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Analyzing Patent Reform Chances and First to File Provisions


Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course
Posted: March 10, 2010 @ 5:12 pm

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By now most are likely aware that patent reform is back, once again, with the current draft legislation available for everyone to read.  It is becoming harder and harder to take patent reform seriously, given that it has started to become a little like a bad horror movie where the villain is killed only to reappear in the next episode, a la Jason from the Friday the 13th movie franchise.  Over the last 5 years or so we have been told that patent reform is a done deal, only to have it called off and proclaimed dead due to lack of compromise.  Is this time different?  At the risk of sounding extremely naive, I think this time is different and it is going to happen.  It looks like most of the contentious issues have been ironed out enough to have generated a bill that can be passed and become law.  However, the continued focus on health care reform by the Obama Administration promises to cripple Congress for at least a few more weeks, likely longer.  By the time Congress is operational again, will there be enough interest to do something, even anything?

Now don’t get me wrong, I think the crippling of Congress and virtual shutting down of government is potentially a good things because at least when Congress cannot accomplish something they are at least not screwing things up.  Nevertheless, with such partisan fighting, Congress’ spring recess and the earnest start of the 2010 political campaign right around the corner, I don’t know what, if anything, Congress and the Obama Administration will achieve.  After all, before this craziness with health care the Democrats enjoyed a majority in the House of Representatives and a filibuster proof majority in the Senate until just last month, yet they accomplished nothing.  So it is hard to see a path forward where much gets accomplished, particularly if health care passes through the use of reconciliation.  Having said this, now that a “passable” bill has been written, patent reform could be of sufficiently low political importance that Democrats and Republicans can get something done.  If health care dies the Democrats will need to pass something desperately, perhaps many things, to show they actually accomplished something.  Therefore, if health care dies I predict patent reform passes.  If health care passes I predict patent reform will die, as the Congress and government slip into heightened posturing in advance of the 2010 elections.

So why is this time different?  Well, patent reform is not a partisan issue, rather a geographical issue.  There will be no party-line votes, but regional alliances that stretch across the isle in support of whatever industry is geographically relevant. The big industries will likely not declare patent jihad on this bill like they have in the past, although only time will tell for sure.  The major provisions seem to be sufficiently watered down to the point where there is really little reform, or perhaps it is best to say that any reform would be “small r reform” and not “big R reform.”  I personally have a hard time calling this patent reform, and would rather it be referred to as “patent change” because things that are essential for true reform are simply not present.  So to the extent this legislation won’t be useful, helpful or a step in the right direction it is probably more likely to get enacted, which is indeed a sad commentary in and of itself.

If this were “reform” it would provide: (1) meaningful obviousness alterations that would do away with KSR v. Teleflex; (2) meaningful inequitable conduct reform that prevents every utterance during prosecution to be the basis of fraud accusations during trial; and (3) more resources for the Patent Office to hire additional patent examiners and invest in state of the art computer systems, rather than rely on state of the art circa 1980 computer systems presently in place.  As it stands there are some tweaks that could help a little in some areas, but more burden is likely going to be placed on the USPTO and changes that would lead to a truly better patent system are ignored.  The tragedy is that once this is done, if it gets done, it will be many years before Congress does anything again.  They will be too busy congratulating themselves for finally passing “patent change” and reform hopes will be all but gone.  Hopefully Senators Hatch and Kyl, who are among the patent literate in Congress, can sneak in some real reform.

While many of the hottest issues seem to be smoothed over we always need to watch out for a pocket of resistance that could form, and the biggest pocket of resistance might come from independent inventors and small businesses concerned with the first to file changes proposed.  I have written at some length that first to file changes should not be feared.  See IPWatchdog posts tagged first to file.  I continue to believe that, but in reading the legislative language there is something that inventors should be focusing on specifically, which will likely get lost in the debate over first to invent versus first to file, namely whether the 12 month grace period that remains will apply to sales.

First, allow me to point out that putting so much energy into keeping first to invent does not seem warranted.  The reality, whether anyone wants to believe it or not, is that first to invent is a false promise, particularly for independent inventors.  In order to satisfy the first to invent requirements inventors must demonstrate that they conceived of the invention prior to the conception of the first to file and exercised diligence straight through and uninterrupted until they reduced to practice.  Reduction to practice can either be shown by a working prototype (or successful process demonstration) or by the filing of a patent application that satisfies the disclosure requirements of 35 USC 112 first paragraph.  The reality is that independent inventors, and even many small businesses, do not keep the records necessary to ever prove prior conception or diligence.  I have even heard inventors say they invented and are waiting because they know they invented first.  If that is you, kiss diligence goodbye, so even if you invented first you will never prevail.  On top of that, prevailing would be quite expensive to do.  On top of that, how many inventors accurately identify in their notes the point of innovation sufficient to demonstrate conception of the key aspect that might later be the focus of an Interference?  While you think of the answer also consider how many even keep notes.  Cryptic notes are not enough, and evidentiary standards need to be met.  First to invent has always been a false promise for the independent inventor, so getting rid of it is not going to change much, if anything, except in a positive way.

I have also heard from many that the loss of the so-called grace period would be devastating.  I agree 100%.  Under 35 USC 102(b) there presently exists a 12 month grace period within which the inventor can engage in certain activities without losing the ability to file and obtain a US patent.  The US is unique in this respect, with most other countries adhering to absolute novelty laws, which means there is no grace period and if you, for example, sell a product before a patent application is filed you lose the ability to obtain a patent.  That is not so in the US, at least not if you file within 12 months of the sale or offer for sale.

The truth is, however, that relying on a 12 month grace period is extremely dangerous.  Every patent attorney and patent agents has had to deal with 102(b) prior art found by a patent examiner.  If only the application had been filed earlier it could have issued as a patent, but the inventor waited too long to file.  I have seen this as a patent attorney, and as an inventor myself.  It happens, and I suggest it happens many times every day of the week, every week of the year and every year!  The grace period is essential, but we do a tremendous disservice to inventors to act like it is something that can be relied upon.  The insidious part of the grace period of 102(b) is that things you don’t know about and could never have realistically known about create problems.  The best strategy is to file early, not to wait.  Sometimes, however, filing early is not an option for one reason or another.

The grace period is essential, particularly for independent inventors and small businesses, because you want to have some idea whether there is enough interest to warrant moving forward with a patent application.  What better way to know than to test the market?

Lets assume there will be no event to trigger a 102(b) problem for a moment.  You engage in activities such as publication of your invention, offering for sale, public use or actually selling the invention.  You now have 12 months within which to file a patent application.  If you file a provisional patent application you have another 12 months within which to file a nonprovisional patent application.  So a lot of times I recommend to inventors they take it step by step and pursue their invention in a business responsible manner, testing, perfecting and protecting in a step by step approach.  If at some point the invention is not working out cut your losses and move on.  If you engaged in a step by step approach rather than putting all your money down at first for a nonprovisional patent application, you will have conserved resources for your next invention.

I recommend that inventors not believe they have a full 12 month grace period before a provisional patent application though.  Take only as much time as necessary to determine if moving forward makes sense, then file something.  Of course, if you want international rights you have to file first anyway.  But at least some grace period is essential, and not having any grace period would be a significant alteration in the law that is, in my opinion, unjustified.

Luckily, the proposed legislation does retain the grace period, despite what you might have heard.  Here is what would become the new 35 USC 102, in relevant part, if the pending legislation is enacted without change:

§102. Conditions for patentability; novelty

(a) NOVELTY; PRIOR ART.—A person shall be entitled to a patent unless—

(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

(2) the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.

(b) EXCEPTIONS.—

(1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION.— A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if—

(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or

(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

What would become 102(a) defines an absolute novelty standard, but what would become 102(b) retains the 1 year grace period.  The grace period provided in proposed 102(b), however, is unnecessarily sloppy and ambiguous.  Proposed 102(b) uses the term “disclosures,” which is a term without definition in current 35 USC 100, and not defined in the proposed legislation, at least anywhere I can see.  So does the exceptions that allow for a 1 year grace period apply to all of the items set forth in proposed 102(a), or to a subset of items?  Specifically, is “public use” a disclosure?  Is “on sale” a disclosure?  And what the heck does “or otherwise available to the public” mean, and would that be a disclosure?

I really don’t think independent inventors or small business should be fearful of moving to a first inventor to file system.  Under the proposed legislation you still need to be an inventor, so there is no reason to fear that someone who learned of your invention, stole it or otherwise misappropriated it would get the patent instead of you if they beat you to the Patent Office.  There is still a grace period, which applies to something, but what I don’t know.  Rather than focusing on the non-issue of first to invent and unjustified worrying about someone stealing your invention and winning a race to the Patent Office, inventors and small businesses should be asking questions about what proposed 102(b) means and demand tighter language that keeps the 12 month grace period currently available under present 102(b) in tact.

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Posted in: Congress, Gene Quinn, Inventors Information, IP News, IPWatchdog.com Articles, Patent Reform, Patents

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

11 comments
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  1. If this passes, will it be retroactive or will it only apply to applications filed subsequent to enactment? If you have an app filed and you plan on swearing behind another application using a 131 affidavit, does this mean you will no longer be able to do so? I am in favor of first to file, but I just don’t think it should be applied retroactively.

  2. “whether the 12 month grace period that remains will apply to sales”

    Gene,

    You hit on the most disturbing aspect of the whole “grace period” issue which my patent attorney brother Mark also noted. This section is exceedingly “sloppy,” and until it’s straightened out gives great pause for whether there’s a hidden “trap door” that some unsuspecting inventor or small business will fall through.

    I’m also still not convinced that changing from a “first to invent” to a “first to file” system (like ROW) is in America’s best interest for small business innovation and American job creation. Do understand that you’re correct that hesitation filingcan be potentially disastrous and even fatal. But David Boundy, who I and others respect much, has noted the problem of encouraging premature filings that simply add cost but will eventually be abandoned because the technology (or market) doesn’t pan out.

    If the U.S. does go to a “first to file” system, provisionals are going to become even more important. Even more important is education of small entity inventor that provisionals are an excuse for writing a sloppy patent spec. I’ve argued that for over 10 years, and with a “first to file” system, that advice becomes even more important.

    I respect your point of view, but I still feel “first to file” benefits much more largerr multinational corporations that are already dealing with a de facto “first to file” system in their global market. I still look at “what does this mean to America?” and I frankly don’t see the benefit for America, especially American smal entities. For many small entities, the U.S. market is enough, and “first to invent” gives them the opportunity to wait before investing filing $ in what may be (as David Boundy argues),. Even with “first to invent, they would be still well advised to not to wait to long or the full year grace period for the reasons you give.

  3. fyi

    http://www.patentdocs.org/2010/03/senator-landrieu-introduces-legislation-requiring-study-on-effects-of-firsttofile-provision-.html

  4. Sunshine-

    I saw that this morning. I am trying to track some more information down. Seems like the first monkey wrench on patent reform. If this gets traction it would seem to mean that patent reform will get pushed back or if it goes forward it would have to be without first-to-file. Stay tuned!

    -Gene

  5. “t looks like most of the contentious issues have been ironed out …”

    Only as far as infringers are concerned.

    Patent reform is a fraud on America. It is patently un-American.

  6. Now we’re getting somewhere. Gene writes —

    > You engage in activities such as publication of your invention, offering for sale, public
    > use or actually selling the invention. You now have 12 months within which to file a
    > patent application. If you file a provisional patent application you have another 12 months
    > within which to file a nonprovisional patent application. So a lot of times I recommend
    > to inventors they take it step by step and pursue their invention in a business responsible
    > manner, testing, perfecting and protecting in a step by step approach. If at some point
    ? the invention is not working out cut your losses and move on. If you engaged in a step
    > by step approach rather than putting all your money down at first for a nonprovisional
    > patent application, you will have conserved resources for your next invention.

    Gene! You’ve got it! Under current law, this is a strategy with acceptable business risk. Statistics show a 3% or so risk of losing patent rights. Businesses take 3% risks all the time. In past postings, I’ve noted that this is sometimes a perfectly resonable thing to do, and now — hurrah! — you’ve agreed.

    Under the new bill, if anyone publishes or discloses the invention but doesn’t file a patent applcation, even if derived from our inventor, now the inventor has to show derivation of every single such publication or disclosure. Thus, if our inventor A tells B, then B tells C and D and E and F and G, before A files, now A has to prove derivation by each of C D E F and G.

    How are you going to prove it? The bill gives the inventor no subpoena power, and no access to a section 146 civil action. So A has to prove the acts or mental state of C D E F and G with no access to any evidence. Good luck.

    Even if A somehow marshals the facts in evidentiary form so A can show derivation to a preponderance, a derivation proceeding is the most expensive form of an interference, and is fiercely expensive in the UK. One recent case noted that a derivation proceeding had taken 8 years.

    We have only a dozen or so derivations proceedings per year in the US under current law, because they only arise when the deriver also files a patent application. Under the new law, there’s no need for the deriver to file to trigger a derivation inquiry. The new law requires thousands, maybe tens of thousands, of derivation showings per year.

    This is what I mean by a grace period that is so tenuous that no one can rely on it.

  7. David-

    You say “and now — hurrah! — you’ve agreed.”

    Are you for real? I have been saying this all along, for many years. For you to act like I am now coming around to your position is absurd. Readers of IPWatchdog know it, and so do you. You are unbelievable.

    What I suggest you do is articulate your position better and focus on the grace period and stop complaining about first to file. Even you now admit that first to file is not the problem, which is a major deviation from your articulated positions here and elsewhere on the Internet. Perhaps this is what you always wanted to say, but wanting to convey a message is very different than conveying a message.

    I will always believe it is in the best interest of a company to file a patent application as soon as possible. If the companies you represent want to take risks that is fine, but lets not pretend you work with independent inventors, OK?

    Finally, you and most everyone else continues to miss the major flaw in this legislation. Right now we have a first to invent system where Interferences are rare. If we move to a first to invent system it will force inventors to file quickly on whatever they can adequately describe. There will be a mad dash to the Patent Office and patent filings should explode in numbers. The applications will likely be bite-size, which is good for the Patent Office, but in a rush to the Patent Office what will happen is many applications will not satisfy 35 USC 112. So the Patent Office and the courts will be charged with undertaking the enormous work load of determining who was actually in possession of the invention as evidenced by patent applications filed. What will happen is rights will be split between and among many players because just because you were first to file and can prove conception and possession of A, doesn’t mean you proved conception and possession of B through Z, which the second to file was in possession of when they filed later. So first filer will get A, second filers will get B through Z. So rather than a rare interference proceeding these types of disputes will be numerous. That will bog down the USPTO and the Courts.

    Once patent reform passes those who are not employing an advanced provisional patent strategy will be the big losers. So big-tech and Mega-corporations will regret the day they ever supported this.

    -Gene

  8. Gene –

    I’m sorry for the confusion. I thought I had made my view very very very clear, that my issue is not first-to-file as between two inventors who both file at about the same time, it’s weak grace period and loss of right for even a single filing inventor.

    You’ve said repeatedly and clearly that, in your legal judgment, “wait and see” and taking advantage of the current grace period is so fatally bad that you have no gripes with Congress taking away the option to wait. I try to give my clients a broad range of options and an assessment of risks and benefits, and let them make their own cost and risk balancing. I don’t think that every business should exercise every option, I don’t advocate “wait and see” routinely. But different businesses need to be able to run their businesses their own way, and I don’t want congress telling them that “file early and file often” is the only way to use the patent system.

    I’ve raised the “poor quality of rushed applications” issue, and I’m really pleased to see it here.

    Wonderful day!

  9. Patent Leather-

    For some reason your comment from 3/11 above got caught up in spam. I just approved it.

    I agree with you that retroactivity is not a good idea. I plan on writing about that over the next couple days.

    I don’t know what the answer is on 131, but I don’t see any reason why you cannot have a first inventor to file system and still keep 131. I don’t think you could do that with the proposed 102(b), but what does that even mean? It is horribly sloppy.

    If you have any language suggestions for the proposed 102(b) I am all ears!

    -Gene

  10. Delighted to see you explode the myth that first-to-invent suits small inventors. I’ve been saying this for a decade or more. First-to-invent sounds fairer (I’ve seen it suggested that first-to-file is contrary to universal human rights, let alone the Constitution) but in fact it is at least as arbitrary as first-to-file. You cannot establish from first principles that the ‘first inventor’ has to be the first to conceive and the first to reduce to practice, except where the second to reduce to practice is continuously diligent from a date prior to the other party’s conception. Indeed you can establish the opposite – because this rule doesn’t give an absolute date of invention, only a rule for deciding who beats whom in a contest. And it’s not even a transitive rule – in theory, in a three-party interference, A can beat B, B beat C and C beat A. If first-to-invent goes, it will benefit most of us – however much fun interference practice was.

  11. in theory, in a three-party interference, A can beat B, B beat C and C beat A

    How?