Patent Law Reform Offers Many Benefits If You Know How To Navigate The New Provisions

Sunday, April 3, 2011 - 01:00
Philip Y. Braginsky

Editor: Phil, please describe your practice.

Braginsky: I co-chair the Intellectual Property Practice Group at Sills Cummis &Gross. Our group consists of attorneys like me who are involved in patent and trademark prosecution, transactions that involve intellectual property, and patent, trademark, copyright and other related litigation. We tend to focus on mid-size to large companies worldwide and on particular industries. We stay focused on matters within our technical expertise and our experience.

Editor: What are some of the industries that your group serves?

Braginsky: Some industries we serve include the life sciences, consumer electronics, tool manufacturing (from hand and construction tools to sophisticated tools for the pharmaceutical and biotech industries), financial services, fashion, personal care and cosmetics industries.

Editor: Would you discuss some of the substantive changes to prior law encompassed in the recently passed Senate bill, the America Invents Act?

Braginsky: We are still waiting for the House to act on it. The Senate version includes major changes in patent law and its administration. What has gotten the most attention is the move towards harmonizing our patent regime with that of most of the rest of the world to a first-to-file system rather than a first-to-invent system. The Act includes changes relating to Patent Office review of patents that have been granted. Another change that is quite important is that the patent office has use and control of the fees that it collects. These are the changes that attracted the most press.

Another change that has received less public attention is a new fee regime that provides fee relief for what is being called a micro-entity. The present fee regime provides that small entities pay 50 percent of the fees that a large entity pays. Now there is a new category called a micro-entity, which presumably will pay 75 percent less than what a large entity pays. This is designed to help small businesses and individuals. It is anticipated that state universities will get the same break. Also, changes relating to the patent marking statute will reduce exposure to litigation for patent mismarking issues.

Editor: If the bill passes the House in its present form, will any provisions be retroactive?

Braginsky: Some aspects of the law will be retroactive. For example, changes in the patent false marking provisions are retroactive.

Editor: Why did patent marking receive attention in the bill?

Braginsky: The law presently allows individuals to sue on the federal government's behalf anyone who falsely marks a product or service as patented. If they win, they receive up to 50 percent of the award of up to $500 for each occurrence - the other half going to the U.S. government. A recent case in the Federal Circuit dramatically demonstrated that the language of the existing law could lead to huge windfalls for plaintiffs who bring such cases. The Senate said in its bill that enough is enough. Therefore, the bill requires that those bringing such suits must now show that they are being competitively injured. These suits can no longer be brought by just any citizen.

This provision is retroactive since there are thousands of defendants presently facing these types of lawsuits. On the other hand, the effective dates of other provisions of the bill are delayed. This is true of some of the post-grant review and reexamination procedures.

Editor: What do you think will happen in the House? Can you foresee any changes?

Braginsky: I think there might be some minor changes, but the House has shown it is willing to pass patent reform legislation. The House realizes that there is little appetite for making major changes or for adding unrelated legislation. I would expect the final legislation to be materially consistent with the Senate bill.

Editor: I read a commentary that maybe the Tea Party folks wouldn't be too happy with the bill.

Braginsky: There has been some discussion based on the idea that the bill is anti-small business or biased against the independent inventor. These issues were thoroughly explored in the Senate, and the bill passed. I think the same will happen in the House. It has been argued that some parts of the bill create difficulties for small businesses, but there are also portions of the bill that are quite beneficial to them. For example, there is a significant fee reduction for micro-entities, which will make it possible for a greater number of smaller companies to file patent applications. Also, the ability to challenge applications by submitting art to the Patent Office and challenge patents in post-grant review and reexamination applies equally to both large and small businesses.

The bill contains a number of strategic options that can be used by smaller businesses to compensate for what they might see as a downside to the first-to-file change.

Editor: Why are some of the large Silicon Valley companies unhappy with the bill?

Braginsky: Some of them have larger issues with the patent system. I also think that many of these companies depend on longer development cycles and prefer to take a longer path with their applications. But much of what was opposed has been eliminated from the Act or changed in the courts.

Editor: Tell us about the new examination procedures.

Braginsky: There are several new procedures that are available for companies that believe some patents or applications are questionable. During the examination process while a patent application is still pending, the bill provides for the opportunity for third parties to submit prior art to the examiner at the patent office along with an explanation of why the prior art is material. The downside is that it could slow the examination process at the patent office. The upside is that it may increase the quality of the granted patent at the end of that process.

Editor: Tell us about the bill's provision for a post-grant review process.

Braginsky: In the post-grant review process, which a party can pursue within the first nine months of a patent being granted, a party can submit arguments and participate in an inter partes proceeding to show that the patent is invalid, and that can be on any grounds. However, it also creates an estoppel, since issues raised in a post-grant review process cannot be raised in a future litigation.

The standard for the post-grant review is quite different from what we have today in a re-exam. The bill requires a preponderance of the evidence to overturn a patent. If it is more likely than not that the patent is invalid, then the patent office will review its patentability.

Editor: How will this bill affect the cost of obtaining a patent?

Braginsky: I think that it might add some cost. More companies will file continuations-in-part. In the rush to be first to file, a company might still be working on the invention and developing it further, and it might find that it is filing many more of these continuations-in-part. Companies will also have to deal with art submitted by third parties during prosecution. On the other hand, the new micro-entity status will make it more affordable for individuals and small businesses to file patent applications.

Editor: If enacted, how will the bill affect ways in which companies protect their intellectual property?

Braginsky: Companies that are sophisticated in managing their intellectual property will not need to make many changes. We have almost always advised clients to file as soon as they can. Of course, those companies with budgetary constraints or human resource constraints may have difficulty coping with the first-to-file system.

Certainly, internal IP procedures will need to be studied and very likely revamped, especially in smaller companies or the companies with fewer resources. Also, if important patents are at stake, events such as post-grant review and reexaminations might need to be reported and reflected in SEC filings in the case of public companies.

Editor: Is there anything you would like to add?

Braginsky: One issue of great importance to your corporate counsel readers is controlling litigation cost. The principles embodied in the bill could very well result in less litigation since the new post-grant review and reexamination procedures may resolve issues that could, under current law, have resulted in litigation. After such procedures have run their course, a lot of the invalidity and non-infringement arguments might not look as strong and convincing as they did before those procedures were available.

Another result of the bill is that patent attorneys will be monitoring their clients' competitors' filings much more closely now. And because of the ability to participate in a reexamination and the ability to participate in post-grant review, we will certainly be monitoring our clients' competitors' applications much more closely. On the flip side, if a competitor doesn't have any interest in foreign rights and is focused only on domestic manufacturing and sales, it might choose an option that is less often used today - but might be used after the bill becomes law - called a non-publication request. If such a request is granted, the application is not published until the patent is granted. You do have to give up your license to file for foreign protection if you choose that. There are some companies that don't have an interest in foreign rights. They might choose the non-publication route so that other competitors won't be able to see what they are doing.

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