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Wednesday, September 4, 2013

Top 5 Important Provisions of the America Invents Act

By Steven Shape, IP Attorney

First to File

The biggest change to US patent laws, and certainly the most notorious, is that the United States has now converted from a first to invent system to a first to file system. First to file may be a misnomer for the new US system, as the term “first to file” has certain international meanings that will not apply.

Traditionally a first to file system is one that demands absolute novelty in order to obtain a patent.  In a traditional first to file system, if there is a prior use or publication of information relating to the invention no patent can be obtained. The new US first to file system does not mandate such a strict standard.

Under the US first to file system the inventor will still have a personal grace-period, which is not available to inventors outside the US. This personal grace-period provides that the inventor’s own disclosures, or the disclosures of others who have derived from the inventor, are not prior art as long as they occurred within 12 months of the filing date of a patent application relating to the invention. However, disclosures of third-parties who independently arrived at the invention information will be considered prior art against the inventor. In other words, there is no grace-period in the case of third party, independently created disclosures. This is a significant difference between the old law and the new law.

It is important to understand that under the new law an inventor is always better off filing sooner rather than later. The new adage is "file early and often."  However, the new US law does not set up a true race to the Patent Office.  In order to be awarded a patent one must still be an inventor. Those who learn of an invention cannot beat the inventor to the Patent Office and obtain a patent.  Inventors must contribute to the invention and stealing from another cannot provide the conception that is necessary to support the award of a patent.

Joinder & Consolidation

The AIA has curtailed patent troll litigation. The new law now prevents patent trolls from bringing patent infringement litigation against multiple defendants in a single infringement action. Courts that previously allowed such filings (sometimes well over 50 defendants were joined in a single case) prevented each defendant from fully defending itself, thereby effectively allowing a shakedown of the defendants.

Before the AIA, a patent owner could sue any number of defendants who were geographically scattered across the country and who offered different products.  The patent owner could then select a district court that offered a friendlier environment for a patentee (typically the Eastern District of Texas).  This would allow a patent owner to economically sue a large number of defendants and then proceed to seek to settle the case for nuisance value.  This effectively allowed the patent owner to easily obtain significant awards by offering settlements that were far less than the cost of litigating. This was quickly characterized by many to be a form of extortion.

Under the AIA accused infringers may be joined in one action or have their actions consolidated for trial only if: (1) a claim is made against parties jointly or severally, or a claim arises out of the same transaction, occurrence, or series of transactions or occurrences; and (2) questions of fact common to all defendants or counterclaim defendants will arise in the action. Under the AIA, patent owners can no longer sue multiple defendants in the same case by simply alleging that they all infringe the same patent.

The joinder and consolidation provisions of the AIA have already curbed activities. Therefore, small business shakedowns are now less commonplace.

False Marking

False marking cases arise under 35 USC § 292.  Prior to the enactment of the AIA anyone could bring a legal action seeking damages when someone affixed a patent number on a product that was not patented, or the patent had expired. The damages that could be recovered by the person bring the lawsuit was $500 for each case of mismarking.

The Court of Appeals for the Federal Circuit recognized that interpreting §292 to apply on a per article basis would encourage a glut of false marking litigation by plaintiffs who had not suffered any direct harm.  Effectively a new business was born, with large corporations being sued for significant sums.

The AIA mandated a change in enforcement of §292 such that only the United States may now sue for a civil penalty.  Nevertheless, a person who has suffered a competitive injury as a result of marking a product in violation of §292 may file a civil action in a Federal district court for recovery of damages adequate to compensate them for the injury. Under the AIA, the marking of a product with an expired patent is no longer a violation.

Best Mode

The best mode requirement historically created a bargained-for-exchange where the patentee obtained the right to exclude others from practicing the claimed invention for a certain time period, and the public received knowledge of the preferred embodiments to practice the claimed invention. The best mode requirement was a safeguard against obtaining patent protection without making a full disclosure as required by the patent laws.  Failure to disclose the best mode of the claimed invention was grounds for finding the patent claim invalid.

With the enactment of the AIA the best mode requirement has largely been eliminated. The failure to disclose the best mode is no longer a basis on which any claim of a patent may be held invalid or otherwise unenforceable.  However, 35 USC 112 still requires the disclosure of the best mode known to the inventor. So legally, applicants are still required to disclose the best mode, even though failure to do so will not invalidate an otherwise valid patent.

Based on the changes to the patent laws under the AIA, further patent law changes may be on the horizon to completely eliminate the best mode requirement.

Non-Infringement Opinions

After the enactment of the AIA, the failure of an infringer to obtain advice of counsel relating to any allegedly infringed patent may no longer be used to prove willful infringement or intentional inducement to infringe a patent. The AIA now mirrors the Federal Circuit’s decision stating that potential infringers have no affirmative obligation to obtain a non-infringement opinion.

Several questions still remain unanswered -- will courts preclude consideration of the lack of an opinion of counsel in determining whether to award enhanced damages?  Will courts still consider the lack of an opinion of counsel in awarding of attorneys fees when there is little due diligence prior to bringing an action?

Ultimately, it may be up to the courts to police the practice of bringing litigation without any due diligence to avoid the plaintiff’s attempts to shakedown defendants.

Disclaimer: Please note that this article does not constitute legal advice, and should not be relied on, since each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This post does not create an attorney-client relationship.

© 2013 Steven M. Shape  All Rights Reserved.

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