Disruptive Forces in Patent Law: Change Without Innovation

JURIST Guest Columnist Dan Burk of the University of California, Irvine School of Law says the America Invents Act unnecessarily disrupts long settled patent law, creates new opportunities for gamesmanship, foments new litigation and introduces new uncertainty for businesses...
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After seven years of controversy and debate, on September 16, 2011, President Barack Obama signed the first major revision of American patent law in nearly 60 years into law, the America Invents Act. The legislation has been touted by politicians as modernizing US patent law, harmonizing it with that of its trading partners, simplifying the patent application process, and — most incredibly — stimulating 200,000 new jobs.

What the legislation in fact does is to unnecessarily disrupt long settled law, create new opportunities for gamesmanship, foment new litigation and introduce new uncertainty into business decision making. The legislation covers a wide range of procedural, substantive and administrative changes, from fee-setting at the US Patent Office, to precluding tax strategy patents. What follows are illustrations of only a couple of the disruptive provisions that patent experts have begun to grapple with since the legislation was enacted.

The US has long been unusual in two aspects of its patent law. One has been the policy of granting the patent to the first inventor. This has meant that in the US, when more than one applicant claimed a patent for the same invention, the dispute was decided by determining who first invented the device. The US Patent Office sometimes needed to conduct lengthy administrative proceedings, called interferences, to collect evidence regarding the applicants' dates of invention, and award the patent to the earliest inventor. Other countries have followed a policy of granting patents to the first person to file an application. Priority disputes in such countries are simply determined by granting the patent to the application with the earliest date.

A second signature feature of the US patent system has been a "grace period" between disclosure and application. This has meant that inventors had one year after their invention became publicly known to draft and file a patent application. The time period could be triggered by anyone, either an inventor or a third party. By contrast, most countries do not allow a grace period for the inventor or anyone else, but instead follow a standard of absolute novelty. Public disclosure of the claimed invention immediately bars applicants from obtaining a patent in countries following this standard.

The new statutory law has been touted as bringing the US into harmony with other "first to file" jurisdictions for the first time. But the new statute is actually a unique and idiosyncratic regime that has neither the old virtue of familiarity nor the promised virtue of harmonization. The statute now provides that the first inventor to file is entitled to a patent. Unfortunately, the statute gives no indication what mechanism the Patent Office should now use to determine whether a given applicant is an "inventor," or whether the old interference definitions of "inventor" should continue to apply.

The situation is additionally complicated because the statute retains a qualified "grace period" only for inventors. If the inventor, or someone who has obtained information about the invention from the inventor, discloses the invention, a one year clock begins to run. This creates opportunities for strategic disclosure of inventions — an inventor could publicly disclose the invention in order to block rivals from obtaining a patent, and then file her own patent application within the one year statutory period.

However, such strategies will be complicated by the global economy. Recall that other countries do not allow a grace period. An inventor considering strategic disclosure of the invention would have to surrender the opportunity to obtain a patent in most countries in the world. A US patent would still be available within a year, but elsewhere the preclusion would be immediate. Small entities may choose this strategy if they intend to file only in the US, perhaps because the only real market for the invention is in the US, or perhaps because the expense of filing patents all over the world is prohibitive.

Other opportunities for strategic maneuvering abound in the short term. The new legislation requires the Patent Office to phase out two existing types of administrative challenges to patents over the next year and to implement several new ones. For many years, the US had a system of inter partes "reexamination" whereby anyone believing that a patent was improperly granted could challenge the patent on the basis of unconsidered prior art evidence. A year from the enactment of the new statute, this will be replaced with a system of post-grant opposition, which will be more constricted in timing, but broader in its scope of inquiry.

Similarly, the old interference system will be replaced with a new, narrower "derivation" proceeding that is intended only to determine if the invention claimed in an application has been improperly derived from another inventor. Additionally, third parties can now submit evidence regarding pending applications to the Patent Office. Over the next year-and-a-half, challengers to patents will have to determine whether they wish to invoke such proceedings, and whether it is more advantageous to do so under the old or the new system.

Indeed, some such decisions have already been made. One part of the new legislation is a litigation "non-joinder" provision, which prohibits lawsuits naming multiple parties for infringing the same patent. This is intended to suppress the activity of "non-practicing entities" — sometimes pejoratively called "trolls" — who derive income from acquiring and enforcing latent patents. The provision raises their cost of enforcement by requiring that patent rights be enforced seriatim against putative infringers. Not surprisingly, the day before Obama signed the act, a record number of patent lawsuits were filed naming multiple parties.

In all, the act entails more than 20 new changes to settled patent law. All will require review by the courts, implementation by the Patent Office and consultation between patent holders and their counsel. If the America Invents Act actually delivers the promised 200,000 jobs, they seem likely to be jobs for patent attorneys, rather than jobs for technological innovators.

Dan Burk is the Chancellor's Professor of Law at the University of California, Irvine School of Law. He is a prominent intellectual property scholar, and some of his recent work has considered the statutory "policy levers" used by courts to apply patent incentives to industries with diverse innovation profiles. Burk recently received a Fulbright Scholar grant to pursue research on comparative biotechnology patent processes in Germany.

Suggested citation: Dan Burk, Disruptive Forces in Patent Law: Change Without Innovation, JURIST - Forum, Oct. 4, 2011, http://jurist.org/forum/2011/10/dan-burk-america-invents.php.




This article was prepared for publication by Ben Klaber, a senior editor for JURIST's academic commentary service. Please direct any questions or comments to him at academiccommentary@jurist.org

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