The Leahy-Smith America Invents Act ("AIA"), also known as the latest version of the patent reform bill, was officially signed into law by President Obama on September 16, 2011, after approval by both houses of Congress following years of various versions being proposed. It has been touted as the most sweeping overhaul of the patent laws in more than a century and will usher in significant changes – some to harmonize U.S. patent rules with their international counterparts and some to address disparities or shortcomings in the examination and enforcement of U.S. patents. The below overview is provided to address common questions about what the new patent rules will mean for our clients in the days and years ahead.

Fee Increases

Most key aspects of the AIA do not go into effect until 12 to 18 months from its enactment date, with the exception of virtually across-the-board fee increases of 15% effective September 26, 2011. Those fee increases, while in some cases relatively substantial, should not have any real effect on many of our clients, who will likely qualify as a “micro entity” under the new rules and so be entitled to fee reductions of up to 75%, such that what may be fee increases for the big corporate players may in fact amount to fee reductions for the "little guy."

To qualify as a “micro entity” and be entitled to the 75% fee reduction, the patent applicant must:

be a “small entity” (a defined term meaning an individual person, certain non-profit organizations, or a “small business concern” having 500 or fewer employees); not be named as an inventor on more than four previously filed U.S. non-provisional patent applications (not including inventions assigned based upon prior employment); have a gross income of less than three times the median household income for the year proceeding the year of application (for example: in 2010, the median household income is reported as $49,445; therefore, any 2011 applicant with a gross income of less than $148,335 would satisfy this requirement); and file an application that has not been assigned to and is not under an obligation to be assigned to an entity that does not meet the above-mentioned income guidelines.

It is noted that while the fee increases (15% surcharge) are effective as of September 26, 2011, the USPTO has not yet set or adjusted the micro entity fees for any specific fee schedule items under the fee setting authority, provided in Section 10 of the AIA, and has not yet even published any definite plans or timeline for doing so. Thus, for the time being, “small entity” status is the only means for receiving a discount on USPTO fees related to filing, searching, examining, issuing, appealing, and maintaining patent applications and patents.

Transition from First-to-Invent to First-to-File

One of the major substantive changes of the AIA is turning the U.S. patent system into a first-to-file (or “first inventor to file”) system as opposed to a first-to-invent system. The USPTO’s current use of the first-to-invent system awards a patent based on the conception of the invention – not necessarily when it is filed. The first-to-file system, as the name suggests, awards a patent to the first person who files for it regardless. This new rule will go into effect on March 16, 2013, and so any applications filed ahead of that date (or having a priority date that pre-dates that date) will stand or fall relative to any other applications claiming substantially the same subject matter under the current first-to-invent rule. Thus, until then, it is still best to keep a good record of an invention, from conception to reduction to practice to patent filing. In contrast, after March 16, 2013, the first to file a patent application on an invention will be awarded the patent regardless of who invented first. However, the issue of “first to invent” may still come into play under the new “Derivation Proceeding” provisions included in the AIA and effective September 16, 2012, wherein a petitioner, or the second-to-file applicant, can assert that the first-filed application was on an invention derived from the petitioner and was filed without their authorization. Thus, if a third-party “innocently” independently invents and wins the race to the Patent Office after March 16, 2013, a second filer – even if the first to actually invent – will simply be out of luck; while, if the second filer can prove that the first filer basically stole the idea and so prevail in the Derivation Proceeding, then the second filer can still ultimately be awarded the patent in such a case.

New Prior Art Rules and Other Changes

Among the other key aspects of the AIA are: (1) a change to the grace period in which an inventor has time to file for a patent after first public disclosure; (2) a new procedure, effective September 26, 2011, for “fast-tracking” an application (now essentially by paying an extra “Prioritized Examination” fee initially set at $4,800 - $2,400 for small entities - as an alternative option to the current, relatively more cumbersome “Accelerated Examination” process that requires much more upfront patent searching and patentability analysis by the applicant and a number of additional related submissions with the application); and (3) new processes effective September 16, 2012, for third-party submission of prior art in a pending application or post-grant challenges to issued patents.

On the first point, the "prior art" rules are set to change as of March 16, 2013, after which date the current one-year grace period for U.S. patent filing will be all but abolished and an application will have to pre-date any patent, printed publication, public use, sale, or other availability to the public of the claimed invention anywhere in the world; with the one exception of the inventor’s own activities disclosing the invention, directly or indirectly, in which case the inventor will still have one year from his or her first such disclosure to file a U.S. patent application, so long as that first disclosure pre-dates any disclosures by third parties. In other words, any disclosure of the invention by a third party prior to the applicant’s filing date will normally be seen as prior art that can negate patentability; however, a third party disclosure within one year of the applicant's filing date will not count as prior art if either: (1) the applicant had already disclosed the invention prior to the third party disclosure (and filed their application within one year from their own disclosure); or (2) the third party disclosure was somehow derived from the applicant. Again, this will be the new “prior art” rule as of March 16, 2013. Keep in mind that such public disclosure pre-dating the applicant’s filing date will still preclude the applicant from pursuing patent protection in most foreign countries (i.e., even after March 16, 2013, an applicant’s earliest filing date must pre-date any public disclosure anywhere in the world to be entitled to patent protection in most countries beyond North America).

Conclusion

In sum, once the AIA is fully implemented, an inventor’s patent application filing date must pre-date the filing or public disclosure of substantially the same idea by any third party in order for a patent to be awarded, with a few exceptions (as always), such that there will then be much more of an incentive than under the current rules for inventors to get their patent applications (provisional or non-provisional) filed sooner than later. But at least in doing so, there may be some fee reductions through the AIA that will help small start-ups and independent inventors with the financial burden of moving relatively more quickly with the patent process, as well as some other rules aimed at preventing third-party abuses of this new scheme.

For a timeline of America Invents Act effective dates, please click here.

For a copy of the America Invents Act itself (H.R. 1249), please click here.

As you will appreciate, this is simply a general overview of the changes going into effect through passage of the America Invents Act. Neither it nor any further information found on our website is meant to be exhaustive or a substitute for the actual advice of counsel. There are a number of technical details that would have to be explored based on a client’s particular situation in order to assess the possibilities, both pre- and post-implementation, of any aspects of the AIA and so determine a best course of action under the circumstances. Thus, if you have any questions or concerns about the America Invents Act and how you might be affected, we invite you to call 949-250-5800 or email us, as we would be more than happy to service any and all of your intellectual property-related needs and walk you through this new era in U.S. patenting.