keep the costs down.
Thus, a challenger may request a review within nine months of the grant of a patent. The review is performed by a panel of three administrative judges, who must hand the decision within a year (additional six months given upon showing of good cause). The scope of Discovery is substantially limited, which helps to curtail the costs. Either party wishing to oppose the decision retains full rights of appeal to the Federal Circuit.
Given that over 180,000 patents are awarded per year, it is not possible nor sensible to track each issued patent, analyze it for patentability requirements and file for a review within the narrow nine month time window. Therefore, the proposal provides a second window of opportunity for bringing a later review action to challenge the patent. Under this provision, an alleged infringer who has received a legal notice of infringement from the patentee may request a review within six months of receiving the notice.
Under existing law sequential challenges to the validity of a patent are prevented. Thus, if a third party (often the accused infringer) brings a reexamination proceeding in the PTO and loses, he may not sue again in court. This is known as “Inter partes reexamination estoppel.”
Here is what happens. A patent is issued and a challenger requests a re-examination. The request must include any prior art references that were not considered previously and an explanation as to why they are pertinent. The PTO decides if the prior art raises a “substantial question of patentability.” If the answer is no, then the matter is closed and there is no further appeal. If the answer is yes, examination proceeds further. The patentee gets to argue his side or amend the claims and the challenger gets to rebut. If the challenger loses, she is later estopped from making any arguments that “could have been raised” in the rehearing.
This process is thought to be biased in favor of the patentee. Proposed Section 9(d) strikes this limitation, so that when the same challenger challenges the patent again she is estopped only as to the arguments she actually made in front of the PTO.
Institutes universal 18-month publication rule
- Section 9 mandates that all applications be published 18 months after the earliest filing date. Universal publication after 18 months has been a norm in the rest of the world. However, in the U.S. patentees who do not wish to file for a foreign patent can opt for non-publication of their patent application. The proposed rule eliminates this anomaly of the U.S. patent law. This is a welcome change which will lead to greater disclosure and sharing of information.
Allows third parties to submit prior art
Today in deciding whether an invention is obvious in light of the prior art, patent examiners rely on the prior art information uncovered during their own searches and the information supplied by the inventor. Under Section 10, public will have a chance to submit prior art references to the PTO.
Whoever submits the reference must explain the relevance of the reference and pay a fee (to be determined by the Director of the PTO). The fee is meant to defray PTO expenses and discourage frivolous submissions. This pre-issuance provision is aimed at improving the quality of patents by giving examiners greater access to prior art when deciding the non-obviousness of the patent.
What the Bill does not do
While the bill makes some welcome changes, it also leaves some concerns unanswered. Particularly disappointing is the fact that the bill does not attempt to address the fundamental problem of improving the quality of the patents being issued.
Reinvigorate the Non-obviousness standard
In order to be patented an invention has to pass the statutory tests of patentable subject matter, utility, novelty, non-obviousness and disclosure. The non-obviousness standard precludes patenting if the differences between the invention and the prior art are such that the subject matter as a whole would have been obvious to a person of ordinary skill in the art. In recent years the non-obviousness standard has been diluted through a series of Federal Circuit decisions. Two independent and comprehensive studies, by FTC and NAS, have identified this problem and recommended that the non-obviousness standard be tightened. The proposal allowing third parties to submit prior art is a move in that direction, but Congress needs to take further measures to address this problem head-on.
Increase PTO capabilities
Part of the reason for the poor quality of patents is due to the PTO’s inability to scrutinize each application carefully. Today the average time spent by a patent examiner on an application is less than twenty hours. The Patent Reform proposal should ensure that the PTO receives adequate resources to improve its performance.
Institute the experimental use exemption for universities
Both the NAS and FTC, as well as many others, have criticized the absence from the U.S. patent system of a well-defined exemption for research activity from infringement liability.
- In the 2002 case of Duke v. Madey, the Federal Circuit court ruled that even noncommercial scientific research conducted in a university is not protected from patent infringement liability. In the court’s words “the profit or non-profit status of the user is not determinative.” This is an awful decision which has the effect of chilling academic research by adding legal costs and delays, particularly for disciplines in which foundational discoveries and research tools are commonly patented. The Patent Reform process cannot be complete without instituting an experimental use exemption.
