Patent Law Reform: Adjusting To A New World Of First-To-File And More

Sunday, April 3, 2011 - 01:00

Editor: Please tell us where you particularly focus in your practice area.

Oczek: My practice primarily focuses on patent and IP litigation at both the trial and appellate level. While my technical background is in biology, I have litigated cases across a broad range of technologies, including medical devices, medical therapies, semiconductor equipment, circuit design, software, and computer networking.

Editor: On March 8, the Senate passed a patent law reform bill (which it called the America Invents Act) that makes important changes in patent law. What is the most dramatic change?

Oczek: I think the most dramatic change in the bill is the provision that replaces the current "first-to-invent" system with a "first-to-file" system. Under current U.S. law, the first person to invent and file for a patent is entitled to the patent, even if a person who invents the technology later files a patent application first. Under the America Invents Act, the first person to file for a patent would be entitled to the patent. Transitioning to a first-to-file system is intended to align the United States with all other industrialized countries.

Editor: I understand the U.S. Patent Office has about 700,000 filings waiting to be processed. It has been argued that the huge backlog that the Patent Office confronts is damaging to our economy and that fees paid to the Patent Office should be used to hire additional staff and take other steps to address that backlog. Does the bill address that issue?

Oczek: The backlog of pending applications at the Patent Office is actually over one million and is one of the issues addressed by the bill. First, the bill would allow the Patent Office to set its fees without requiring Congress's prior approval. Second, the bill would end the diversion of fees collected by the Patent Office and would allow these fees to be used by the Patent Office for future expenditures. The Patent Office could use these fees to hire more examiners and otherwise improve productivity at the Patent Office.

Editor: Does the bill improve the competitive position of those who file in the U.S.?

Oczek: Whether you're an American corporation or a foreign corporation doing business in the U.S, if you have a global patent strategy, you're going to be familiar with the different patent systems throughout the world. For companies with global patent strategies, I don't see any competitive change resulting from introducing a first-to-file system in the U.S., because those companies are presumably filing patents with the first-to-file systems in mind. I think the real improvement from a competitive standpoint for those filing patent applications in the U.S. will come from giving the Patent Office additional funding to reduce the backlog of patent applications.

Editor: What are the key strategic components of an effective response from corporations to a first-to-file system?

Oczek: Companies should expect to face increased pressure to file applications as quickly as possible. The first-to-file system puts the onus on corporations to make sure they have a systematic patent program in place. What I mean by that is a program where a corporation has a process, which may include regular meetings where engineers, business managers, and lawyers consider whether to file for patents on the technology being developed at the company. Companies that have a systematic patent program and strategy in place will be well positioned for the first-to-file system.

Editor: There is something called the Coalition for Patent Fairness, which is opposed to this bill. What is the basis for their concern?

Oczek: I think these companies are of the view that the first-to-invent system gives you more time to work on your invention with no need to rush to the Patent Office to get your application on file. The United States historically has had a first-to-invent system based on the rationale of rewarding innovators who can prove they invented first. The first-to-file system is obviously a different paradigm that encourages folks to file their patent applications sooner rather than later.

I've heard the arguments that the first-to-file system benefits large corporations at the expense of the small inventor, which I think is a bit of an oversimplification. Obviously, the first-to-file system rewards those who are alert to the need to file promptly after making their invention. Those entities, whether large or small, are going to be well positioned to address the first-to-file system. A large corporation, even though it may have substantial resources, may not have a system in place for systematically identifying patentable inventions. In contrast, creative individuals may be very aware of the need to file promptly.

Editor: What are the corporate governance implications of first-to-file?

Oczek: I think the first-to-file system will put a renewed emphasis on companies to take a critical look at their patent strategy and to bring in patent counsel to advise on the company's patent process to make sure they have a system in place where they're periodically looking at the technology being developed at the company and making timely decisions on what to file and what not to file.

Editor: Given that traditional challenges to patent filings are based on first-to-invent, how will the dispute resolution landscape change if the bill becomes law?

Oczek: There would be a number of changes. At the Patent Office, interference proceedings (the process by which two patent applicants try to prove who invented first) would no longer be in place. In patent lawsuits, patent owners would no longer have the ability to prove an earlier invention date for purposes of removing "prior art" (anything in the public domain before the filing of a patent, generally speaking) used to invalidate a patent. On the other side of the equation, defendants in patent lawsuits would no longer have the ability to invalidate a patent by proving that someone else had privately invented the technology before the patent owner.

Editor: How will the bill affect the cost of obtaining patents?

Oczek: The cost for filing a normal patent application would remain the same. There is the possibility of increased costs if a third-party challenger decided to take advantage of some new options that the patent reform bill would put in place.

Currently, the only procedure at the Patent Office for a third party to challenge an issued patent is through a reexamination proceeding, of which there are two types: ex parte reexamination and inter partes reexamination. Ex parte means that the third-party challenger does not have the ability to be involved in the proceeding other than to file the initial request. Inter partes proceedings allow the third-party challenger to have some participation in the proceeding. In both types of reexamination proceedings, third-party challengers are limited to submission of a "printed publication," such as a published science article or an earlier patent or published patent application.

The bill introduces a new type of challenge, a "post-grant review" proceeding that would allow anyone to challenge a patent within nine months after the patent is issued. The key aspect of the post-grant review proceeding is that a challenger would be able to raise the full range of defenses that are available in patent litigation.

The bill would also expand upon the ability for third parties to submit materials while a patent application is pending. Currently, third parties can only submit, without comment, prior art patents or publications for entry into the application file of a pending published application. The bill would allow third parties to submit a short statement along with copies of the prior art patents or publications.

Editor: How will the bill's proposed changes affect strategies with respect to M&A and private equity?

Oczek: I don't expect the bill to dramatically change overall strategies in those areas. Of course, when you're conducting due diligence in M&A or private equity transactions, you must be cognizant of any new law. On a case-by-case basis, various provisions of the bill could impact the conclusions reached during in the diligence process.

Editor: Do you have anything you'd like to add?

Oczek: One other provision in the Senate bill that would have a major impact on the patent landscape is the amendment to the false patent marking statute. Over the last several years, a cottage industry of litigants has developed who have filed false marking lawsuits, involving allegations of intentional and fraudulent patent markings on companies' products. A provision of the Senate bill would modify the current false marking law to limit lawsuits to situations where either the U.S. government brings the case or where the plaintiff can prove competitive injury. The bill would still allow competitors to bring false marking claims but would not allow private citizens who don't have competitive injury to bring these suits. This provision would apply, if enacted, on the effective date of the legislation to future cases and those that are pending.

I think the passage of the America Invents Act by the Senate is noteworthy because it marks the first time in nearly six years and four consecutive congressional sessions in which patent reform has been debated that a major patent reform bill has passed in the Senate. The more contentious issues regarding patent litigation reform - including issues of venue and limitations on infringement damages - were dropped from the bill to secure passage in the Senate. Attention now turns to the House of Representatives, which is expected to introduce its own version of the bill.

Please email the interviewee at joczek@proskauer.com with questions about this interview.