US Patent Law Reform 2009
As of August 1, 2009, S515 has been reported out of the Senate Judiciary Committee, but not voted on by the Senate as a whole. House Bill HR 1260 still awaits committee action.
The main features of the bills are as follows:
1. Change in Novelty/Statutory Bar provisions (Section 2 of S 515; Section 3 of HR 1260)
(A) prior patenting, printed publication, public use, placing on sale or “otherwise” making available to the public anywhere in the world more than one year before the effective filing date will be a bar. The “effective filing date” is the date of filing of an application containing a claim to the invention or a priority date afforded under any of section 119, 120, 121, 365(a), (b) or (c).
(B) any of the above acts within one year prior to the effective filing date will also be a bar unless the act was by or an inventor, joint inventor or others obtaining the disclosed subject matter directly or indirectly from the inventor or joint inventor or is by a third party but follows such a disclosure by or deriving from the inventor or joint inventor .
(C) Furthermore the contents of any earlier-filed but later-published application (apparently including a PCT application designating the US irrespective of the language of publication) or patent: will also be a bar unless any of the exceptions in (B) apply or the prior application was commonly owned or subject to an obligation to assign to common ownership no later than the effective filing date. (“Common ownership” includes being subject to a joint research agreement similar to the current provisions of CREATE.
As a consequence of these changes the possibility of registering an invention under the statutory invention scheme is repealed.
Provisions are made to replace the current interference proceedings by derivation proceedings before the Patent Trial and Appeal Board (which will replace the current Board of Patent Appeals and Interferences) to enable a determination to be made as to whether a prior publisher etc. or applicant had derived the subject matter in question from the patent applicant. It will be permissible for contesting parties to settle issues of derivation by agreement or submit them to arbitration. Agreements shall be accepted by the Board unless :inconsistent with the evidence of record and at the request of “a party” to the proceeding be kept confidential. Arbitration awards will be dispositive between the parties but unenforceable until notice is given to the PTO. Civil actions with respect to determinations of the Board in derivation proceedings are possible in the same manner as at present in interference proceedings.
The House bill makes all of these changes conditional on patenting authorities in “Europe and Japan” adopting a grace period “substantially similar” to that of the US. There is no equivalent provision on the Senate Bill.
The Senate bill on the other hand restricts outsourcing of searching and examination, to the extent it permitted by treaty obligations, holding these to be “sovereign functions that shall be performed in the US by US citizens employed by the US government.
1. Addition of “otherwise” making available to the public to the grounds on which novelty may be destroyed on its face adopts a European standard. It remains to be seen how this will be applied in practice. Earlier bills attempted to define this in terms of reasonable accessibility etc. No such attempt is made in either of the present bills.
2. The ability to establish a publication date prior to a third party independent disclosure raises interesting issues. Particularly in the absence of any prior user defense to protect that third party from a subsequent law suit.
3. Prior proposals for amendment dropped the “on sale” bar. The present bills make the bar a world-wide one.
2. Assignee Filing, Oaths and Declarations (Section 3 of S 515, Section 4 of HR 1260)
Both the House and Senate versions simplify oath and declaration requirements and permit statements currently required in the oath or declaration to be incorporated into an assignment document filed at the PTO instead, as long as the statements are accompanied by an acknowledgment of the penalties accompanying any false statement set out in 18 USC 1001. Required statements are that the application was made or authorized by the affiant or declarant and that he or she believes him or herself to be the inventor or a joint inventor of the invention claimed. The Director of the PTO is given te power to provide for additional required statements. .
The Senate bill, but not the House bill, also provides for filing in the name of an assignee, but only “where appropriate to preserve the rights of the parties” Where this is done, the patent will issue to the real party in interest.
The reduction in the number of papers that will need to be signed is a useful improvement, as would be the change proposed by the senate bill to possibly liberalize the circumstances where filing may be by an assignee and have an application filed by an assignee mature into a patent owned by the assignee. .
3. Compensatory Damages (Section 4(a) of S 515, Section 5(a) of HR 1260)
It was the inability of pharma and telecom to reach agreement on this issue that thwarted the 2005 and 2007 attempts at patent law reform.
The bills in the House and Senate have in common that the judge should have a greater role in determining how damages are to be calculated, while leaving the ultimate determination to the jury if there is one.
The House bill addresses the issue of how to calculate a reasonable royalty, which both bills, like the current law, sets out as the minimum amount of damages that may be awarded. To do this the court must determine whether a showing has been made that the claimed invention’s specific contribution over the prior art is the predominant basis for market demand for an infringing product. If so damages may be calculated on the entire market value of the infringement. Where there is established non-exclusive licensing such as to establish a “general marketplace”, reasonable royalties for infringements may be based on the terms of such licensing. In other cases, the court “shall make an analysis to ensure that aa reasonable royalty is applied only to the portion of the economic value attributable to the claimed invention’s specific contribution over the prior art”. Other factors that the court “determines to be appropriate” may also be considered.
The Senate bill requires the court to make a determination of the methodology to be used in calculating damages and requires that in general the parties make written submissions as to the methodologies and factors they wish to have set out in jury instructions by “no later than the final pretrial order”. The court or jury is to consider only those methodologies for which for which there is “legally sufficient evidentiary basis” and evidence shall be permitted only that is “relevant to the methodologies and factors that the court determines may be considered in making the damages determination.
There is now some distance between the House and Senate approaches. However, bot aim at keeping extraneous information away from a jury and it is likely that a final compromise along these lines will be reached. It seems, however, that any attempt to make the court make a determination of whether an infringement sells well because of the fact that it incorporates the novel features of the patent or fo some other reason is fraught with difficulty in the real world.
4. Increased Damages (Section 4(a) of S 515, Section 5(a) of HR 1260)
Both bills confine these to acts of willful infringement and define this as acts occurring after written notice from the patentee, intentional copying of a patented invention, knowing it to be patented, or recidivism. Both bills require clear and convincing evidence. The Senate bill terms such acts as “objective recklessness.
Both bills provide for defense based on reasonable reliance on counsel’s advice, attempts to modify to avoid infringement and other evidence of good faith. Both bills prevent the plaintiff from relying on absence of counsel’s opinion as evidence of bad faith and both delay any pleading of willful infringement until infringement, validity and enforceability have been found.
5. First Inventor Defense (Section 4(b) and 4(c) of S 515, Section 5(b) and (c) of HR 1260)
Contrary to what had been proposed in previous reform bills, neither of the present bills provides for an extension of the first inventor defense to patents for categories of invention other than “any method of doing or conducting an entity’s business”, although both bills call for a report to Congress on this subject within two years based on a comparative study of the impact of such rights on innovation, and start-ups in the EU, Japan, Canada and Australia and an analysis of the legal and constitutional issues that might arise if there were to be a change in US law on this subject.
For the types of invention covered, however, both bills extend the protection afforded to a party being sued if it had itself been a prior user of the invention is expanded to cover “the person who performed the acts or caused the performance of the acts necessary to establish the defense as well as any other entity that controls, is controlled by, or is under common control with such a person”, but is not licensable or transferable other than with the enterprise or line of business to which it relates.
6. Virtual Marking (Section 5(e) of S. 515)
The Senate bill permits the marking requirements of 35 USC 287 to be met pacing information on the patented article that uses the word “patent” or “pat” and directs the public to a free internet site that associates the patented article with the patented item.
Such a change would avoid the problem that may exist at present of needing to remove references to expired patents from products being sold.
7. Citation of Prior Art (Sections 5(a) and 7 of S. 515, Sections 6(a) and 9 of HR 1260)
Both bills provide that prior to grant, the ability of third parties to submit prior art is amended to permit such submissions up to the earlier of at least six months after publication or the date of allowance
Both the Senate and House bills expand upon the information that may be placed on record in the PTO on any patent to include written statements made by the patent owner in federal court or PTO proceedings as to the position taken by the patent owner as to the meaning of one or more claims. The House bill would add statements made in ITC proceedings to the list. Statements made in this way will be able to be used only for purposes of claim interpretation in re-examination proceedings.
The House bill would also allow submission of evidence relating to prior use or sale more than one year before the effective filing date to the categories of information that may be placed on record.
8. Cancellation Proceedings (S 515 Section 5(f), HR 1260 Section 6(h)).
Both bills have the same provisions. The main features are as follows:
a) Proceedings can be instituted only within one year of grant of the patent or with the consent of the patent owner.
b) Cancellation may be sought on any ground of invalidity that can be raised as a defense in an infringement action except failure to disclose the best mode of carrying out the invention.
c) No presumption of validity will apply to a patent during cancellation proceedings.
d) Petitions for cancellation can only be made by parties who have not previously petitioned for cancellation of the same patent and will require submission of evidence in support of allegations of the invalidity of any claim. Furthermore if a court in a civil action finds that the claims in question were not invalid, cancellation actions cannot be brought or continued against such a claim on any ground that the party or its privies raised or could have raised in the civil action.
e) Petitions for cancellation will be subject to an initial review to determine whether “the information presented” (possibly after a request from the PTO for further information) “provides sufficient grounds to believe that there is a substantial question of patentability concerning one or more claims of the patent at issue” There is to be no review of determinations made on this issue.
f) The Patent owner will be entitled to respond and submit evidence if a determination is made that the petitioner has raised a substantial question of patentability.
g) Discovery is to be permitted, subject to rules made by the Director of the PTO, but limited to “evidence directly related to factual assertions advanced by either party”. Rules are to set out procedures “consistent with the purpose and nature of the proceeding”
h) Amendments will be permitted during cancellation proceedings only to cancel a challenged claim, replace a challenged claim or to amend other parts of the patent. The
“scope of the claims” may not be “enlarged”.
i) Final decisions of the Patent Trial and Appeal Board are to be made within one year of the dare of institution of the proceeding, subject to a possible six months extension “for good cause”.
j) At any time before the board’s decision, the parties may settle. However, they must file full details of the settlement which will be available to “government agencies on written request or any person showing good cause” bay otherwise can be kept from public view.
k) Decisions of the Board are to be appealable by either party.
l) Decisions in favor of the patent owner have an estoppel effect in other proceedings for “any ground that the cancellation petitioner raised during the” cancellation proceeding. However settlement agreements will have no estoppel effect.
9. Inter Partes Re-Examination (S 515 Section 5(c), HR 1260 Section 6(c))
Both the House and the Senate bills transfer the conduct of inter partes re-examination to administrative patent judge and provide that the PTO will set up new rules for inter partes reexamination. Procedure is, however, to be modified so as to give the requester the opportunity to comment on official actions issued during reexamination as well as on the patent owner’s responses, sixty days now to be allowed for such comments. Additionally, at the request of either party, there will be an oral hearing prior to a decision unless the APJ finds “cause lacking for such hearing”. Furthermore, both bills remove from the estoppels arising from any determination made in inter partes re-examination any estoppel relating to matters that could have been raised but were not.
The House bill, but not the Senate, would add evidence of prior use or prior sale more than one year prior to the effective filing date to the grounds on which re-examination can be requested.
It seems that this enhancement of inter partes re-examination is part of a compromise wherein the term within which cancellation proceedings can be brought has been restricted and no second window of opportunity for bringing cancellation actions provided for as had been the case, and a source of controversy, in earlier proposals for reform.
In response to allegations of undue forum shopping, both bills contain venue provisions. The Senate bill simply requires a district court hearing “any civil action arising under any Act of Congress relating to patents” to transfer the case to a venue that is “clearly more convenient” than its own if requested to do so. The House bill is more complicated barring “the manufacture of venue” to “invoke the venue of a specific district court” and restricting venue in patent case (but subject to some exceptions) to districts where the defendant has its principal place of business or is incorporated, where the defendant has committed “substantial acts of infringement” and has a “regular and established physical facility” that constitute a “substantial portion” of its operations, or in the case institutes of higher education, non profits and individuals who qualify as micro entities, where the plaintiff or primary plaintiff resides. Furthermore, the defendant will have the right to request transfer on grounds of convenience if such transfer would not cause undue hardship to the plaintiff.
11. PTO Rule-Making Authority (S 515 Section 9 HR 1260 Section 11)
The Senate and House bills are the same, Contrary to proposals in previous reform bills, the proposed changes in PTO rule-making are confined to fee-determining issues. However, the change is a significant one in that it would give the Director the power to set all fees for activities of the PTO as long as such fees are “set to reasonably compensate the Office for services performed”. At present, much of this power lies with Congress, with fees being specified in 35 USC 41 or 35 USC 376.
12. Best Mode Requirement (Sections 5(f) and 14 of S 515, Section 6(h) of HR 1260
The Senate bill removes failure to disclose the best mode from the list of possible invalidity defenses to an infringement action and excludes such a ground from grounds on which a petition for cancellation of a patent may be filed. The House bill simply excludes the best mode requirement from the possible grounds to be used in a cancellation action.
The effect of the Senate proposal is difficult to understand if the best mode requirement is retained in 35 USC 112. Would deliberate failure to disclose a best mode be a possible ground of unenforceability as being inequitable conduct?
13. Interlocutory Appeals (S 515 Section 8(b) HR 1260 Section 10(b))
Both bills provide for interlocutory appeals from district court claim construction. The House bill gives the district court discretion as to whether to approve an application for an interlocutory appeal. The Senate bill limits the possibility of interlocutory appeal to the situation where the district court “finds that there is a sufficient evidentiary record and an immediate appeal from the [claim construction order] (A) may materially advance the ultimate termination of the litigation, or (B) will likely control the outcome of the case, unless such certification is clearly erroneous”
Both bills (S. 515 Section 12, HR 1260 Section 13) provide for the creation of a new category of patent applicant, who would under the House venue provisions have the right to bring a patent action on “home turf” and would possibly be entitled to pay fees at a lower rate than current small entity rates, which category will be designated a “micro-entity”
Both bills (S 515 Section 10, HR 1260 Section 12) amend the residency requirement for judges so that judges of the Federal Circuit Court of Appeals no longer need to be resident in the DC-area.
Both bills (S 515 Section 6 and HR 1260 Section 7) provide for the replacement of the present Board of Patent Appeals and Interferences by a Patent Trial and Appeal Board that will have jurisdiction over appeals during examination and re-examination, and conduct derivation proceedings and cancellation proceedings.
The Senate bill (Section 12) changes the percentage of royalty income that must be paid to the government when the royalty exceeds 5% to a government owned contractor operated facility from 75% to 15%.
The Senate bill (Section 15) establishes a pilot program for better training of judges to handle patent cases and where a trained judge is available to allow other judges in the district to decline to accept a patent case.
The House bill retains requirements for studies on the use of special masters in patent cases, workplace conditions in the PTO and patent damages that were removed from the Senate bill during its passage through the Judiciary Committee.
Issues that have not been covered in the present bills but which were present in earlier reform bills include:
• General prior user rights,
• Increase rule-making power for the PTO outside the realm of fee-setting.
• Amendments to implement the Patent Law Treaty
• Changes in the law on inequitable conduct.
• Requirements for applicants to submit examination support-type documents.
• Broadening the requirement for 18 month publication to all applications.
• Removing remedies or patent eligibility from certain types of invention, such as those relating to tax planning..