The evolution of the patent reform movement

In 1967 a New York Times article pitted those in favour of patent reform against those who opposed changes to the existing system. Contrary to most of the current press at the time, the dispute in this piece was not about the damages provisions or rulemaking authority at the US Patent and Trademark Office (USPTO). It highlighted what is generally considered to be a relatively innocuous issue: converting the current patent scheme in the United States from a "first to invent" system to a "first to file" system. It cited a government official, who remarked that the United States must move towards a universal patent system harmonised with the rest of the world, against a Kenyon & Kenyon lawyer, who opposed patent reform if the price to be paid for reform was the conversion to a first to file system.

In the four decades since, adoption of a first to file system in the United States has proved to be an elusive target and the US patent system to this day remains a first to invent system. Before Congress, yet again, is a patent reform bill which includes some sweeping changes - among them, first to file provisions.

While the Senate Committee on the Judiciary has held eight hearings on patent reform since 2005, during which it heard testimony from almost 50 experts from institutions ranging from Stanford University and the University of Pennsylvania to Cisco Systems and Goldman Sachs, it was during that session of Congress in 1967 that the modern patent reform movement was born.

The Patent Reform Act of 2009 follows a line of recent efforts based in part on a Federal Trade Commission report, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, published in 2003, and a National Academy of Sciences report, A Patent System for the 21st Century, published in 2004. The bill under consideration is preceded by the proposed Patent Reform Act of 2007, the proposed Patent Reform Act of 2005, the proposed Patent Systems Harmonisation Act of 1992 and, of course, the Patent Reform Act of 1967.

Although the current version raises similar issues to that introduced over 40 years ago, the focus has changed. Today, the issues related to "first to file" are considered almost unanimously acceptable for harmonisation purposes, although a minority of critics predict that the change will unfairly favour large organisations with established invention protocols and legal teams. That said, both sides of the debate generally support the first to file model, but since it is often part of a larger discussion, it has yet to be adopted.

This year, the Judiciary Committee has approved S515, its version of the patent reform bill, which expressly changes the effective date of invention to the filing date for the patent containing a claim to the invention or the earliest date connected to a document in which the claimed invention is disclosed.

The new legislation also grants a one-year grace period for inventors to file an application after they disclose their invention to the public, which would not apply to disclosures made by individuals other than the inventor. It is possible, however, that the change would be effective only if other members of the World Intellectual Property Organisation (eg, the European Union and Japan) adopted a similar one-year grace period for filing a patent application. The uncertain actions of the IP authorities across the world adds yet another layer of complexity to the challenges associated with this movement.

The death of interferences
If approved, the first to file model would result in the end of the priority contest that interference proceedings currently create in favour of a more uniform approach to resolving multiple patent applications. Interference proceedings are unique to the United States and are a byproduct of the first to invent system. An interference proceeding is designed to unravel the question of which of two competing inventors is entitled to a US patent based on their respective dates of conception and reduction to practice, as well as their comparative diligence.

In the place of interferences, there would be derivation proceedings to determine whether an earlier applicant derived an invention in dispute from a later applicant. Supporters claim that this process would be faster and cheaper than interference proceedings. It would also provide a grace period for disclosing the subject matter of the claimed invention to the public while maintaining priority.

Post-grant review procedures
As a supplement to inter partes re-examination proceedings and ex parte re-examination proceedings, S515 empowers the USPTO to create a new scheme for third parties to challenge the validity of existing patents within 12 months of the date on which the patent was issued. Unlike re-examination proceedings, in which a challenge may be based on patents and printed publications, any ground that could be raised to challenge validity of a patent in a district court litigation may serve as the basis for challenging validity in a post-grant review proceeding. And, unlike re-examination proceedings, which are examined much like regular patent applications, post-grant review proceedings shall be conducted by a newly created Patent Trial and Appeal Board (which shall take the place of the present Board of Patent Appeals and Interferences).

Inter partes re-examination proceedings
Two aspects of current inter partes re-examination proceedings are considered serious deterrents to seeking inter partes re-examination: (i) the statutory estoppel, which precludes the requester from later challenging validity based on any ground that the requester raised or could have raised during the inter partes re-examination proceeding; and (ii) the tight deadline (which, by statute, is a 30-day response period measured from service of the patentee's response and, by USPTO rule, is unextendable) for the requester to submit comments on a rejection or the patentee's response thereto.

S515 eases these aspects of inter partes re-examination. Regarding the statutory estoppel, the phrase "could have raised" would be stricken, thus limiting the estoppel to grounds that the requester raised in the inter partes re-examination proceeding. Regarding the time limit for the requester to submit comments, the response period would be doubled to 60 days. In addition, it appears that the requester is provided with two 60-day response periods: the first measured from the date of service of an office action on the requester and the second measured from the date of service of the patent owner's response on the requester. This additional time period would be beneficial - particularly in instances where additional prior art searching might be warranted in light of, for example, proposed amendments to the claims that raise new issues.

Patent Reform Act favours applicants
If passed, the Patent Reform Act of 2009 would ultimately move from an inventor-centric system to one favouring an applicant. It would streamline the necessary paperwork for patent filings. For example, an amended provision would allow an institution to file an application on behalf of an employee inventor when he or she had an assignment obligation. This seemingly minor issue would ease the signed declaration requirement and simplify the application process.

Probability of passage
Three variables will directly impact on passage of any new reform legislation. First, the attention of the current Congress will be distracted for the next few months by the Supreme Court nomination of Judge Sonia Sotomayor of the US Court of the Appeals for the Second Circuit. Second, the conversion of Senator Specter from Republican to Democrat has changed the political landscape and could impact on the dynamic of bipartisan support for patent reform in the Senate. Third, the appointment of the new director of the USPTO may influence the debate.

In addition, despite President Obama's public affinity for technology, his administration has not significantly participated in the discussion surrounding reform. The White House website simply notes its interest in:

"updat[ing] and reform[ing] our copyright and patent systems to promote civic discourse, innovation, and investment while ensuring that intellectual property owners are fairly treated."

However, members of private industry have been compromising on the most contentious issues of damages and wilful infringement. The biotechnology, pharmaceutical and large manufacturing industries continue to support strong patent rights, while technology, energy, media and financial services companies tend to favour reform. All appear to be committed to some meaningful change, but their readiness to compromise is tested annually. The overall commitment to overhauling a system that works, but could benefit from improvement, is ultimately at issue as much today as it was when that New York Times article was written four decades ago.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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