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Patent Reform Bill of 2011: An Annotated Outline

by Orlando Lopez

In a great example of the power of perseverance, the Patent Reform Bill -2011 version is finally moving to the floor of the Senate. Since patent reform is finally upon us, we have presented below, an annotated version of the outline of the bill.

First inventor to file – The proposed bill moves the US from being the only inventor centric, first to invent, patent system to being a first to file system, like the rest of the international community. By allowing filing by entities other than the inventor, the proposed bill places the US in the same camp as the rest of the world. While I have not met an in-house counsel who likes the first to invent system (and for good reasons), the proposed bill presents some problems for small entities and universities. By doing away with the one year grace period except for disclosures by or originating from the inventor(s), the proposed bill creates a field of landmines for small entities and universities. The proposed bill provides an opportunity for the top salesperson (usually the president) of a startup or small entity, to act in such a way as to preclude filing a patent. A more balanced solution to the problems created by first to invent, so that large entities are not disadvantaged and small entities are still allowed leeway, is still needed.

Damages – The proposed bill prescribes procedures for the damages part of an infringement case. The courts, not waiting for the legislative branch, have provided decisions that ensure most of the provisions of the bill. The portion of the bill regarding damages may disappear as part of the manager’s amendment introduced on March 1, 2011.

The proposed bill also defines willful infringement, and should be compared to the In re Seagate CAFC decision. Although the present statute does not define willful infringement, the proposed bill appears to codify In re Seagate.

Post-grant review – two avenues for post-grant review are proposed in the present bill, an Opposition- like post-grant review filed within nine months of when the patent issued, and an inter-parties review similar to re-examination available after the nine month period .

Opposition procedures are available in most other countries. The procedure for conducting the opposition-like review is left to the USPTO Director. There are two concerns regarding the opposition- like post-grant review. One is that it adds one more procedure to an already stressed USPTO Board of Patent Appeals, at a time when the USPTO needs more resources in order to expedite the examination of applications. Another concern related to small entities, is the possible expense of the opposition-like procedure if it is conducted in a manner similar to interferences and trademark oppositions. Both interferences and trademark oppositions include discovery and are deemed to be too expensive for small entities (in the range of the cost of 8 to 15 patent applications).

The second avenue for post-grant review is a procedure similar to inter-parties re-examination, but limited to anticipation and obviousness.

Fee setting authority – like the previous versions, the present proposed bill provides fee setting authority to the USPTO. This is a welcome change, placing the USPTO closer to being able to control its budget. Now, if it were possible to ensure that the USPTO is not treated as a cash cow, that would be another welcome change. That welcome change is part of the manager’s amendment introduced on March 1, 2011.

Pre-Issuance Third Party Submission – the proposed bill allows third parties to submit printed publications to be considered during the examination of a patent application, along with a description of the relevance of the document.

Venue – the proposed bill includes a statement of transfer of a suit to a different District Court based on the convenience of the parties and interest of justice. In a number of recent decisions, the CAFC has provided the necessary precedent for determining whether a transfer of venue request should be granted. The portion of the bill regarding venue may disappear as part of the manager’s amendment introduced on March 1, 2011.

False Marking – the proposed bill restricts false marking suits to suits filed by the US government and by parties harmed by the false marking. In response to the present epidemic of qui tam false marking suits, the proposed bill aims at ending the epidemic.

Tax Strategies excluded – in the proposed bill, strategies for reducing, avoiding or deferred tax liability are considered as “known prior art” and are not patentable.

Best mode – in the proposed bill, the best mode requirement cannot be used for invalidating a patent. This proposal basically emasculates the best mode requirement.

Sen. Leahy should be commended for his dedication to patent reform. Since the proposed bill is basically similar to the previously proposed bill, the concerns remain the same; however, in the present economic climate, given the connection between patents and the establishment of new ventures, the presently proposed bill should be looked at taking into consideration its effect on small entities and start-ups.

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