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U.S. sees most significant patent reform in decades

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Indiana Lawyer Focus

Sweeping patent reforms became law Sept. 16 when President Barack Obama signed the America Invents Act, the most significant patent reform legislation in six decades. The AIA incorporates many changes and harmonizes U.S. practices with systems in place around the world, according to some Indiana lawyers. Some believe the revisions are more symbolic than practical, while others believe the changes will impact every aspect of how patent lawyers do their jobs.

“It changes how you go about getting a patent, defend or challenge a patent infringement case, when to file, the internal procedures for documenting patentable inventions … basically there’s a lot that has been affected and it influences all companies, start-ups and individuals big or small,” said IP attorney Todd Vare with Barnes & Thornburg in Indianapolis.
 

Todd Vare Vare

The U.S. House of Representatives passed the bill 304 -117 in June, and in early September the Senate voted 89-9 in favor of it. Research universities, technology firms and various business groups supported the changes, while most of the opposition came from small businesses that worried the reforms favored large firms with access to more capital.

Some changes will go into effect in 2011, while other aspects of the legislation will become effective in 12 or 18 months.

Specifically, the bill streamlines the patent process to eliminate the backlog of 680,000 patent applications and reduces the time it takes for a patent to be approved, currently three years. Reforms are also designed to reduce litigation and costs associated with challenging or defending a patent.

Most notably, the reforms bring the nation’s patent system into conformity with laws observed throughout the world by granting patent protection to the first person to file a patent rather than the current “first-to-invent” process.

Before the change, the existing first-to-invent standard used to determine patent ownership involved an inventor being able to demonstrate that he or she came up with an idea first. The requirements of that process involved steps patent holders and seekers frequently described as burdensome and full of delays in obtaining a patent. The “first-to-file” system gives priority in deciding who owns an invention’s patent to the first person or entity to file for the patent, regardless of the date of invention.


rost-stephen-mug.jpg Rost

Some Indiana attorneys think this new first-to-file process will create a race to the U.S. Patent & Trademark Office in order to obtain patent protection first. Stephen Rost with Taft Stettinius & Hollister said smaller companies will be under more pressure to file a patent application for each new development and invest more upfront to get that done, without knowing the potential for actually obtaining the patent.

Baker & Daniels attorney Adam Cox of Ft. Wayne isn’t sure if the new first-to-file system will have a practical impact, but he finds the change troubling.

“In the U.S., we’ve always valued individual rights and the image of the garage inventor is very pertinent in our culture,” he said, mentioning iconic inventors like Thomas Edison, Henry Ford, Bill Gates and Steve Jobs. “The thought of the garage inventor who invents first but delays filing and eventually loses to the big company who invents later but files faster is troubling. That is one reason we’ve always operated under the first-to-invent system, and this flips that notion on its head.”

But small individual inventors are often passionate and motivated to file quickly, so Cox says the impact may be less than critics expect. Rost said patent lawyers and patent agents may be asked to draft more patent applications because companies will be under increased pressure to file quickly. The number of provisional patent applications will likely skyrocket because they can be used as place holders until an actual patent can be officially requested, he said.

Other notable changes to U.S. patent laws include:

• Third parties are given the opportunity to challenge the patent office’s decision to grant a patent.

• Third parties may cite prior art to the patent office during prosecution of a patent application.

• Business method strategies to reduce taxes are not patentable.

• Only the government and those suffering a competitive injury will be allowed to sue for false patent marking.

• Failure to obtain the advice of counsel cannot be used to prove willful infringement.

• Creates a mechanism by which the patent office will reevaluate and possibly invalidate previously issued business method patents.

• Eliminates the requirement that inventors describe the “best mode” of making and using the invention as a basis for challenging the validity of a patent.

• Allows individual inventors or very small companies to file patent applications at significantly lower fees, allowing those small companies and inventors to afford filing a patent application where they might not otherwise be able to afford such an application.

The changes were designed to give the patent office more resources so it will do a better job of assessing patent applications, with the idea that rejecting bad patents will head off some litigation. The AIA has been promoted by the president as a job creator and a way to speed up the patent application process and end delays.

Half of the patents challenged in court are invalidated. The new law will allow anyone – including a company’s rivals – to scrutinize newly granted patents and give the patent office evidence to show why it should not be allowed.

“Whether these changes are viewed positively or negatively may actually depend on the type of client one represents,” Rost said.

More legal time will be needed to follow competitors’ filed patent applications and monitor those issues, Rost said, and that will increase the workload IP and patent-focused attorneys will have. Vare added on the flipside that companies won’t have to spend as much internally to document the invention process as they did in the first-to-intent system, compiling detailed lab notebooks and records.

“Anybody and everybody has an opinion about it being good or bad, but it is what it is,” Vare said. “As an attorney, you need to take advantage of the provisions you need and know what you might get burned by.”•
 

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