It appears as if the time has finally arrived for an up or down vote on patent reform in the United States Senate. It has been widely reported that the full Senate will take up patent reform upon returning from recess this week, and it is now believed by many on the inside that the Senate will take up patent reform on Monday, February 28, 2011, the first day back. Some are even anticipating that the Senate will vote on patent reform bill S. 23 late in the day on Monday, February 28, 2011. See Crunch Time: Call Your Senators on Patent Reform. That would seem exceptionally quick, particularly given the rancorous issues and Amendments still to be presented, but nothing will surprise me.
As we get closer to a vote in the Senate the rhetoric of those for and against patent reform is heating up to a fever pitch. The big fight, once again, is over first to file, with battle lines drawn that run extremely deep. Senator Diane Feinstein (D-CA) is expected to file an Amendment stripping the first to file provisions, which could be supported by Senate Majority Leader Harry Reid (D-NV).
Before tackling the first to file issue I would like to point out that regardless of whether first to file is supported or opposed everyone, and I do mean everyone, unanimously agrees that the USPTO should be allowed to keep the fees it collects to reinvest in the agency and to do the work promised. An overwhelming majority also seem to support giving the USPTO fee setting authority. Fee setting authority is present in S. 23 (see Section 9) and Senator Tom Coburn plans to introduce an Amendment that would once and for all eliminate fee diversion and let the USPTO keep the fees it collects. So while there is argument about first to file hopefully we won’t lose sight of the fact that most everyone is on the same team relating to fixing the USPTO.
With respect to first to file, in practical effect we already have a first inventor to file system. For example, since the start of fiscal year 2005 on October 1, 2004, there have been over 2.9 million patent applications filed and only 502 Interferences decided. An Interference Proceeding occurs when multiple inventors file an application claiming the same invention, and is the hallmark of a first to invent system because it is possible in the United States to file a patent application second and then be awarded the patent if the second to file can demonstrate they were the first to invent. On top of the paltry 502 Interferences over nearly 7 years a grand total of 1 independent inventor managed to demonstrate they were the first to invent, and a grand total of 35 small entities were even involved in an Interference. A small entity can be an independent inventor, university, non-profit or a company with 500 or fewer employees. Thus, we have a de facto first to file system and the “first to invent” system that supposedly favors independent inventors is overwhelmingly dominated by large companies with over 500 employees. See chart below.
On top of this, the independent inventors and small entities, those typically viewed as benefiting from the current first to invent system, realistically could never benefit from such a system. To prevail as the first to invent and second to file you must prevail in an Interference proceeding, and according to 2005 data from the AIPLA the average cost through an interference is over $600,000. So lets not kid ourselves, the first to invent system cannot be used by independent inventors in any real, logical or intellectually honest way, as supported by the reality of the numbers above. So first to invent is largely a “feel good” approach to patents where the underdog at least has a chance, if they happen to have $600,000 in disposable income to invest on the crap-shoot that is an Interference proceeding.
I will acknowledge, however, that one of the best arguments I have seen against first to file was prepared by Hank Nothhaft, President & CEO of Tessera and a frequent contributor to IPWatchdog.com. In his op-ed in The Hill Hank concludes by asking: “Why risk that by weakening the incentives for startups?” As I can point to the fact that we have a de facto first to file system already, Hank and others can say — so why the need for change? I readily acknowledge that the small c conservative thing to do, which I normally promote, would be to do nothing and keep the status quo. That is a fine argument, but it would keep the USPTO devoting precious resources on a complex Interference system that really mirrors a first to file system anyway. Of course, if patent reform gives the USPTO fee setting authority and an end to fee diversion then the resources problem isn’t nearly the concern and Congress could layer on responsibilities for the Patent Office and Team Kappos could deliver and still reduce the backlog.
Some others who challenge the first to file changes in the patent reform bill say the Interference analysis above is misplaced because first to file is not about whether the first to invent will obtain the patent. As illogical as that sounds, they have a point. Notice, however, that the Interference data does clearly demonstrate there is no need whatsoever for a first to invent system in the United States. Thus, many who challenge the first to file system don’t seem to question that first to file is acceptable, but they do not like the loss of the familiar 12 month grace period.
The truth is, however, that relying on a 12 month grace period is extremely dangerous, but it does have its place. As Bryan Lord correctly explains in Crunch Time: Call Your Senators on Patent Reform, many start-up companies rely on the grace period, which is critical “to companies that rely upon external collaborations or have comparatively limited resources.” There is absolutely no argument with the fact that a grace period does factor into the equation for small businesses and start-up companies that are strapped for cash and already need to make choices about how much, and which, innovations to protect. I also like Lord’s questioning the rush to harmonize. I always like to point out that harmonization is fine, but why can’t we do what makes for a good system and not just what everyone else does. Lets harmonize what the world does better and lets lobby the world to adopt what our system clearly gets right.
Having said all of this, there is absolutely no reason why we cannot move from a first to invent system to a first inventor to file system that would still retain a real and substantial grace period and still retain the right for patent applicants to swear behind references to demonstrate an earlier date of invention, at least with respect to pieces of prior art that are not the progeny of earlier filed patent applications.
Regardless of of the disinformation that is widespread, the currently proposed S. 23 does, in fact, have a grace period. The grace period would be quite different than what we have now and would not extend to all third party activities, but many of the horror stories say that if someone learns of your invention from you and beats you to the Patent Office they will get the patent. That is simply flat wrong.
As it stands now, the currently proposed 102 in S. 23 says, in relevant part:
§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.
(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.
Looking at the proposed 102(b), it becomes clear that despite the claims of critics there is a grace period within S. 23. I find it sad, yet amusing, that some who challenge the bill simply refuse to quote 102(b), and even outright claim “there is no grace period.” Obviously, there is a grace period.
The proposed 102(b) seeks to eliminate from the universe of prior art disclosures made by the inventor or which owe their substance to the inventor. So if the inventor discloses his or her invention less than a year before filing a patent application the patent can still be awarded. If someone learns of the invention from the inventor and discloses less than a year before filing a patent application, the patent can likewise still be awarded. What is notably missing here are several things. First, a definition for “disclosure.” Second, an exception that applies to third-party activities where the third party acted without learning of information from the inventor but yet did not file a first application themselves. So the grace period set up by proposed 102(b) excepts disclosures (whatever they are) made by or through an inventor less than 1 year before the inventor files, but does not extend to disclosures (whatever they are) made by others less than 1 year before the inventor files.
The proposed 102(b) is a departure from the current law of novelty. Nevertheless, it is simply wrong to claim there is no grace period in an attempt to manipulate independent inventors, small businesses and others to support elimination of first to file.
In any event, under the current 102(b), a patent applicant is entitled to a patent unless —
the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States…
Under current 102(b) an inventor can create their own bar to patentability as a result of activity such as publication, public use in the US or sale in the US if it occurs more than 1 year before a US patent application is filed. A bar can likewise be created if a third party, either known or unknown to the inventor, engages in the same activity more than one year before a US patent application is filed. What this necessarily means, and has long been interpreted to mean, is that a patent can be awarded so long as the invention has not been patented, published, on public use in the US or on sale in the US for more than 1 year. The current 102(b) provides a solid grace period that applies across the board, the proposed 102(b) does not.
Independent inventors and start-ups are rightly concerned about whether they will be able to enjoy a grace period relative to third party activities. They are rightly concerned to wonder whether the term “disclosure” in 102(b) would mean that the exception applied to their own public use or sale activities, which is anything but clear. Inventors and start-ups are also rightly concerned about whether they will be able to swear behind and prove prior inventorship relative to prior art not associated with an earlier filed patent application. In short, I see no reason why we cannot have a first inventor to file system that does away with Interference proceedings, awards patents to the first inventor who files a patent application but which also preserves a 12 month grace period under current law.
Of course, if first to file as stated in 102(b) becomes the law of the land it will encourage independent inventors to do exactly what they should do, which is file patent applications earlier in the process. I hear the most ridiculous strategies from independent inventors who almost universally don’t understand the requirements to prove they were the first to invent, see Much Ado About Nothing, so a simpler system that they can understand will no doubt benefit them. Small businesses and start-ups should likewise file earlier in the process, and frankly that is why there is so much opposition to first to file.
Small businesses and start-up companies do need a grace period to try and figure out what to pursue, and the proposed grace period should keep much of the law in its place will not be as widespread as currently enjoyed. While resources are always limited with start-ups, I think they incorrectly argue that there is an over-burdensome cost in terms of both money and time associated with filing provisional patent applications to preliminarily protect rights. In fact, I have offered to demonstrate just how the preparation and filing of streamlined provisional patent applications can be accomplished to many of those making the argument that it is too costly and time consuming to prepare quality provisional patent applications. As yet I have had no takers. So if cost and time are such concerns why aren’t they willing to consider a better, faster, cheaper way.
I think Bryan Lord’s call to reach out to your Senators is absolutely the right thing to do. Get involved and be heard!- - - - - - - - - -
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About the Author
Gene Quinn 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.