03.11

2011's Patent Reform Legislation

By Glenn S. Tenney CISSP CISM

After six years, Congress is once again considering Patent Reform legislation in the form of the America Invents Act (S. 23). At the heart of the bill is a shift from a first-to-invent to first-inventor-to-file system.  But there are many other issues that should also be of concern to technology professionals.  What does this bill mean to all of us non-lawyers? Patent law can be very complex and difficult to understand, and different groups have very different reasons for wanting or objecting to various aspects of this bill.  I’m writing this piece in an effort to describe from a non-lawyer’s perspective to other non-lawyers what effect the current legislation will have on us. 

As I write this, the bill is on the Senate floor being debated.  Amendments are being offered and considered, some of which might improve the bill, while others might make the bill worse. Your Senators will be voting for or against this bill and the proposed amendments. Now is the time to make your opinions known. Please contact your Senators and let them know your view on this legislation, and especially on the amendments. [Update: On 8 March, the Senate approved S. 23 by a vote of 95 to five. The U.S. House Judiciary Committee plans to introduce its version of  the bill later this month. ]

One important bi-partisan amendment, the Feinstein-Risch amendment, has already been defeated. That amendment contained language that would have removed all of the major issues I discuss below (changing to a first-inventor-to-file system, changes to definitions of prior art, and the changes to the one-year grace period). If you believe that S.23 as-is is better for U.S. inventors, startups, and our economy, you should call your Senators and urge them to support passage of S.23. If you believe that S.23 will do more harm than good, then you should call your Senators and ask them to vote against S.23 in its current form. When you read this, there might still be time for your call to your Senator to have an effect on S.23.

After the Senate has finished their deliberation on S.23, the House will then consider its version of patent reform. Your Representative will have to consider all of these same issues and their short and long-term ramifications to U.S. inventors. You'll have the opportunity, then, to let your Representative know what you think about the House's patent reform bill.

What is clear about S. 23 is that it includes many changes that will affect every inventor, innovator, startup, or established company.  Some of these changes to patent law introduce new terminology and other changes use terminology in different ways than ever before.  All of these changes in terminology will need to be interpreted by court cases (developing what’s known as “case law”) before inventors or lawyers can rely on these terms with confidence.  Developing an understanding of these new terms will take a decade or more.  This means that regardless of whether one supports this bill or not and whether the long-term effect of the bill is for the better or not, we’ll have a great deal of uncertainty for many years at a time when our economy is still striving to recover.  That uncertainty will be accompanied with some products and ventures not being funded, and some inventors will even lose their patent rights due to these changes from existing case law.

When we think of “patent reform” we likely have a very different view than what’s being pushed through Congress.  Many people think that patent reform should improve the quality of issued patents and reduce the delay and backlog (known as “pendency”) in having patent applications processed.  Yet, improving the operation and funding of the U.S. Patent and Trademark Office (“USPTO”) is now only being barely touched on by recent amendments to the current bill.

The current legislation is often touted as being all about changing from first-to-invent (the way the U.S. patent system has always been) to first-inventor-to-file  (the way most other countries’ patent systems work).  Because of that, it’s also touted as necessary for harmonization.  But do we actually get harmonization in return?  There is nothing about harmonization in the bill, and some people believe that the bills changes in the area of what is/not prior art actually pull the United States further away from harmonization.

First, the legislation is not just about changing from first-to-invent, but also includes many other unrelated changes, changes which could be made with or without changing from first-to-invent.  Yet, all of these other changes are lumped together as “first-inventor-to-file.” It is these other changes which will affect us the most.  Of most concern are: changing what’s considered as prior art (i.e. what can be used to show that an invention was obvious or already known and thus preclude or invalidate a patent or patent application); and changing the one-year “grace period” in the United States (a period during which an inventor can use, sell, or publish without losing their ability to file for patent protection).

The three major areas of change being proposed that will affect you:

How does changing from first-to-invent affect IEEE-USA members?

At it’s simplest, first-to-invent means that (in theory at least) if you’re an inventor and have solid proof of your work, you could overturn someone else who filed a patent for the same invention before you were able to do so.  Some people believe that the number of times that this happens is very low.  Some people believe that changing to a first-inventor-to-file will make a simple clear-cut rule that whoever files their application first will get the patent.

But, there is a potential downside for us.  If you come up with an invention and wait too long to file the patent application for that invention and if someone else comes up with that same invention and files first, then you’d be out of luck — there’d be little you could do to gain any rights to even market your invention because you weren’t the first-inventor-to-file.  This will generate a tough challenge when it can take years to take a collection of inventions (e.g. a software or firmware based system) far enough along to even be able to judge which of perhaps hundreds of inventions should be patented.  This change in the U.S. patent system is expected to cause inventors to file more patents earlier just to protect themselves. 

How will the changes to what’s considered prior art affect IEEE-USA members?

Today it’s very clear that any publications can be prior art, and that products in public use or for sale in the U.S. are also potential prior art.  The patent reform legislation changes that to (a) be anywhere in the world, and (b) anything that would be available to the public.  This will have a greater impact on small businesses than on large multi-national business.  Instead of being able to compete head-on only within the U.S. marketplace, all businesses (including small startups) will now be faced with competing in an international marketplace, and dealing with all of the issues involved with distance and language. 

It’s important to understand that the prior art issues are rarely about finding that an exact description previously existed (prior to filing a patent application or one-year prior to filing an application).  Rather, it’s a question of whether a patent application is obvious in light of the prior art.  That is already a challenge for patent examiners at the USPTO and for expert witnesses at trial, and this bill makes it even more challenging.  In the U.S. we’ve had Supreme Court rulings on obviousness (decided after this bill’s earlier incarnations over the past four years).  Our current case law, combined with the changes to definitions of prior art in this bill, might make it more difficult for an inventor (forced by the bill’s changes into the worldwide marketplace) to prove that their invention was not obvious.  And nothing in the bill related to prior art issues is directed towards harmonization with how other countries handle prior art and obviousness.

How will changes to the one-year grace period affect IEEE-USA members?

This is by far the area that has the greatest potential adverse impact to U.S. IEEE  members.  Time and time again small businesses, individual inventors, and startups need to make disclosures, run public beta tests, and even sign-up potential investors to purchase their future products — all with the current understanding that they still have one year to file a patent in the U.S.  The patent reform bill will at the least make this much more complicated, and at the worst take away our one-year grace period completely. 

A reason that this area will be a problem is that the grace period is laid out (as an exception to what is defined as blocking prior art) and the new bill does so using new terminology that could mean different things.  The grace period exceptions in the new bill introduces the new concept of “disclosure” which could mean only publications and not public use or sales, or it could mean only very detailed publications that describe all aspects of the invention sufficiently to enable someone else to recreate the invention, or it could mean any public use, sale, or publication. If an inventor has to respond to a prior art exception challenge (either with the USPTO before the patent grants, or afterwards during litigation), the inventor might be faced with having to investigate worldwide.

The differences here are critical to us.  Many startups need to discuss and show potential investors their products under development without a non-disclosure agreement, and some run an online beta-test (these would be a “public use”).  Some startups also receive non-equity funding by receiving an order for a product that isn’t completely finished yet (this would be a “sale”). This wide range of possible meanings would result in an inventor not knowing if what they are doing falls within a grace period or not — until the courts resolve this many years from now.  This is an example of an area of patent law changes for which the past 150 years of case law may be of little use in understanding newly used terms. A loss of our one-year grace period would have a large impact on most IEEE-USA members.

Another note on the grace period and harmonization is that the length of grace periods varies from country to country, and different countries use different types of prior art for deciding their grace period criteria.

There are many other areas of patent law that are being changed by this bill, such as:

• After a patent has been granted, anyone (such as a competitor) will have enhanced rights to petition the USPTO to review that patent with the hope of invalidating the patent

• The process of determining damages is being changed which could limit how much money might be awarded in a patent infringement law suit

• Creating a “micro entity” that will likely not include most U.S. IEEE members (e.g. if you’ve been working and inventing for your employer(s), when you decide to go off on your own with your next great idea, you might find yourself ineligible as a “micro entity” because you already had more than a handful of patents over those years as an employee)

Conclusion

Patent reform needs to identify the problems and then address the root causes of those problems while still supporting the needs of small businesses and individual inventors.  It’s not clear that the root causes have been addressed by this bill.  Small businesses, individual inventors, and the IEEE-USA IP Committee don’t believe that our needs are supported by the patent law changes being proposed by this bill.

One area that clearly needs to be addressed is the patent application and examination process by the USPTO.  The USPTO needs to receive all of the fees collected so that they can improve their engineering management and quality controls to better examine patents to have higher quality patents issue while also reducing the unacceptable backlog.  On the second day of debate, the Senate adopted by a 97-2 vote a manager's amendment offered by the Senate Judiciary Chair Sen. Patrick Leahy, which would incorporate language to allow the USPTO to keep all the fees it collects, which will be critical for speeding along patent processing and clearing the backlog of applications.

The questions you should consider are:  Does the current bill work to solve the problems or will it generate more problems?  Do you believe that the current bill will help create jobs or that it will adversely affect jobs?  Whatever you decide, now is the time to contact your Senator about this legislation.

IEEE-USA links:

Patent Reform:  U.S. Innovation, Entrepreneurialism and US. Competitiveness
http://www.ieeeusa.org/policy/positions/patentreform.pdf

Off-site links:

Senate Bill S.23
http://thomas.loc.gov/cgi-bin/query/z?c112:S.23.RS:

How to contact your Senator
http://www.senate.gov/reference/common/faq/How_to_contact_senators.htm

Article: “IEEE-USA, others challenge patent reform”
http://www.eetimes.com/electronics-news/4213581/IEEE-USA-others-challenge-patent-reform

White paper: “Patent Reform: Effects On Medical Innovation Businesses”
http://journals.lww.com/medinnovbusiness/Fulltext/
2010/06010/Patent_Reform__Effects_On_Medical_Innovation.3.aspx

Mr. Tenney is a senior member of the IEEE and has been chair and vice-chair of the IEEE-USA Intellectual Property Committee for a total of ten and a half years.  He is a software and systems architecture designer, information security professional, and has been a consulting expert on several patent related law suits.

Comments may be submitted to todaysengineer@ieee.org.