Recently, the Senate Judiciary Committee unanimously approved the “America Invents Act” (S. 23), a bill that would overhaul the U.S. patent system by changing it from a first-to-invent to a first-to-file system. The legislation would also give courts more influence in determining patent dispute damages.
After its passage in Committee, the bill was passed by the Senate on March 8 in a 95-5 vote. This kind of legislation has been considered for several years and has reached the full Senate three times since 2008. According to an analysis by the law firm White & Case, LLP, the bill contains many important provisions affecting the patent process in the United States:
· Patent System Moves From First-to-Invent System to First-to-File System. The bill would harmonize the US patent system with the rest of the world by switching from a first-to-invent system to a first-to-file system.
· PTO Given Fee-Setting Authority. The bill would allow the PTO to set patent and trademark fees without Congress's prior approval.
· End to Fee Diversion. The bill ends diversion of fees collected by the PTO into the general fund. A USPTO Revolving Fund will enable those fees to be used by the PTO for future expenditures.
· Third Parties May Submit Prior Art During Patent Examination. The bill would allow third parties to submit prior art for consideration during patent examination.
· Post-Grant Review During First Nine Months After Issue. Post-grant review could be requested on any grounds in the first nine months after a patent issues. The PTO Director would have sole authority to authorize or deny post-grant review.
· Supplemental Examination Process Provided for Patent Owners to Submit Prior Art and Prevent Its Use in an Inequitable Conduct Defense. The bill creates a new procedure called "supplemental examination," which allows the patent owner to make pre-litigation submissions to the PTO of prior art not disclosed during examination. Such submissions could not then be used to support an inequitable conduct defense.
· Ban on Tax Strategy Patents. Strategies for reducing, avoiding or deferring tax liability are not eligible for patents.
In the bill’s favor, the patent office is self-financing, and the legislation would not add to the budget deficit. Consequently, David J. Kappos, the director of the patent office and under secretary of commerce for intellectual property, asserted that the America Invents Act “would be an enormous improvement.”
Mr. Kappos noted that, “the current, first-to-invent system does no more than grant an inventor “a lottery ticket,” with the right to defend in court whether he was the first to come up with an idea.” Instead, Mr. Kappos recognized that a first-to-file system “adds transparency and objectivity” in the form of a clear line of priority — that is, who arrived first at the patent office.
In addition, Gary F. Locke, the Secretary of Commerce, which oversees the patent office, told the New York Times that it is “unacceptable and scandalous” that the patent office has a backlog of more than 700,000 unexamined applications. This means that it takes “two years for an inventor to get an initial ruling on one, and a final patent usually takes another year.” Secretary Locke noted that the patent office’s “computer systems are out of date and Congress has made a practice of siphoning off the office’s revenue for other uses.”
As the Times noted, the legislation would allow the patent office to set its own fees and make several changes, including charging companies that desire a decision within a year of filing to pay extra to move to the front of the line. Mr. Kappos said he also “wanted to cut fees for independent inventors and small businesses by at least half. Applicants currently pay about $4,000 for a patent.”
Additionally, the Times article explained that “Mr. Kappos disputes the notion that a first-to-file system puts small companies, which might need more time and money to develop a patentable idea, at a disadvantage.” Mr. Kappos “said that the office already offers a $110 provisional application that secures a place in line and gives the applicant time to develop an idea before submitting a full application.”
Consequently, large corporations such as General Electric, Cateprillar, and IBM,
support the bill because the “proposed changes would also help to keep patent disputes out of the court system, which inevitably adds millions of dollars to the cost of maintaining patent protection.”
In addition, the Biotechnology Industry Organization (BIO) commended the Senate for its overwhelming passage of the America Invents Act by a vote of 95-5. BIO noted that, “once enacted into law, it will strengthen and improve our nation’s patent system, spurring innovation and job creation.”
BIO noted in its press release how “patents are often the main assets of small biotech companies, and they rely on this intellectual property to attract investors to fund the lengthy and expensive research and development process necessary to bring breakthrough new therapies and other biotech products to patients and consumers.”
However, “opponents of the bill maintain that the current system is better structured to “give the little guy an advantage.” Some believe that changing to a first-to-file system, “could cause big companies to overwhelm the patent office with claims on every imaginable innovation, slowing the process further and crowding out small inventors.”
The next step in the process is for the House Judiciary Committee to take up the bill, which is led by Chairman Lamar Smith (R-TX). As for now, the Committee does not have anything scheduled, so it is uncertain when the legislation will be considered.