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The Leahy-Smith America Invents Act:
Innovation Issues
Wendy H. Schacht
Specialist in Science and Technology Policy
John R. Thomas
Visiting Scholar
January 24, 2012
Congressional Research Service
7-5700
www.crs.gov
R42014
CRS Report for Congress
Pr
epared for Members and Committees of Congress
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The Leahy-Smith America Invents Act: Innovation Issues
Summary
Following several years of legislative discussion concerning patent reform, the Congress enacted
P.L. 112-29, signed into law on September 16, 2011. The Leahy-Smith America Invents Act
makes significant changes to the patent system, including:
• First-Inventor-to-File Priority System. The America Invents Act shifts the U.S.
patent priority rule from the current “first-to-invent” system to the “first-
inventor-to-file principle” while allowing for a one-year grace period.
• Prior User Rights. The legislation establishes an infringement defense based
upon an accused infringer’s prior commercial use of an invention patented by
another.
• Assignee Filing. Under the America Invents Act, a patent application may be
filed by the inventor’s employer or other entity to whom rights in the invention
are assigned.
• Post-Grant Review Proceedings. The America Invents Act changes the current
system of administrative patent challenges at the U.S. Patent and Trademark
Office (USPTO) by establishing post-grant review, inter partes review, and a
transitional program for business method patents.
• Public Participation in USPTO Procedures. The legislation allows members of
the public to submit pertinent information to the USPTO concerning particular
applications both before and after patent issuance.
• USPTO Fees. The new law stipulates fees for USPTO patent services and allows
the agency to adjust the fees in order to cover its costs. It also requires that fees
collected above the amount provided for in the appropriations process be used
only for the USPTO.
• Patent Marking. The America Invents Act limits lawsuits challenging patent
owners with false patent marking and allows for virtual, Internet-based marking.
• Patentable Subject Matter. The America Invents Act prevents patents claiming or
encompassing human organisms and limits the availability of patents claiming
tax strategies.
• Best Mode. The statute maintains the requirement that patents describe the best
mode, or superior way for practicing the claimed invention, but eliminates
failures to do so as a basis for invalidating the patent.
The America Invents Act introduces a number of additional changes to the patent law, including
changes to the venue statute, the introduction of supplemental examination, and a clarification of
the law of willful infringement.
Although the America Invents Act arguably makes the most significant changes to the U.S. patent
statute since the 19th century, the legislation does not reflect all of the issues that were the subject
of legislative discussion including the assessment of damages during infringement litigation and
the publication of all pending patent applications prior to grant.
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Contents
Introduction...................................................................................................................................... 1
Patent System Fundamentals ........................................................................................................... 2
The Leahy-Smith America Invents Act............................................................................................ 4
First Inventor to File.................................................................................................................. 4
Grace Period .............................................................................................................................. 5
Marking ..................................................................................................................................... 5
Prior Commercial Use Defense ................................................................................................. 6
Inventor’s Oath and Assignee Filing ......................................................................................... 8
Willful Infringement/Advice of Counsel................................................................................... 9
Inter Partes and Post-Grant Reviews ...................................................................................... 10
Post-Grant Citation of Prior Art............................................................................................... 12
Preissuance Submissions ......................................................................................................... 12
Venue ....................................................................................................................................... 13
USPTO Fee-Setting Authority and Funding............................................................................ 13
Supplemental Examination...................................................................................................... 14
Tax Strategy Patents ................................................................................................................ 16
Best Mode................................................................................................................................ 17
Clarification of Jurisdiction..................................................................................................... 17
Transitional Program for Covered Business Method Patents.................................................. 17
USPTO Satellite Offices.......................................................................................................... 18
Other USPTO Programs .......................................................................................................... 18
Prohibition of Patents on Humans ........................................................................................... 18
Patent Term Extension Filings................................................................................................. 19
Further Considerations................................................................................................................... 19
Contacts
Author Contact Information........................................................................................................... 20
Acknowledgments ......................................................................................................................... 20
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The Leahy-Smith America Invents Act: Innovation Issues
Introduction
P.L. 112-29, the Leahy-Smith America Invents Act, arguably makes the most significant changes
to the patent statute since the 19th century. Among other provisions, the statute introduces into
U.S. law a first-inventor-to-file priority rule, an infringement defense based upon prior
commercial use, and assignee filing. The legislation prevents patents from claiming or
encompassing human organisms, limits the availability of patents claiming tax strategies, and
restricts the best mode requirement. The America Invents Act also makes notable reforms to
administrative patent challenge proceedings at the U.S. Patent and Trademark Office (USPTO)
and to the law of patent marking. Along with numerous other changes to patent laws and
procedures, these reforms were intended to modernize the U.S. patent system and to improve its
fairness and effectiveness.
Congressional interest in patent reform is evidenced by sustained legislative activity over the last
four Congresses.1 There is broad agreement that more patents are sought and enforced than ever
before; that the attention paid to patents in business transactions and corporate boardrooms has
dramatically increased; and that the commercial and social significance of patent grants, licenses,
judgments, and settlements is at an all-time high.2 As the United States becomes even more of a
high-technology, knowledge-based economy, the importance of patents may grow even further in
the future.
Most experts agree that patent ownership is an incentive to innovation, the basis for the
technological advancement that contributes to economic growth. It is through the
commercialization and use of new products and processes that productivity gains are made and
the scope and quality of goods and services are expanded. Award of a patent is intended to
stimulate the investment necessary to develop an idea and bring it to the marketplace embodied in
a product or process. Patent title provides the recipient with a limited-time monopoly over the use
of his discovery in exchange for the public dissemination of information contained in the patent
application. This is intended to permit the inventor to receive a return on the expenditure of
resources leading to the discovery but does not guarantee that the patent will generate commercial
benefits. The requirement for publication of the patent is expected to stimulate additional
innovation and other creative means to meet similar and expanded demands in the marketplace.
Passage of the America Invents Act was preceded by several years of legislative debate about the
current workings and future direction of the U.S. patent system. Although the discussion was
wide-ranging, several points of concern were frequently mentioned. One was the recognition that
differences between U.S. patent laws and global patent norms might increase the difficulty of
domestic inventors in obtaining rights abroad. Another was that poor patent quality and high costs
of litigating patent disputes might encourage speculation, or “trolling,” by entrepreneurs that
1 See CRS Report R41638, Patent Reform in the 112th Congress: Innovation Issues, by Wendy H. Schacht and John R.
Thomas; CRS Report R40481, Patent Reform in the 111th Congress: Innovation Issues, by Wendy H. Schacht and John
R. Thomas; CRS Report RL33996, Patent Reform in the 110th Congress: Innovation Issues, by John R. Thomas and
Wendy H. Schacht; and CRS Report RL32996, Patent Reform: Innovation Issues, by John R. Thomas and Wendy H.
Schacht.
2 Statistics from the United States Patent and Trademark Office (USPTO) support this account. In 1980, 104,329 utility
patent applications were received at the U.S. Patent and Trademark Office (USPTO); by 2009, this number had more
than quadrupled to 456,106 applications. During the same time period, the number of U.S. utility patents granted grew
from 61,819 to 167,349. U.S. Patent and Trademark Office, U.S. Patent Statistics, Calendar Years 1963-2009,
available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.pdf.
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acquire and enforce patents. Congress also recognized that individuals, universities, and small
entities play a role in the technological advancement and economic growth of the United States. A
number of provisions of the America Invents Act address these issues and concerns in different
ways.
As ultimately enacted, the America Invents Act also reflects the reality that the courts have been
active in making changes to important patent law principles. Some observers believe that several
court decisions addressed the same concerns that had motivated earlier legislative reform
proposals, thereby obviating or reducing the need for congressional action. For example, judicial
opinions issued in the past several years have addressed the availability of injunctive relief
against adjudicated patent infringers,3 the standards for deciding which venue is appropriate for
conducting a patent trial,4 and the assessment of damages in patent infringement cases.5 As a
result of these and other developments, several provisions found in predecessor versions of the
America Invents Act were not included in the final version of the statute.6
This study provides an overview of the America Invents Act. It begins by offering a brief
overview of the patent system. The specific components of this legislation are then identified and
reviewed in greater detail. The report closes with further considerations.
Patent System Fundamentals
The patent system is grounded in Article I, Section 8, Clause 8 of the U.S. Constitution, which
states that “The Congress Shall Have Power ... To promote the Progress of Science and useful
Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries....” As mandated by the Patent Act of 1952,7 U.S. patent
rights do not arise automatically. Inventors must prepare and submit applications to the U.S.
Patent and Trademark Office (USPTO) if they wish to obtain patent protection.8 USPTO officials
known as examiners then assess whether the application merits the award of a patent.9 The patent
acquisition process is commonly known as “prosecution.”10
In deciding whether to approve a patent application, a USPTO examiner will consider whether
the submitted application fully discloses and distinctly claims the invention.11 In addition, the
application must disclose the “best mode,” or preferred way, that the applicant knows to practice
the invention.12 The examiner will also determine whether the invention itself fulfills certain
substantive standards set by the patent statute. To be patentable, an invention must consist of a
3 eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).
4 In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008).
5 Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009).
6 See papers cited in footnote 1.
7 P.L. 82-593, 66 Stat. 792 (codified at Title 35 United States Code).
8 35 U.S.C. § 111.
9 35 U.S.C. § 131.
10 John R. Thomas, “On Preparatory Texts and Proprietary Technologies: The Place of Prosecution Histories in Patent
Claim Interpretation,” 47 UCLA Law Review (1999), 183.
11 35 U.S.C. § 112.
12 Ibid.
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process, machine, manufacture, or composition of matter that is useful, novel, and nonobvious.
The requirement of usefulness, or utility, is satisfied if the invention is operable and provides a
tangible benefit.13 To be judged novel, the invention must not be fully anticipated by a prior
patent, publication, or other state-of-the-art knowledge that is collectively termed the “prior art.”14
A nonobvious invention must not have been readily within the ordinary skills of a competent
artisan at the time the invention was made.15
If the USPTO allows the patent to issue, the patent proprietor obtains the right to exclude others
from making, using, selling, offering to sell, or importing into the United States the patented
invention.16 Those who engage in these acts without the permission of the patentee during the
term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined
from further infringing acts.17 The patent statute also provides for the award of damages
“adequate to compensate for the infringement, but in no event less than a reasonable royalty for
the use made of the invention by the infringer.”18
The maximum term of patent protection is ordinarily set at 20 years from the date the application
is filed.19 At the end of that period, others may employ that invention without regard to the
expired patent.
Patent rights are not self-enforcing. Patentees who wish to compel others to observe their rights
must commence enforcement proceedings, which most commonly consist of litigation in the
federal courts. Although issued patents enjoy a presumption of validity, accused infringers may
assert that a patent is invalid or unenforceable on a number of grounds.20 The U.S. Court of
Appeals for the Federal Circuit (Federal Circuit) possesses national jurisdiction over most patent
appeals from the district courts.21 The U.S. Supreme Court enjoys discretionary authority to
review cases decided by the Federal Circuit.22
13 35 U.S.C. § 101.
14 35 U.S.C. § 102.
15 35 U.S.C. § 103.
16 35 U.S.C. § 271(a).
17 35 U.S.C. § 283.
18 35 U.S.C. § 284.
19 35 U.S.C. § 154(a)(2). Although patent term is based upon the filing date, the patentee gains no enforceable legal
rights until the USPTO allows the application to issue as a granted patent. A number of Patent Act provisions may
modify the basic 20-year term, including examination delays at the USPTO and delays in obtaining marketing approval
for the patented invention from other federal agencies.
20 35 U.S.C. § 282.
21 28 U.S.C. § 1295(a)(1).
22 28 U.S.C. § 1254(1).
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The Leahy-Smith America Invents Act
First Inventor to File
The America Invents Act shifts the U.S. patent priority rule from the current “first-to-invent”
principle to the global norm of the “first-inventor-to-file” principle.23 Within the patent law, the
priority rule addresses the circumstance where two or more persons independently develop the
identical or similar invention at approximately the same time. In such cases the patent law must
establish a rule as to which of these inventors obtains entitlement to a patent.24
Prior to the enactment of the America Invents Act, the United States was the only patent-issuing
state to follow the “first-to-invent” rule. Under this principle, when more than one patent
application was filed claiming the same invention, the patent would be awarded to the applicant
who was the first inventor in fact. This conclusion holds even if the first inventor was not the first
person to file a patent application directed towards that invention.25 Within this “first-to-invent”
system,26 the timing of real-world events, such as the date a chemist conceived of a new
compound or a machinist constructed a new engine, is of significance.
In contrast, priority of invention under the “first-inventor-to-file” principle is established by the
earliest effective filing date of a patent application disclosing the claiming invention.27 Stated
differently, the inventor who first files an application at the patent office is presumptively entitled
to the patent. Whether or not the first inventor applicant is actually the first individual to complete
the invention in the field is irrelevant. This priority system follows the “first-inventor-to file”
principle.
A simple example illustrates the distinction between these priority rules. Suppose that Inventor A
synthesizes a new chemical compound on August 1, 2010, and files a patent application on
November 1, 2010, claiming that compound. Suppose further that Inventor B independently
invents the same compound on September 1, 2010, and files a patent application on October 1,
2010. Inventor A would be awarded the patent under the first-to-invent rule, while Inventor B
would obtain the patent under the first-inventor-to-file principle.
The “first-inventor-to-file” rule established by the America Invents Act becomes effective 18
months after the statute’s date of enactment. Notably, the America Invents Act does not allow one
individual to copy another’s invention and then, by virtue of being the first to file a patent
application, be entitled to a patent. All patent applicants must have originated the invention
themselves, rather than derived it from another.28 In order to police this requirement, the new
legislation provides for “derivation proceedings” that would allow the USPTO to determine
23 P.L. 112-29 at § 3(b).
24 See Roger E. Schechter & John R. Thomas, Principles of Patent Law § 1.2.5 (2d ed. 2004).
25 In addition, the party that was the first to invent must not have abandoned, suppressed or concealed the invention. 35
U.S.C. § 102(g)(2).
26 See Charles E. Gholz, “First-to-File or First-to-Invent?,” 82 Journal of the Patent and Trademark Office Society
(2000), 891.
27 See Peter A. Jackman, “Adoption of a First-to-File System: A Proposal,” 26 University of Baltimore Law Review
(1997), 67.
28 35 U.S.C. § 101.
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which applicant is entitled to a patent on a particular invention.29 It is expected that this provision
will reduce the costs associated with determining when an invention was first made in a dispute
under the previous system.
Grace Period
The America Invents Act continues to provide inventors with a one-year period to decide whether
to pursue patent protection after disclosing their inventions to the public. Current U.S. patent law
essentially provides inventors with a one-year period to decide whether patent protection is
desirable, and, if so, to prepare an application. Specified activities that occur before the “critical
date”—patent parlance for the day one year before the application was filed—will prevent a
patent from issuing.30 If, for example, an entrepreneur first discloses an invention by publishing
an article in a scientific journal, she knows that she has one year from the publication date in
which to file a patent application. Importantly, uses, sales, and other technical disclosures by third
parties will also start the one-year clock running. As a result, inventors have a broader range of
concerns than merely their own activities.31
Suppose, for example, that an electrical engineer files a patent application claiming a new
capacitor on February 1, 2010. While reviewing the application, a USPTO examiner discovers an
October 1, 2008, journal article by any author disclosing the identical capacitor. Because the
article was published prior to the critical date of February 1, 2009, that publication will prevent or
“bar” the issuance of a patent on that capacitor.
Under the America Invents Act, the grace period operates similarly. The statute stipulates that a
disclosure “made by the inventor or joint inventor or by another who obtained the subject matter
disclosed directly or indirectly from the inventor or a joint inventor” would not be patent-
defeating, provided it was made “1 year or less before the effective filing date of a claimed
invention.” In contrast, disclosures qualify as prior art, and are therefore potentially patent-
defeating, if they were made either by (1) the inventors and their associates more than one year
before the patent application’s filing date; or (2) anyone else prior to the filing date, provided that
such a disclosure occurred prior to the inventor’s own disclosure. These amendments in essence
protect the patent positions of individuals who disclosed their inventions up to one year before
they filed a patent application and encourage publication so as to put the information before the
public.
Marking
The America Invents Act introduces reforms to the legal rules governing the practice of
“marking” articles with the numbers of particular patents. The U.S. patent laws have long
encouraged patent proprietors that manufacture their patented inventions to notify the public of
their patent rights.32 Section 287(a) of the Patent Act of 1952 provides that patent owners should
place the word “patent,” or the abbreviation “pat.,” along with the number of the patent, on
29 P.L. 112-29 at § 3(h).
30 35 U.S.C. § 102(b).
31 Schechter & Thomas, supra, at § 4.3.1.
32 For further discussion of current patent marking issues and proposed legislation, see CRS Report R41418, False
Patent Marking: Litigation and Legislation, by Brian T. Yeh.
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patented goods. If the nature of the article does not allow this notice to be placed directly upon it,
then a label may be placed on its packaging. This practice is commonly termed “marking.”33
There is no absolute duty to mark. If a patent proprietor fails to mark in the specified manner,
however, then it may receive damages only for infringing acts that occur after the infringer
receives actual notice of infringement.34 Filing an infringement lawsuit is considered to provide
such actual notice. Less severely, a patent owner may issue a specific charge of infringement,
commonly by sending a cease and desist letter to the infringer. The marking statute is said “to
give patentees the proper incentive to mark their products and thus place the world on notice of
the existence of the patent.”35
The Patent Act also addresses the issue of “false marking.” Section 292 prohibits marking a
product with the number of another’s patent, the name of another patent owner, or a patent or
application number where no such patent or application exists. Prohibited marks also include the
number of expired patents and patents that do not cover the marked product, provided such marks
were affixed for the “purpose of deceiving the public.” The Patent Act mandates a maximum fine
of $500 for “every such” offense. According to the statute, “any person may sue for the penalty,
in which event one-half shall go to the person suing and the other to the use of the United
States.”36
The America Invents Act alters the Patent Act’s false marking provision by stipulating that the
statute may only be privately enforced by a “person who has suffered a competitive injury as a
result of the violation....”37 Damages in such cases would also be limited to those “adequate to
compensate for the injury.” This amendment would change previous law, which allows any
private person to bring a civil action for false marking, whether or not they have been negatively
affected. These provisions do not apply to the U.S. government. Under the provisions of the
America Invents Act, the U.S. government would continue to bring false marking suits without
regard to competitive injury, and also would retain the ability to recover a maximum fine of $500
per each falsely marked article.
The America Invents Act also allows for “virtual marking.” Under this proposal, the marking
standard would be fulfilled if the product or its packaging included the word “patent” or the
abbreviation “pat.,” together with an Internet address that provided the number of the patent
associated with the patented article.38
Prior Commercial Use Defense
The American Inventors Protection Act of 1999, P.L. 106-113, allowed an earlier commercial user
of a “method of doing or conducting business” that was later patented by another to claim a
defense to patent infringement in certain circumstances. The America Invents Act expands the
33 See Schechter & Thomas, supra, at § 9.2.3.
34 It should be further appreciated that under 35 U.S.C. § 286, “no recovery shall be had for any infringement
committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”
35 Laitram Corp. v. Hewlett-Packard Co., 806 F. Supp. 1294, 1296 (E.D. La. 1992).
36 35 U.S.C. § 292(b). This sort of proceeding is termed a qui tam action.
37 P.L. 112-29 at § 16(b).
38 P.L. 112-29 at § 16(a).
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range of individuals who may assert this defense in court. Even more significantly, the new
legislation eliminates the current restriction of the prior commercial use defense to business
method patents. Under the America Invents Act, a patent claiming any type of invention may be
subject to the prior commercial user defense.
The prior commercial user defense accounts for the complex relationship between the law of
trade secrets and the patent system. Trade secrecy protects individuals from misappropriation of
valuable information that is useful in commerce. One reason an inventor might maintain the
invention as a trade secret rather than seek patent protection is that the subject matter of the
invention may not be regarded as patentable. Such inventions as customer lists or data
compilations have traditionally been regarded as amenable to trade secret protection but not to
patenting.39 Inventors might also maintain trade secret protection due to ignorance of the patent
system or because they believe they can keep their invention as a secret longer than the period of
exclusivity granted through the patent system.40
The patent law does not favor trade secret holders, however. Well-established patent law provides
that an inventor who makes a secret, commercial use of an invention for more than one year prior
to filing a patent application at the USPTO forfeits his own right to a patent.41 This policy is
based principally upon the desire to maintain the integrity of the statutorily prescribed patent
term. The patent law grants patents a term of 20 years, commencing from the date a patent
application is filed.42 If the trade secret holder could make commercial use of an invention for
many years before choosing to file a patent application, he could disrupt this regime by delaying
the expiration date of his patent.
Settled patent law principles established that prior secret uses would not defeat the patents of later
inventors.43 If an earlier inventor made secret commercial use of an invention, and another person
independently invented the same technology later and obtained patent protection, then the trade
secret holder could face liability for patent infringement. This policy is based upon the reasoning
that once issued, published patent instruments fully inform the public about the invention, while
trade secrets do not. Between a subsequent inventor who patented the invention, and thus had
disclosed the invention to the public, and an earlier trade secret holder who had not, the law
favored the patent holder.
An example may clarify this rather complex legal situation. Suppose that Inventor A develops and
makes commercial use of a new manufacturing process. Inventor A chooses not to obtain patent
protection, but rather maintains that process as a trade secret. Many years later, Inventor B
independently develops the same manufacturing process and promptly files a patent application
claiming that invention. In such circumstances, Inventor A’s earlier, trade secret use does not
prevent Inventor B from procuring a patent. Furthermore, if the USPTO approves the patent
application, then Inventor A faces infringement liability should Inventor B file suit against him.
The American Inventors Protection Act of 1999 somewhat modified this principle. That statute in
part provided an infringement defense for an earlier user of a “method of doing or conducting
39 Restatement of Unfair Competition § 39.
40 David D. Friedman, “Some Economics of Trade Secret Law,” 5 Journal of Economic Perspectives (1991), 61, 64.
41 35 U.S.C. § 102(b). See Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts, 153 F.2d 516 (2d Cir. 1946).
42 35 U.S.C. § 154.
43 W.L. Gore & Associates v. Garlock, Inc., 721 F.2d 1540 (Fed. Cir. 1983).
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business” that was later patented by another. By limiting this defense to patented methods of
doing business, Congress responded to the 1998 Federal Circuit opinion in State Street Bank and
Trust Co. v. Signature Financial Group.44 That judicial opinion recognized that business methods
could be subject to patenting, potentially exposing individuals who had maintained business
methods as trade secrets to liability for patent infringement.
Again, an example may aid understanding of the prior commercial user defense. Suppose that
Inventor X develops and exploits commercially a new method of doing business. Inventor X
maintains his business method as a trade secret. Many years later, Inventor Y independently
develops the same business method and promptly files a patent application claiming that
invention. Even following the enactment of the American Inventors Protection Act, Inventor X’s
earlier, trade secret use would not prevent Inventor Y from procuring a patent. However, should
the USPTO approve Inventor Y’s patent application, and should Inventor Y sue Inventor X for
patent infringement, then Inventor X may potentially claim the benefit of the first inventor
defense. If successful,45 Inventor X would enjoy a complete defense to infringement of Inventor
Y’s patent.
Prior to the America Invents Act, the prior commercial user defense could “be asserted only by
the person who performed the acts necessary to establish the defense....”46 The America Invents
Act would also allow the defense to be asserted by “any other entity that controls, is controlled
by, or is under common control with such person....”47
In addition, the America Invents Act eliminates the restriction of the prior commercial user
defense to business method patents. As a result, any type of patented invention would be subject
to the prior commercial user defense. The new legislation also exempts patents held by
universities from the prior commercial user defense when it stipulates that this is not available if
“the claimed invention ... was made, owned or subject to an obligation of assignment to either an
institution of higher education ... or a technology transfer organization whose primary purpose is
to facilitate the commercialization of technologies developed by one or more such institutions of
higher education.”
Inventor’s Oath and Assignee Filing
As the law stood prior to enactment of the American Invents Act, a patent application had to be
filed by the inventor—that is, the natural person or persons who developed the invention.48 This
rule applied even where the invention was developed by individuals in their capacity as
employees. Even though rights to the invention usually have been contractually assigned to an
employer, for example, the actual inventor, rather than the employer, must be the one that applies
for the patent. In particular, Section 115 of the Patent Act obliges each applicant also to submit an
44 149 F.3d 1368 (Fed. Cir. 1998).
45 As presently codified at 35 U.S.C. § 273, the prior commercial user defense is subject to a number of additional
qualifications. First, the defendant must have reduced the infringing subject matter to practice at least one year before
the effective filing date of the application. Second, the defendant must have commercially used the infringing subject
matter prior to the effective filing date of the patent. Finally, any reduction to practice or use must have been made in
good faith, without derivation from the patentee or persons in privity with the patentee.
46 35 U.S.C. §273(b)(6)
47 P.L. 112-29 at §5.
48 35 U.S.C. § 111.
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oath or declaration stating that he believes himself to be the “original and first inventor” of the
subject matter for which he seeks a patent. Section 118 of the Patent Act allowed a few
exceptions to this general rule. If an inventor cannot be located, or refuses to perform his
contractual obligation to assign an invention to his employer, then the employer may file the
patent application in place of the inventor.
The America Invents Act modifies these rules by incorporating the exceptions found in current
Section 118 into Section 115 of the Patent Act.49 This reform appears to be primarily technical in
nature, although a few differences between the new statute and prior law exist. First, the new law
requires inventors to declare only that they are the “original inventor”—rather than the “original
and first inventor”—in keeping with the proposed shift to a first-inventor-to-file priority system.
Second, the new law allows an “individual who is under an obligation of assignment for patent
[to] include the required statements ... in the assignment executed by the individual, in lieu of
filing such statements separately.” This provision comports with the allowance of the filing of
patent applications by employers and other assignees of patent rights.
The America Invents Act further stipulates that a “person to whom the inventor has assigned or is
under an obligation to assign the invention may make an application for patent.” Individuals who
otherwise make a showing of a “sufficient proprietary interest in the matter” may also apply for a
patent on behalf of the inventor upon a sufficient show of proof of the pertinent facts. Under the
new law, if the USPTO “Director grants a patent on an application filed under this section by a
person other than the inventor, the patent shall be granted to the real party in interest and upon
such notice to the inventor as the Director considers to be sufficient.”
Willful Infringement/Advice of Counsel
The patent law of the United States allows a court to “increase the damages up to three times the
amount found or assessed.”50 An award of enhanced damages, as well as the amount by which the
damages will be increased, is committed to the discretion of the trial court. Although the statute
does not specify the circumstances in which enhanced damages are appropriate, the Federal
Circuit recently explained that “a patentee must show by clear and convincing evidence that the
infringer acted despite an objectively high likelihood that its actions constituted infringement of a
valid patent.”51 This circumstance is termed “willful infringement.”52
Courts will not ordinarily enhance damages due to willful infringement if the adjudicated
infringer did not know of the patent until charged with infringement in court, or if the infringer
acted with the reasonable belief that the patent was not infringed or that it was invalid. Prior to
the 2007 decision in In re Seagate Technology, Federal Circuit decisions emphasized the duty of
someone with actual notice of a competitor’s patent to exercise due care in determining if his acts
will infringe that patent.53 In Seagate Technology, however, the Federal Circuit opted to “abandon
49 P.L. 112-29 at § 4.
50 35 U.S.C. § 284.
51 In re Seagate Technology, 497 F.3d 1360 (Fed. Cir. 2007) (en banc).
52 See Beatrice Foods Co. v. New England Printing & Lithographing Co., 923 F.2d 1576, 1578 (Fed. Cir. 1991).
53 See, e.g., Jon E. Wright, “Willful Patent Infringement and Enhanced Damages—Evolution and Analysis,” 10 George
Mason Law Review (2001), 97.
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the affirmative duty of due care.”54 The court of appeals instead explained that “proof of willful
infringement permitting enhanced damages requires at least a showing of objective
recklessness.”55
Prior to 2004, the Federal Circuit held that when an accused infringer invoked the attorney-client
or work-product privilege, courts should be free to reach an adverse inference that either (1) no
opinion had been obtained or (2) an opinion had been obtained and was contrary to the infringer’s
desire to continue practicing the patented invention.56 However, in its decision in Knorr-Bremse
Systeme fuer Nutzfahrzeuge GmbH v. Dana Corp.,57 the Federal Circuit expressly overturned this
principle. The Court of Appeals further stressed that the failure to obtain legal advice did not
occasion an adverse inference with respect to willful infringement either. Following the Knorr-
Bremse opinion, willful infringement determinations are based upon “the totality of
circumstances, but without the evidentiary contribution or presumptive weight of an adverse
inference that any opinion of counsel was or would have been unfavorable.”58
The America Invents Act includes language specifying that the “failure of an infringer to obtain
the advice of counsel ... may not be used to prove that the accused infringer willfully infringed the
patent....”59 This provision appears essentially to codify the holding of Knorr-Bremse described
above.
Inter Partes and Post-Grant Reviews
The America Invents Act mandates changes to the options available for post-grant USPTO review
proceedings by (1) replacing the existing inter partes reexamination system with inter partes
review proceedings;60 and (2) introducing a new proceeding titled “post-grant review.”61 Both
inter partes and post-grant reviews are patent revocation proceedings administered by the
USPTO. They would operate similarly to the existing reexamination system, which has been part
of U.S. law since 1981. The USPTO currently administers two types of reexamination
proceedings, termed ex parte and inter partes.
Under the reexamination statute, any individual, including the patentee, a competitor, and even
the USPTO Director, may cite a prior art patent or printed publication to the USPTO. If the
USPTO determined that this reference raised a “substantial new question of patentability” with
respect to an issued patent, then it would essentially reopen prosecution of the issued patent.
Traditional reexamination proceedings were conducted in an accelerated fashion on an ex
parte basis—that is to say, as a dialogue between applicant and examiner without extended
participation by others. Following the American Inventors Protection Act of 1999,62 an inter
54 Seagate Technologies, supra.
55 Id.
56 See, e.g., Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1572 (Fed. Cir. 1988).
57 383 F.3d 1337 (Fed. Cir. 2004).
58 Ibid at 1341.
59 P.L. 112-29 at § 17.
60 P.L. 112-29 at § 6(a).
61 P.L. 112-29 at § 6(d).
62 The American Inventors Protection Act of 1999, P.L. 106-113, was part of the Intellectual Property and
Communications Omnibus Reform Act of 1999, attached by reference to the Consolidated Appropriations Act for
Fiscal Year 2000. President Clinton signed this bill on November 29, 1999.
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partes reexamination allowed the requester to participate more fully in the proceedings through
the submission of arguments and the filing of appeals. Either sort of reexamination may have
resulted in a certificate confirming the patentability of the original claims, an amended patent
with narrower claims, or a declaration of patent invalidity.
Congress intended reexamination proceedings to serve as an inexpensive alternative to judicial
determinations of patent validity.63 Reexamination also allows further access to the legal and
technical expertise of the USPTO after a patent has issued.64 However, some commentators
believe that reexamination proceedings have been employed only sparingly and question their
effectiveness.65
The America Invents Act establishes a new proceeding termed a “post-grant review.” Unlike
previous reexamination proceedings, petitioners may challenge validity based upon on any
ground of patentability in a post-grant review. A post-grant review must be filed within nine
months of the date of patent grant. To initiate a post-grant review, the petitioner must present
information that, if not rebutted, would demonstrate that it is more likely than not that at least one
of the claims is unpatentable. A post-grant review must be completed within one year of its
commencement, with an extension of six months possible for good cause shown. As well, the
individual who commenced the proceeding, along with his privies (people who have a legal
interest in the patent), are barred in the future from raising issues that were “raised or reasonably
could have been raised” during the post-grant review.
The new law also replace existing inter partes reexamination proceedings with a similar system
termed “inter partes review.” A notable difference between the old and new proceedings is that
the USPTO will be required to complete the proceeding within one year of its commencement,
with an extension of six months possible for good cause shown. In broad outline, the law allows a
person who is not the patent owner to file a petition requesting inter partes review nine months
after a patent issues or reissues, or the conclusion of any post-grant review, whichever occurs
later. In contrast to the post-grant review, the basis for requesting an inter partes review is
restricted to patents or printed publications. As a result, patent challenges under inter partes
review are limited to the patentability issues of novelty and nonobviousness.66 Post-grant reviews
allow a patent challenger to raise additional patentability issues, such as unpatentable subject
matter or lack of enablement, that are not based upon a patent or printed publication.
Under the America Invents Act, the petitioner must demonstrate that there is a “reasonable
likelihood” that he would prevail with respect to at least one claim in order for the inter partes
proceeding to begin. Under the time frames established, the effective result is that a patent may be
challenged at the USPTO on any basis of any patentability issue within nine months from the date
it issued (via post-grant review). Thereafter, and throughout its entire term, the patent may be
challenged at the USPTO on the grounds of novelty and nonobviousness (via inter partes
review).
63 Mark D. Janis, “Inter Partes Reexamination,” 10 Fordham Intellectual Property, Media & Entertainment Law
Journal (2000), 481.
64 Craig Allen Nard, “Certainty, Fence Building and the Useful Arts,” 74 Indiana Law Journal (1999), 759.
65 See Schechter & Thomas, supra, at § 7.5.4.
66 Notably, the proposed restriction of inter partes review to patents and printed publications limits the grounds on
which a patent challenger may request such a review. Once a patent is subject to inter partes review, the USPTO may
potentially consider other pertinent patentability issues, such as claim definiteness.
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The new law stipulates that an accused infringer may not seek inter partes review if he has
already filed a lawsuit challenging the patent or more than six months have passed since the date
the accused infringer was served with a complaint alleging infringement of that patent. The law
affords the patent proprietor a single opportunity to amend its patent during the proceeding, with
further opportunities available with good cause shown. Should the patent survive the inter partes
review proceeding, the individual who commenced the proceeding, along with his privies, are
barred in the future from raising issues that were “raised or reasonably could have been raised.”
Post-Grant Citation of Prior Art
The USPTO has long allowed any person at any time to bring to the agency’s attention “patents
or printed publications” believed to “have a bearing on the patentability of any claim of a
particular patent.”67 That person may also include a written statement explaining the relevance of
the cited document to the patent. This sort of “prior art citation” does not provoke any sort of
administrative proceeding. However, the USPTO will place these submissions within the official
file of the relevant patent, where they are accessible to the public. Prior art that potentially has a
negative impact upon the patent’s validity may be of considerable interest to the patent owner, its
customers and competitors, and possibly others. The name of the person who files a prior art
citation may be kept confidential by request.
The ability of members of the public to cite to the USPTO information that may be pertinent to
the validity of a granted patent would be augmented under the provisions of the America Invents
Act. The new law also allows the citation of written statements that the patent owner has filed
before a federal court or the USPTO regarding the scope of the patent’s claims.68
Preissuance Submissions
The America Invents Act expands the possibilities for members of the public to comment upon
pending applications at the USPTO. Prior to this legislation, interested individuals could file a
“protest” at the agency. Such a protest was required to identify the application specifically and be
served upon the applicant. The protest had to include a copy and, if necessary, an English
translation, of any patent, publication, or other information relied upon. The protester was
required to explain the relevance of each item.69
Protest proceedings have traditionally played a small role in U.S. patent practice. Until Congress
enacted the American Inventors Protection Act of 1999, the USPTO maintained applications in
secrecy. Therefore, the circumstances in which members of the public would learn of the precise
contents of a pending patent application were relatively limited. Following the 1999 legislation,
the USPTO began to publish many pending patent applications. Seemingly aware of this
possibility, the 1999 Act provided that the USPTO shall “ensure that no protest or other form of
pre-issuance opposition ... may be initiated after publication of the application without the express
written consent of the applicant.”70 Of course, the effect of this provision was to eliminate the
67 35 U.S.C. § 301.
68 P.L. 112-29 at § 6(g)
69 37 C.F.R. § 1.291.
70 35 U.S.C. § 122(c).
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possibility of protest in exactly that class of cases where the public was most likely to learn of the
contents of a pending application.
Through rulemaking, the USPTO had nonetheless established a limited mechanism for members
of the public to submit information they believe is pertinent to a pending, published application.
The submitted information must consist of either a patent or printed publication, and it must be
submitted within two months of the date the USPTO published the pending application.
Nondocumentary information that may be relevant to the patentability determination, such as
sales or public use of the invention, will not be considered.71 In addition, because Congress
stipulated that no protest or pre-grant opposition may occur absent the consent of the patent
applicant, the USPTO had explained that it will not accept comments or explanations concerning
the submitted patents or printed publications. If such comments were attached, USPTO staff
would redact them before the submitted documents were forwarded to the examiner.72
The America Invents Act expands the possibility for preissuance submissions. Under the
legislation, any person may submit patent documents and other printed publications to the
USPTO for review. Such prior art must be submitted within the later date of either (1) the date the
USPTO issues a notice of allowance to the patent applicant; or (2) either six months after the date
of pre-grant publication of the application, or the date of the first rejection of any claim by the
USPTO examiner. Such a submission must include “a concise description of the asserted
relevance of each submitted document.”
Venue
The America Invents Act alters the venue provisions that apply to suits where the USPTO is a
party—for example, appeals from inventors whose patent applications have been rejected.73 Such
cases are currently heard by the District Court for the District of Columbia. Under the new law,
the District Court for the Eastern District of Virginia will hear such cases. This change in venue
may reflect the fact that the headquarters of the USPTO is no longer located within Washington,
DC, but rather in Alexandria, VA.
USPTO Fee-Setting Authority and Funding
The USPTO enjoys certain rulemaking authority provided by law. The USPTO may establish
regulations that “govern the conduct of proceedings” before it, for example, as well as regulations
that “govern the recognition and conduct” of patent attorneys.74 However, the fees charged by the
USTPO currently were determined by Congress.
71 37 C.F.R. § 1.99.
72 U.S. Dept. of Commerce, U.S. Patent & Trademark Off., Manual of Patent Examining Procedure § 1134.01 (8th ed.
July 2008).
73 P.L. 112-29 at § 9.
74 35 U.S.C. § 2(b)(2). It should be appreciated that “Congress has not vested the [USPTO] with any general
substantive rulemaking power.... ” Cybor Corp. v. FAS Techs, Inc., 138 F.3d 1448, 1479 (Fed. Cir. 1998) (en banc)
(Newman, J., additional views).
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The America Invents Act grants the USPTO additional authority “to set or adjust by rule any fee
established or charged by the Office” under certain provisions of the patent and trademark laws.75
This appears to provide the USPTO with greater flexibility to adjust its fee schedule absent
congressional intervention. The new law requries that “patent and trademark fee amounts are in
the aggregate set to recover the estimated cost to the Office for processing, activities, services and
materials relating to patents and trademarks, respectively, including proportionate shares of the
administrative costs of the Office.”
The America Invents Act additionally stipulates fees for patent services provided by the
USPTO.76 In general, the new law raises the fees slightly. For example, the fees for filing a patent
application and for the issuance of an approved application were $300 and $1,400 respectively;
the new fees are $330 and $1,510. As previously discussed, each of these fees would then
presumably be subject to adjustment by the USPTO.
The new statute creates within the Treasury a “Patent and Trademark Fee Reserve Fund” into
which fee collections above that “appropriated by the Office for that fiscal year” will be placed.
These funds will be available to the USPTO “to the extent and in the amounts provided in
appropriations Acts” and may only be used for the work of the Office.77
The America Invents Act also establishes a new “micro entity” category of applicants.78 A micro
entity must make a certification that it qualifies as a small entity, has not been named on five
previously filed patent applications, does not have a gross income exceeding three times the
average gross income, and has not conveyed an interest in the application to another entity with
an income exceeding that threshold. Micro entities would be entitled to a 75% discount on many
USPTO fees. The USPTO Director is given authority to limit those who qualify as a micro entity
if such limitations “are reasonably necessary to avoid an undue impact on other patent applicants
or owners and are otherwise reasonably necessary and appropriate.” The USPTO must inform
Congress at least three months in advance of imposing such limitations.
Supplemental Examination
The America Invents Act establishes a new post-issuance administrative proceeding termed
“supplemental examination.”79 This proceeding appears to be based upon a need to address
concerns over the legal doctrine of inequitable conduct, a topic that bears some explanation. The
administrative process of obtaining a patent from the USPTO has traditionally been conducted as
an ex parte procedure. Stated differently, patent prosecution involves only the applicant and the
USPTO. Members of the public, and in particular the patent applicant’s marketplace competitors,
do not participate in patent acquisition procedures.80 As a result, the patent system relies to a great
extent upon the applicant’s observance of a duty of candor and truthfulness towards the USPTO.
75 P.L. 112-29 at § 10.
76 P.L. 112-29 at § 11.
77 P.L. 112-29 at § 22.
78 P.L. 112-29 at § 10(g)
79 P.L. 112-29 at § 12.
80 35 U.S.C. § 122(a) (stating the general rule that “applications for patents shall be kept in confidence by the Patent
and Trademark Office and no information concerning the same given without authority of the applicant.... ”).
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An applicant’s obligation to proceed in good faith may be undermined, however, by the great
incentive applicants might possess not to disclose, or to misrepresent, information that might
deleteriously impact their prospective patent rights. The patent law therefore penalizes those who
stray from honest and forthright dealings with the USPTO. Under the doctrine of “inequitable
conduct,” if an applicant intentionally misrepresents a material fact or fails to disclose material
information, then the resulting patent will be declared unenforceable.81 Two elements must exist
before a court will decide that the applicant has engaged in inequitable conduct. First, the
patentee must have misrepresented or failed to disclose material information to the USPTO in the
prosecution of the patent.82 Second, such nondisclosure or misrepresentation must have been
intentional.83
During patent infringement litigation, an accused infringer has the option of asserting that the
plaintiff’s patent is unenforceable because it was procured through inequitable conduct. Some
observers have expressed concerns that charges of inequitable conduct have become routine in
patent cases. As one commentator explains:
The strategic and technical advantages that the inequitable conduct defense offers the
accused infringer make it almost too attractive to ignore. In addition to the potential effect on
the outcome of the litigation, injecting the inequitable conduct issue into patent litigation
wreaks havoc in the patentee’s camp. The inequitable conduct defense places the patentee on
the defensive, subjects the motives and conduct of the patentee’s personnel to intense
scrutiny, and provides an avenue for discovery of attorney-client and work product
documents....84
The Federal Circuit has stated that “the habit of charging inequitable conduct in almost every
major patent case has become an absolute plague.”85 Other observers believe that because
inequitable conduct requires an analysis of the knowledge and intentions of the patent applicants,
the doctrine may also be contributing disproportionately to the time and expense of patent
litigation.86
Due to these perceived burdens upon patent litigation, some experts have proposed that the
inequitable conduct defense be eliminated.87 Others believe that inequitable conduct is necessary
to ensure the proper functioning of the patent system. As the Advisory Commission on Patent
Law Reform explained in its 1992 report:
Some mechanism to ensure fair dealing between the patentee, public, and the Federal
Government has been part of the patent system for over 200 years. In its modern form, the
unenforceability defense provides a necessary incentive for patent applicants to engage in
fair and open dealing with the [USPTO] during the ex parte prosecution of patent
applications, by imposing the penalty of forfeiture of patent rights for failure to so deal. The
81 Glaverbel Societe Anonyme v. Northlake Mktg. & Supply Inc., 45 F.3d 1550 (Fed. Cir. 1995).
82 Heidelberger Druckmaschinen AG v. Hantscho Comm’l Prods., Inc., 21 F.3d 1068 (Fed. Cir. 1993).
83 Jazz Photo Corp. v. U.S. Int’l Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001).
84 John F. Lynch, “An Argument for Eliminating the Defense of Patent Unenforceability Based on Inequitable
Conduct,” 16 American Intellectual Property Law Association Quarterly Journal (1988), 7.
85 Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418 (Fed. Cir. 1988).
86 See, e.g., Scott D. Anderson, “Inequitable Conduct: Persistent Problems and Recommended Resolutions,” 82
Marquette Law Review (1999), 845.
87 Lynch, supra, at 7.
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defense is also considered to be an essential safeguard against truly fraudulent conduct
before the [USPTO]. Finally, the defense provides a means for encouraging complete
disclosure of information relevant to a particular patent application.... Thus, from a policy
perspective, the defense of unenforceability based upon inequitable conduct is desirable and
should be retained.88
To limit the use of inequitable conduct in patent litigation, the America Invents Act permits patent
owners to request a “supplemental examination” in order to “consider, reconsider, or correct
information believed to be relevant to the patent.” If the USPTO Director believes that this
information raises a substantial new question of patentability, then a reexamination will be
ordered. The America Invents Act provides that a “patent shall not be held unenforceable ... on
the basis of conduct relating to information that had not been considered, was inadequately
considered, or was incorrect in a prior examination of the patent if the information was
considered, reconsidered, or corrected during a supplemental examination of the patent.” The
supplemental examination request and resulting reexamination must be concluded prior to the
start of litigation for the patent to obtain this benefit. The statute stipulates that if there is evidence
of “material fraud,” the Director of the USPTO is authorized to notify the Attorney General for
“such further action as the Attorney General may deem appropriate.”
Tax Strategy Patents
In recent years, the USPTO has issued patents on financial, investment, and other methods that
individuals might use in order to minimize their tax obligations.89 Under the America Invents Act,
for the purpose of evaluating whether an invention meets the requirements of novelty and
nonobviousness, “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.”90 Under this rule, unless a tax strategy patent
claimed an additional component that met the novelty and nonobviouness requirements—such as
new computer hardware—then the invention could not be patented. The new law stipulates that
this provision does not apply to that part of an invention “used solely for preparing a tax or
information return or other tax filing....”
The America Invents Act stipulates that the tax strategy patent provision does not apply to “a
method, apparatus, technology, computer program product, or system used solely for financial
management, to the extent it is severable from any tax strategy or does not limit the use of any tax
strategy by any taxpayer or tax adviser.” The statute also states that “[n]othing in this section shall
be construed to imply that other business methods are patentable or that other business method
patents are valid.”
88 1992 Advisory Commission, supra, at 114.
89 See CRS Report RL34221, Patents on Tax Strategies: Issues in Intellectual Property and Innovation, by John R.
Thomas.
90 P.L. 112-29 at § 14.
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Best Mode
The U.S. patent statute requires inventors to “set forth the best mode contemplated by the
inventor of carrying out his invention.”91 Failure to disclose the best mode known to the inventor
is a ground for invalidating an issued patent. The courts have established a two-part standard for
analyzing whether an inventor disclosed her best mode in a particular patent. The first inquiry
was whether the inventor knew of a way of practicing the claimed invention that she considered
superior to any other. If so, then the patent instrument must identify, and disclose sufficient
information to enable persons of skill in the art to practice that best mode.92
The America Invents Act continues to apply the best mode requirement to all patents. However,
violation of the best mode requirement would no longer form the basis for an accused infringer’s
defense to a charge of patent infringement during enforcement litigation or post-grant review
proceedings.93 Compliance with the best mode requirement would remain subject to review by
USPTO examiners during the initial prosecution of a patent, although USPTO rejection of
applications based upon failure to comply with the best mode requirement is reportedly a rare
circumstance.94
Clarification of Jurisdiction
The America Invents Act confirms that state courts do not possess jurisdiction to hear claims for
relief under the patent, plant variety protection, and copyright laws.95 The statute further provides
that the Federal Circuit possesses jurisdiction over appeals relating to patent and plant variety
protection cases. In addition, cases are allowed to be removed from courts that do not possess
jurisdiction and transferred to those that do.
Transitional Program for Covered Business Method Patents
The America Invents Act creates a transitional post-grant review proceeding for the review of the
validity of certain business method patents.96 This transitional proceeding would be limited to
patents that claim “a method or corresponding apparatus for performing data processing
operations utilized in the practice, administration, or management of a financial product or
service, except that the term shall not include patents for technological inventions.” Only
individuals who have been either sued for infringement or charged with infringement of a
business method patent may petition the USPTO to commence such a proceeding. The
transitional program would apply to all business method patents issued before, on, or after the
date of enactment of the legislation.
91 35 U.S.C. § 112.
92 See, e.g., Chemcast Corp. v. Arco Industries Corp. 913 F.2d 923 (Fed. Cir. 1990).
93 P.L. 112-XX at § 15.
94 Jerry R. Selinger, “In Defense of “Best Mode”: Preserving the Benefit of the Bargain for the Public, 43 Catholic
University Law Review (1994), 1099 (“Failure to comply with best mode ... is not something an examiner normally can
evaluate when reviewing the application.... ”).
95 P.L. 112-29 at § 19.
96 P.L. 112-29 at § 18.
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The new law stipulates that a party may seek a stay of litigation related to the transitional
proceeding, and that the district court’s decision may be subject to an immediate interlocutory
appeal to the Federal Circuit. This transitional program is subject to a sunset provision that would
repeal the program after eight years. In addition, the statute provides that its business method
patent provisions shall not be construed as amending or interpreting categories of patent-eligible
subject matter.
USPTO Satellite Offices
The USPTO has long been required to maintain its principal office in the metropolitan
Washington, D.C., area. The law further allows the USPTO to “establish satellite offices in such
other places in the United States as it considers necessary and appropriate in the conduct of its
business.”97 The USPTO recently announced it would open its first satellite office in Detroit,
MI.98
The American Invents Act requires the USPTO to establish three or more additional satellite
offices in the United States subject to available resources.99 The satellite offices are intended to
increase inventor outreach activities, enhance patent examiner retention, improve recruitment of
patent examiners, decrease the number of unexamined patent applications, and improve the
quality of patent examination. The USPTO is required to ensure the geographic diversity of its
satellite offices. The act designate the Detroit satellite office as the “Elijah J. McCoy United
States Patent and Trademark Office.”100
Other USPTO Programs
The America Invents Act provides for other reforms relating to the USPTO. Among them is the
creation of a patent ombudsman program for small business concerns, subject to available
resources.101 In addition, the legislation allows the USPTO to prioritize examination of patent
applications relating to technologies that are “important to the national economy or national
competitiveness.”102 The new law proposes that studies be undertaken in the following areas:
patents on genetic testing; diversity of patent applicants; international patent protection for small
businesses; consequences of litigation by non-practicing entities; and implementation of the
legislation.
Prohibition of Patents on Humans
The USPTO has interpreted the Thirteenth Amendment, which bans human slavery, as barring
patents claiming human beings.103 The America Invents Act gives statutory footing to this policy
97 35 U.S.C. §1(b).
98 U.S. Patent and Trademark Office, Press Release, USPTO to Open First Ever Satellite Office in Detroit (Dec. 16,
2010), available at http://www.uspto.gov/news/pr/2010/10_65.jsp.
99 P.L. 112-29 at § 23.
100 P.L. 112-29 at § 24.
101 P.L. 112-29 at § 28.
102 P.L. 112-29 at § 25.
103 See Commissioner of Patents and Trademarks, Policy Statement on Patentability of Animals, 1077 Off. Gaz. Pat.
(continued...)
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by stipulating that “no patent may issue on a claim directed to or encompassing a human
organism.”104
Patent Term Extension Filings
The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the
Hatch-Waxman Act, provides holders of patents on pharmaceuticals and other regulated products
with an extended term of protection to compensate for delays experienced in obtaining marketing
approval. Under prior law, a petition to receive such a term extension “may only be submitted [to
the USPTO] within the sixty-day period beginning on the date the product received permission
under the provision of law under which the applicable regulatory review period occurred....”105
The America Invents Act stipulates that if regulatory approval is transmitted after 4:30 PM
Eastern time on a business day, or is transmitted on a day that is not a business day, then the
product shall be deemed to have received such permission on the next business day.106
Further Considerations
Although the America Invents Act is the product of years of discussion and debate, some
observers believe that Congress did not address certain issues of pressing concern to the patent
system. One of these issues involves the propriety of current judicial assessments of damages in
patent infringement cases. Some observers believe that judges and juries have tended to
overcompensate patent holders when they make damages awards, particularly in cases where the
accused infringement includes additional features not covered by the patent.107 Other
commentators found the level of compensation to be appropriate and expressed concerns that
legislative reforms might reduce damages awards to such a degree as to diminish the value of
patent ownership.108 A number of recent judicial opinions, including Lucent Technologies, Inc. v.
Gateway, Inc.,109 appear to have recognized expressed concerns about damages awards in patent
cases and the Federal Circuit has issued rulings designed to increase their fairness and
predictability. Perhaps because of these judicial developments, the America Invents Act
ultimately did not address the award of damages in patent cases. For some, however, concerns
linger concerning the damages issues.110
Some observers believe that Congress should have required the USPTO to publish all patent
applications during their pendency. When enacting the American Inventors Protection Act of
(...continued)
Office 24 (April 7, 1987).
104 P.L. 112-29 at § 33.
105 35 U.S.C. § 156(d)(1).
106 P.L. 112-29 at § 37.
107 See, e.g., Elizabeth M. Bailey et al., “Making Sense of ‘Apportionment’ in Patent Damages,” 12 Columbia Science
and Technology Law Review 255 (2011) (noting these concerms).
108 See, e.g., Martha K. Gooding & William C. Rooklidge, “The Real Problem with Patent Infringement Damages,” 91
Journal of the Patent and Trademark Office Society 484 (2009).
109 580 F.3d 1301 (Fed. Cir. 2009).
110 See, e.g., Brad Smith, “In a Competitive Economy, The Country’s Prosperity Depends More Than Ever on a
Healthy Patent System,” Inside Counsel 8 (May 1, 2010).
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.
The Leahy-Smith America Invents Act: Innovation Issues
1999, Congress for the first time introduced the concept of pre-grant publication into U.S. law.
Since November 29, 2000, U.S. patent applications have been published 18 months from the date
of filing, with some exceptions. The most significant of these exceptions applies where the
inventor represents that he will not seek patent protection abroad. In particular, if an applicant
certifies that the invention disclosed in the U.S. application will not be the subject of a patent
application in another country that requires publication of applications 18 months after filing,
then the USPTO will not publish the application.111 As a result, inventors who do not wish to seek
foreign patent rights retain the possibility of avoiding pre-grant publication. Congress had
previously considered eliminating this exception, and some observers continue to believe this was
the preferable option. On the other hand, many commentators believe that this exception is more
fair to individuals, small firms, and other innovators that may be especially vulnerable to piracy
of their products.
Another concern that some observers argue has not been sufficiently addressed is that of patent
fee “diversion.” Under that practice, the USPTO is not provided the budget authority through the
appropriations process to spend all fees collected within a fiscal year. Beginning in 1990,
appropriations measures have, at times, limited the ability of the agency to use the full amount of
fees collected in each fiscal year. Some observers believe that “fee diversion” has limited the
ability of the USPTO to discharge its statutory duties effectively. On the other hand, others
believe that the agency obtains sufficient financial support and point to the need to support other
governmental programs.112 The approach embodied in the America Invents Act keeps USPTO use
of fees within the appropriations process, but mandates that any excess fees be used only to fund
USPTO activities. It remains to be seen if this provides the USPTO with the necessary resources.
The Leahy-Smith America Invents Act is by any reasonable measure a watershed event in the
field of intellectual property law. The numerous reforms introduced by the legislation, intended to
improve, update, and adopt global best practices, will undoubtedly bring immediate changes to
patent practice by the USPTO, the private bar, and innovative firms. Experience will inform us
whether the legislation meets its intended goals of increasing patent quality, making patent
dispute resolution more fair and efficient, improving the environment for innovation, and
enhancing the economic growth of the United States.
Author Contact Information
Wendy H. Schacht
John R. Thomas
Specialist in Science and Technology Policy
Visiting Scholar
wschacht@crs.loc.gov, 7-7066
jrthomas@crs.loc.gov, 7-0975
Acknowledgments
This report was funded in part by a grant from the John D. and Catherine T. MacArthur Foundation.
111 35 U.S.C. § 122(b).
112 See CRS Report RS20906, U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation, by
Wendy H. Schacht.
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