Patent law reform shifts to a first-to-file system

In the next 18 months, a host of changes to U.S. patent law will roll out as part of the America Invents Act – and perhaps the biggest shift will change who gets the credit for inventing something first.

The act, which was signed into law in September 2011, is being hailed by some as the most significant reform since the 1952 Patent Act.

“It’s just huge,” said Bill Kircher, an attorney with Husch Blackwell’s Kansas City office, speaking not only of the changes but also of the confusion that he is likely to follow.

“Congress has kind of mucked up the law. They didn’t write it with all the clarity that they could have. There are lots of interpretations that are going to have to be made by the courts for us to eventually know what all this new stuff means,” said Kircher, who presented a March program on the subject in Springfield.

Springfield patent attorney John Bay of Jonathan Bay Law Offices PC said he’s not convinced America Invents is the biggest change in U.S. patent law in modern times. He thinks 1995 changes may hold that record.

“I think it is more significant for what it did not do to address some of the problems in the patent system,” Bay said of the latest legislation. Among those problems, he said, are companies that buy thousands of patents each year for the sole purpose of setting a trap to sue others when they infringe upon them.

Attorneys agree America Invents is bringing significant change to patenting, and perhaps the biggest change is a shift to a first-to-file system from a first-to-invent system.

Under  the new law, the party who files an application first is awarded the patent, said Tracey Truitt, a patent lawyer at Polsinelli Shughart in Kansas City.

Kircher said this move changes who is likely to come out the victor when more than one person comes up with the same invention.

“Under the old law, which will stay in effect for another year and a half or so, the conflict would have been between a senior inventor who conceived of the invention first but did not immediately file for the application versus a junior inventor who made the first patent filing for the invention but conceived of the invention after the senior inventor,” Kircher said. “In the new system, a junior inventor would win. The first inventor who files a patent application will be the owner of the idea and patent irrespective of who conceived of the idea.”

Bay said the first-to-file system is used worldwide, but he is not sure why the U.S. would choose to adopt it. “Why would we harmonize with the rest of the world when we’re the largest patent office in the world? I don’t know,” Bay said.

Truitt, however, said an advantage could be that when an inventor is trying to evaluate whether a patent will be awarded, first-to-file status will be the same worldwide.

There are also disadvantages to the new system, which all three attorneys said generally favors industry giants because of their deep pockets.

“Probably, it benefits (the pharmaceutical industry), the Microsofts of the world, the Apples of the world, big companies with big budgets to file a lot of patent applications,” Kircher said.

According to the U.S. Patent and Trademark Office, the fee for a basic utility filing is $380 – and that’s just the beginning, with numerous other fees attached that could add up into the thousands of dollars.

Those costs could be daunting to small companies, which Truitt characterized as more careful about how they spend money when pursuing patents.

“Larger companies may file several thousand other patent applications anyway,” Truitt said. “Now, companies have to make a decision faster, meaning they’ll be filing more applications with larger costs up front without knowing whether or not they work or whether they’ll be a success in the marketplace.”

A provisional patent application – with a $250 filing fee – may be a more palatable option for smaller companies and can be used to establish a priority date, Kircher said.

“You must convert it in 12 months to a regular utility application,” Kircher said. “If you have a plethora of applications, file a dozen, then decide which of the ones you filed are worth spending more monies on to convert.”

He cautioned that not spending the money on a potentially lucrative patent could be a foolish move, he said.

“What if I spend ‘X’ thousand dollars on an invention that is earning me multimillions in profit? You’re silly not to do it. It’s a very good investment. If you file the provisional applications, you have a year to determine in your mind whether it’s going to be commercially valuable,” Kircher said.

Beyond the switch to a first-to-file system, other key changes in America Invents are in regard to prior art and derivations.

“Under the old law ... a person is entitled to a patent unless it has been disclosed in a printed publication or on sale in this country,” Kircher said of prior art, or publication of the product prior to the patent filing. Now, the prior art component is worldwide, so if a product has been made available to the public or information about it was published or it has been sold anywhere, it could invalidate the patent, he said.  “Another big change is directed to a derivation process,” Kircher added. “That’s going to be a process and a procedure by which you could bring in the patent office, and if you think somebody stole your invention, you could file a petition in the patent office and you could claim that the guy who filed this application really stole it from the original inventor.”

The process demands excellent recordkeeping, he said.

“There’s going to be some difficulty proving derivation, but that doesn’t mean that you wouldn’t be able to do so,” Kircher said.

While the changes may seem to give an advantage to larger companies – with bigger budgets and more staff to handle recordkeeping and research – Kircher noted that America Invents doesn’t necessarily shut out others.

“If you’re smart, it doesn’t mean the little guy can’t take advantage of these things, too. But they have to be in tune with what’s going on and correspond and communicate and work hand in hand with their patent lawyer,” he said.