that President Obama is signing in to law today?
Basically, it's another deferal of the US to foreign interests.
"Proponents of this change submit that it would simplify the application process and bring U.S. patent law into better harmony with the patent law of other countries, most of which operate on the "first-to-file" system."
From Wikipedia:
The Leahy-Smith America Invents Act (H.R. 1249), previously called the Patent Reform Act of 2011, is a bill passed by both houses of the U.S. Congress which is expected to be signed by President Obama into the law on Sept 16,2011.
The America Invents Act represents the fourth attempt to introduce significant changes in U.S. patent law, and closely resembles previously proposed legislation in the Senate in its previous session (S. 515, see the Patent Reform Act of 2009). Most importantly, it provides a transition from a "first to invent" to a "first to file" system. It has been referred as the first significant change to the U.S. patent system since 1952.
On the other hand, it has been argued that, compared to the Patent Reform Act of 2009, proposed changes were significantly reduced
History
Senator Leahy (D-VT) introduced similar bill S. 23 in the United States Senate on January 25, 2011, with seven co-sponsors (also members of the Judiciary Committee) that include Senators Coons (D-DE), Grassley (R-IA), Hatch (R-UT), Klobuchar (D-MN), Kyl (R-AZ), Lieberman (I-CT), and Sessions (R-AL). The Judiciary Committee unanimously approved the bill, and the United States Senate passed it March 8, 2011, by a vote of 95–5. H.R. 1249: was passed by the House Judiciary Committee on April 14, 2011, by a vote of 32-3.
The House of Representatives passed their version of the Act (H.R. 1249) on June 23, 2011 by a vote of 304-117, with sixty-seven Republicans and fifty Democrats voting against the bill. The bill then went to conference. On, 9/8/2011, the Senate approved the House version. The Senate's 89-9 bipartisan vote has sent the Bill to the White House where it is expected to be signed into law on 9/16 by President Barack Obama, who strongly supports the measure. The President has indicated that he will sign the law once it reaches his desk.
Proposed changes
Opposition procedures
The proposed bill, H.R. 1249, revises and expands opposition procedures. The bill retains existing "ex parte reexamination", adds "preissuance submissions" by third parties, expands "post-grant inter partes reexamination" and renames it "inter partes review", ] and adds "post-grant review." The Bill provides additional tools to oppose patent applications with "expanded discovery," and to file multiple oppositions.
First to file and grace period
Proposed law would switch U.S. patent priority from the present "first-to-invent" system to a "first-to-file" system. The proposed legislation also modifies the prior art definitions of the patent law. Acts and prior art that bar a patent will include public use, sales, publications, and other disclosures available to the public as of the filing date, other than publications by the inventor within one year of filing (inventor’s “publication-conditioned grace period”), whether or not a third party also files a patent application.
Applicants that do not publish their inventions prior to filing will receive no grace period. The proceedings at the U.S. Patent Office for resolving priority contests among near-simultaneous inventors who both file applications for the same invention ("interference proceedings") are repealed, because priority will be determined based on filing date. An administrative proceeding—called a “derivation” proceeding, similar to that currently used within some interference proceedings is provided to ensure that the first person to file the application is actually an original inventor and that the application was not derived from another inventor.
The bill refers to the new regime as "First-Inventor-to-File (FITF)." This new regime operates differently than the FTI regime in the US and the various FTF regimes in place in the rest of the world. An analysis of the differences between FTI, FTF, the original FITF, and the regime in the current bill was performed for some 200 different typical fact patterns involving the actions and timing of two different inventors in terms of whether and how each would publish or file patent applications. The comparison demonstrates the different outcomes that can occur under each of the four different regimes.
This bill does not clearly indicate how it will resolve the dispute between an invention, as in lab research note, prior to the enactment of this law and a filed patent application after the enactment of this law.
Additional proposed changes
The America Invents Act as amended prior to cloture filed on March 3, 2010 proposes additional changes to current patent law, including:
Tax strategy inventions.
Provides that any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art.
False marking.
Would eliminate false marking lawsuits except for ones filed by the US government or filed by a competitor who can prove competitive injury.
Filing by other than inventor.
Would enable an entity to file an application on behalf of an inventor who assigned, or is under an obligation to assign, the invention rights to the entity, without seeking the inventor's execution of the application.
Oath and declaration.
Would make it easier for a corporation to file a substitute inventor's oath when the inventor cannot be reached or is non-cooperative.
Best mode.
Although an inventor will still be required to “set forth” the best mode for accomplishing the invention, the bill would exclude failure to disclose a Best Mode from being used as a basis for invalidating an issued patent.
Reports to Congress.
Requires within one year of enactment that (a) the Small Business Administration report on effects on small businesses of repealing the invention date-based system of priority and transitioning to the filing-date-based system; (b) the USPTO report on the operation of prior user rights in selected countries in the industrialized world.
USPTO practice changes
Fee Setting Authority.
The USPTO would be given authority to adjust its fees in a way that "in the aggregate" recover the estimated costs of its activities.
"Fee diversion".
Provides a special USPTO Public Enterprise Fund from paid-in user fees, ending fee "diversion" from the Office.
Review of inter partes reexamination.
Would deny the right of "de novo review" of USPTO decisions in "inter partes reexaminations" in D.C. Federal District Court, making direct appeal to the Federal Circuit the only path for judicial review in inter partes reexamination cases. Anomalously, the legislation leaves intact the right of the Patent Office (acting through the Board of Patent Appeals and Interferences) to sandbag a patent owner with a "new ground of rejection" at the last stage of intra-Patent Office proceedings, but denies the patent owner any responsive or reciprocal right to introduce evidence in rebuttal.
Prioritized examination.
Provides for prioritized examination for technologies important to American competitiveness.
Disclosure on USPTO's "Special Dispatch".
Require the USPTO to disclose the length of time between the commencement of each inter-partes and post-grant review and the conclusion of that review.
Additional USPTO facilities.
Establishes additional USPTO satellite offices.
Third-party submission of prior art.
Codifies existing regulation for third-party submission of prior art in published application by extending the period allowed for such submissions in 37 C.F.R § 1.99 from two months to six months after publication.
Advocacy for and against
Proponents of the Bill argue that it may even the playing field by removing the tricks a well-funded infringer can currently use against a startup owning patented technology.
Proponents of the bill suggest that technology companies are subject to an unprecedented wave of patent lawsuits, stifling innovation and creating an overburdened and lethargic patent system.
Advocates for the America Invents Act argue that it will create jobs, bolster innovation, streamline the patent system, reduce patent litigation, and keep the U.S. competitive globally.
Opponents of the Bill contend that it will lead to results similar to other nations' patent systems on which the bill is modeled — market incumbents will become further entrenched, the rate of startup formation will fall to levels in other countries, and access to angel and venture capital will fall to the levels of other countries, as described in the Impact of the Changes section below.
A startup which relies on patents for protection from competitive risk, will, under the Bill, lose the protections of today's law to assemble the capital, strategic partners, and time for R&D and testing. The startup, exposed to the risk of copying by an established player in the marketplace, will be unable to attract venture capital, and so will lack the financial resources necessary to commercialize the startup’s invention and grow the company. The weakening of patent protection diminishes incentives for investments and development.
In addition opponents of the bill point out that the proposed revisions create greater options for accused infringers, and weaken the rights of patentees, and that patent reform should remain in the hands of the court system.
Opponents argue that patent reform should be confined to administrative reforms at the USPTO. The time, effort and money that will be spent after issuance under the Bill on inter partes review and post-grant review would be better spent improving initial examination.
According to patent attorney and reexamination specialist Taraneh Maghame, “the root of the problem trying to be addressed by the reexamination process could be better solved if quality patents are issued in the first instance.”
Number of patent disputes
Organizations supporting the bill claim that the number of patent lawsuits has increased dramatically in the past few years. The Federal Judicial Statistics document that the number of U.S. patent lawsuits as a percentage of total patents has not changed significantly over the past two decades and remains at approximately 1.5% of all patents issued with 93 trial patent cases annually in a system with 1.8 million active patents.
First to file and grace period
Proponents of this change submit that it would simplify the application process and bring U.S. patent law into better harmony with the patent law of other countries, most of which operate on the "first-to-file" system. Proponents also claim that it would eliminate costly Interference proceedings at the USPTO and reduce U.S. applicants’ costs in seeking patent rights outside of the United States.
Opponents contend that a "first-to-file" system favors larger firms with well-established internal patenting procedures, patent committees and in-house attorneys over small business inventors.
They show that, in a novel and perverse way found in no other country, the Act would weaken patent protection only in America. Opponents also submit that it will (i) cause loss of patent rights due to new prior art published after the invention date but before the filing date, (ii) weaken the current grace period so it cannot be relied on, compelling inventors to behave as if there were no grace period, (iii) replace "interferences" with costly derivation proceedings, which are generally even more expensive than interferences, (iv) create a “race to the Patent Office” with every new idea, increasing the number of patent applications filed, with the attendant costs in attorney fees and diversion of company personnel to patent application preparation, (v) increase examination backlogs at the USPTO, (vi) do nothing to reduce U.S. applicants’ costs of acquiring patents outside of the U.S., and (vii) decrease average patent quality.
The patent reform bill of 2007, which the current bill closely resembles, was analyzed by the Deputy Director of IP division of Beijing High People's Court, Senior Judge, and he found that that the bill "... is friendlier to the infringers than to the patentees in general as it will make the patent less reliable, easier to be challenged and cheaper to be infringed. It is not bad news for developing countries which have fewer patents. Many of the Chinese companies are not patent owners in the U.S. market and their products are often excluded from the market because of patent infringement accusations. This bill will give the companies from developing countries more freedom and flexibility to challenge the relative US patent for doing business in US and make it less costly to infringe."
It was found that the proposed new regime behaves more like a new and unique kind of patent system with characteristics of both the FTI and FTF regimes, rather than a harmonized system sharing characteristics of both.
Opponents point out that under First-to-Invent, a company with extensive resources can choose to practice First-to-File, by simply racing to the patent office as soon as every invention is conceived, eliminating any need to keep records of invention conception. Meanwhile, a company with limited resources can take still utilize First-to-Invent, only filing patents that matter after funding is obtained. Under First-(Inventor)-to-File, the reverse is not true: all parties, regardless of their resources, must adhere to “race to the patent office”. This places small entities at an enormous disadvantage to large entities. Indeed, it is a key reason why no other nation has anything close to the number of startups as the US.
There is a question of whether changing to FTF would be constitutional. Article I, Section 8 of the Constitution states: “To promote the Progress of ... useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their respective ... Discoveries.” The term "inventor" means "the first to invent." "To invent" means "to create something that has not existed before." Therefore, by the standard definitions of our language, adoption of FTF would require amending the constitution. All peer-reviewed papers published in scholarly journals have found this or similar problems.
Canada changed from FTI to FTF in 1989 and experienced a measurable "adverse effect on domestic-oriented industries and skewed the ownership structure of patented inventions towards large corporations, away from independent inventors and small businesses."
Judicial review of reexamination decisions
Opponents note that the bill contains a provision that would deny the right of patent owners to obtain judicial review of adverse USPTO decisions in ex parte patent reexaminations by civil action in district court – a right that has existed under 35 U.S.C. § 306/ § 145 since the inception of reexamination in 1980. They contend that abolishing this right will leave direct appeal to the Federal Circuit as the only judicial recourse – an intolerable scenario for patent owners who need to rely on evidence that was unavailable during the administrative appeal stage.
Opponents contend that this provision will exacerbate ex parte reexamination abuses by creating an unprecedented end-run around Federal District Courts in potentially all patent disputes. They warn that alleged infringers would simply file ex parte reexamination requests with USPTO, receive a final agency decision subject only to Federal Circuit review, essentially bypassing Federal courts. Opponents fear that given the deference the Federal Circuit must accord the agency (Zurko), large number of prospective/alleged infringers would choose this new favorable path to challenge a patent, overwhelming the USPTO, causing much lengthier delays in reexamination and holding up patentees' patent rights for years.
Post-grant opposition
Advocates argue that allowing a challenge of a patent in the first year after the issuance or reissuance of a patent will improve patent quality by allowing third party inputs. Opponents note that: (a) inter partes review under the Bill allows a third party to challenge the validity of any claim(s) in a patent *after* the first year; (b) re-exams are in fact used, not as an alternative to litigation, but rather as a supplement to litigation.
In FY2008, 62% of current inter partes re-exams and 30% of ex parte re-exams were simultaneously in litigation; (c) predatory corporations can and do file multiple post-grant oppositions against startup companies for the purpose of inflicting financial pain and through this practice have successfully extracted patent licensing and purchase agreements on favorable terms; (d) the existing inter partes process in a contested case now takes 34 to 53 months for an un-appealed reexam (assuming no “rework” by the patent office and no secondary appeals to the BPAI, the Federal Circuit, or the Supreme Court), and 5 to 8 years for appealed cases.
When Congress created inter partes reexamination, it directed the USPTO to conduct these reexaminations with "special dispatch."
The Bill expands the existing inter partes procedure, adding discovery and a hearing in the Patent Trial and Appeal Board. Consequently, under the Bill, pendency of the inter partes procedure will likely increase, despite the legislative fiat requiring 18 month disposition; and (e) the Bill all but requires a federal district court to stay a patent infringement suit copending with an inter partes review.
Because of the enormous costs and long pendency of inter partes review, the grant of a stay in a copending infringement suit can effectively be "game over" for the patent owner.
Impact of the changes
Opponents of the Bill assert that the impact of the changes to the current law will be to effectively neuter the U.S. patent system. Patents owned by startup companies, research institutions, and independent inventors ("startups") will be unenforceable against large corporations.
The use of reexamination, or the threat of its use, in licensing negotiations or in patent infringement litigation is common. “[G]amesmanship of the reexamination process has, in the view of some, become more the rule than the exception. Reportedly it has become ‘standard procedure’ that a defendant in patent litigation ‘take an aggressive stance by saying it plans to request a re-exam on the patent-in-suit or even all’ of the plaintiffs patents. The threat of reexamination is then used as leverage in licensing negotiations, intimidating patent-holders into settling out of court for lower amounts than those to which the value of their patents might entitle them.” The practice is widespread and growing. Reexamination requests from companies accused of patent infringement have recently more than tripled.
“Ironically, Congress intended that the reexamination process should have just the opposite effect: "Patent office reexamination will greatly reduce, if not end, the threat of legal costs being used to 'blackmail' such [patent-] holders into allowing patent infringements or being forced to license their patents for nominal fees."
Critics argue that the Act will accelerate the decline of the U.S. as an industrial power because it will prevent startups from raising capital. To understand why this is so, one needs to understand the basic life cycle of a startup. In the first step of this life cycle, an inventor or group of inventors conceives the invention. Second, the inventors undertake limited prototyping and testing sufficient to convince themselves and potential investors that the invention will work, not just in the lab, but in practice.
Third, the inventors research the market and write a business plan estimating (a) a revenue stream based on forecast demand for the envisioned product at a specific target price, and (b) the capital needed to reach the break-even point, i.e. the point in time when revenues will equal expenses so that the startup will be self-funding. Fourth, potential investors scrutinize the business plan including evaluating competitive risk. By definition, a startup is a new entrant to the marketplace. The startup has no established brand, and no established sales, distribution, or service channels. It is only after this point that an investor typically invests, and thus this is the point at which a typical inventor has a sufficient conception of the invention and funding to be able to file a patent application.
In contrast, in Europe, the practice is that investors will not talk to inventors until before the "Fourth" step of the preceding paragraph, that is, before funding exists to pay a patent attorney.
Opponents of the Bill contend that, if the bill becomes law, venture funding will be diverted to less risky investments. Therefore startups, the primary source of inventions, will be unable to raise funding to commercialize their inventions. Over time, and compounding year on year, the decrease in economic growth and the failure to commercialize innovative, disruptive technologies will accelerate the economic decline of the United States relative to competing nations.
Proponents of the Bill argue that revision of both "post grant opposition" and "interference" will help US inventors. They point out that a patent that has survived a post-grant review will be stronger than one without. Neither side has put forward a cost-benefit balance showing that the added strength of these patents will compensate for the loss of access to venture capital, though the venture capitalists that have opined on the likely balance have concluded that the post-grant review will reduce access to capital more than it increases patent strength.
Other IssuesCritics of the bill have expressed concern that the administration has been guided by the same people who previously lobbied for patent reform on behalf of IBM and Microsoft. USPTO Director David Kappos represented IBM, and Marc Berejka (Senior Policy Advisor, Office of the Secretary, U.S. Department of Commerce) lobbied on behalf of Microsoft on these very issues, and that their appointments were a violation of the Obama Administration's "Revolving Door Ban." The Secretary of Commerce, Gary Locke, to whom the USPTO reports, also has extensive ties to Microsoft.
Opponents have raised the concern that the Law of Unintended Consequences could result in outcomes that cause the USA to lose its leadership position in innovation, particularly as a result of the adverse impact on small companies, who have not been represented in the negotiations leading up to this bill. The complexity of the innovation ecosystem being beyond most legislative bodies' comprehension argues for small incremental changes that are less likely to cause harm in the manner that the well-intended Sarbanes–Oxley Act did.
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