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Bayh-Dole Compliance Obligations Meet America Invents Act


Written by Eric W. Guttag
Eric W. Guttag IP Law Office
Posted: July 1, 2011 @ 1:06 pm
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In going from the current “first to invent” to the new “first to file” regime mandated by the America Invents Act (AIA), much attention has been focused on the amorphous “grace period” provision provided to patent applicants for certain activities undertaken by them prior to filing for a U.S. patent.  Much less attention was paid to the amendments made to sections 203(c)(2) and 203(c)(3) of the Bayh-Dole compliance obligations which were directly impacted by this change in definition from the old “statutory bar” provision (based on publication, on sale, or public use of the invention caused by the patent applicant), to this new “grace period” provision.  But even more astounding (and unsettling) are the unrecognized consequences caused by the AIA in “realistically” meeting certain Bayh-Dole compliance obligations by going from the current “first to invent” to the new “first to file” regime.

For those subject to Bayh-Dole compliance obligations (i.e., those entities conducting federally funded research), there are fifteen obligations pertaining to invention/patent rights under a standard funding agreement. Only three of those obligations involve defined timing for compliance:  (1) disclose each subject invention to the funding agency within two months after the inventor discloses the invention to the person who is responsible for patent matters at the funded entity (section 203(c)(1), hereafter referred to as “Bayh-Dole obligation (1)”); (2) within two years of such disclosure, notify the funding agency in writing whether the funded entity elects to retain title (section 203(c)(2), hereafter referred to as “Bayh-Dole obligation (2)”); and (3) no later than one year after electing to take title, file the initial U.S. patent application (section 203(c)(3), hereafter referred to as “Bayh-Dole obligation (3)”).  See also Scott D. Locke and Eric W. Guttag, “Losing Patent Right for Failing to Comply with the Bayh-Dole Act:  The Implications of Campbell Plastics on Federally Funded University Research,”

Under the current “first to file” regime, “realistic” compliance with Bayh-Dole obligations (1) through (3) was driven more by avoiding “statutory bars” caused by patent applicant activities which occurred more than one year prior to the U.S. patent filing date.  That’s because the critical “prior art date” for U.S. patent filing purposes under a “first to invent” regime was the invention date.  Admittedly, the U.S. patent filing date is treated as the “constructive” invention date for prior art purposes.  Even so, the U.S. patent applicant could still swear behind the prior art date by showing an earlier invention date.  In effect, the U.S. patent applicant who cared only about patent protection in the U.S. had a one year “window” after the invention date before having to really worry about intervening prior art created by others after that invention date.

All that has changed with the AIA.  As noted above, the AIA does take into account the impact of the new “grace period” provision on Bayh-Dole obligations (2) and (3) as it relates to patent applicant activities.  But what the promoters of the AIA were oblivious to (or simply didn’t care about) is how going to this new “first to file” regime effectively creates significant time pressure in complying with Bayh-Dole obligations (1) through (3), while at the same time avoiding intervening prior art issues created by others (i.e., third parties) prior to the U.S. patent filing to comply with obligation (3).  That’s because the effective prior art date under the “first to file” regime of the AIA is what prior art exists before the U.S. patent filing date.  In other words, the U.S. patent applicant no longer has the luxury of that one year “window” after the invention date.  Instead, the danger of intervening prior art by others steadily (and potentially exponentially) increases as time passes between the invention date and the U.S. patent filing date.

Putting this in Bayh-Dole terms, the time periods provided for compliance with obligations (1) through (3) may create a potentially fatal illusion with regard to the new “realities” of the “first to file” regime under the AIA.  For example, waiting two years from disclosure of the subject invention to elect title as permitted by Bayh-Dole obligation (2) and then filing a U.S. patent afterwards may well “doom” that patent filing effort long before the end of that two year period.  Even waiting the full year permitted by Bayh-Dole obligation (3) may be way too late to file the initial U.S. patent before intervening prior art by others effectively negates the ability to secure patent protection in the U.S.  In fact, a federally funded entity may be under the gun to file the U.S. patent before even the two month period has run under Bayh-Dole obligation (1) to minimize the ever increasing danger of intervening (and accumulating) prior art coming into play.

When enacted in 1982, the primary purpose of the Bayh-Dole Act was to encourage federally funded individuals, small businesses and universities to commercialize technologies created from that federally funded research.  And in return for complying with those Bayh-Dole obligations, including obligations (1) through (3) relating to invention/patent rights, those compliant individuals, small businesses and universities had the opportunity to retain title to the invention/patent fruits from those labors.  But in one fell and incomprehensible swoop, the “first to file” regime of the AIA may have washed away, or at least severely undermined, what has been a significant benefit for almost thirty years to those subject to and compliant with these Bayh-Dole obligations.  Americans, including American universities engaged in significant research, those wishing to be entrepreneurs and those seeking jobs in the current dismal U.S. economy, may yet eventually curse this unrecognized, yet frustrating consequence of the “first to file” regime of the AIA.

*© 2011 Eric W. Guttag.


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11 comments
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  1. Re: “In effect [under "first to invent"], the U.S. patent applicant who cared only about patent protection in the U.S. had a one year “window” after the invention date before having to really worry about intervening prior art created by others after that invention date.”
    That has always been far more of a myth than a reality. A Rule 131 declaration needed to “swear behind” such prior art is fatally defective without valid proofs of a prior “actual reduction to practice” or “continuous dilligence” from before the prior art date to the filing date, OR if any of the prior art or its published foreign equivalents has become a 102(b) bar before the filing date, OR if the prior art is a prior application of another with interfering claims. The fact that many examiners do not understand that and accept invalid Rule 131 declarations does not protect a patent against successful validity challenges.

  2. Paul,

    I understand your point, but please also consider my quoted statement in context of what my article addresses. As I noted in my article, anything which published before the invention date is going to be an issue, including potentially being a 102(b) bar. Also, getting into the intricacies and technicalities of whether a Rule 131 Declaration addresses the reduction to practice/diligence issues is not what my article was about.

    Instead, my primary point was that you do have a potential “window” after the invention date (however big it may be in real terms) under the current “first to invent” regime that you’ll not have under the “first to file” regime of the AIA in terms of intervening prior art after the invention date and before the U.S. filing date. In fact, I believe David Boundy has pointed that out before. That “window,” however large it might be in “reality,” is important for indivdiuals and small businesses who only care about protection in the U.S., and don’t have the bucks that the Goliaths (i.e., large multinational corporations) do to do an early and aggressive filing program which may end up being a “throwaway cost.” For them, the “first to file” regime of the AiA is going to be brutal in terms of cost and the time pressure, something that David Boundy has correctly pointed out before. And those universities who are primarily concerned about U.S rights and complying with Bayh-Dole may be lulled into a false sense of security, and thus be truly shocked to find out that the “first to file” regime of the AIA has caused their invention/patent rights to go up in smoke because of the “disconnect” with the timing compliance under Bayh-Dole.

  3. Hi Eric-
    Thanks for the insightful analysis, and I can’t help but wonder how many other harmful consequences the AIA might result in. My Rep actually had the temerity to be a sponsor of the amendment to hold USPTO user fees and funding in escrow, which will allow Congress to continue to steal funding from the USPTO at will (Norm Dicks D-WA) He is going to hear from me when he gets back home, and I will never vote for him again. Hopefully the America Invents Act will get hung up the Senate-House conference process, or Obama might simply refuse to sign this very ill-considered legislation into law. Time to start talking to my Senators I guess, and I have one ace in the hole in Senator Maria Cantwell, (D-WA) who was one of the very few in the Senate to see through the sham that the S-23 bill represented.

    I think I need a glass or three of Pessimistic Persimmon kook aid to dull the pain somewhat.

    All the best,
    Stan~

  4. Eric – You have done a nice job using the specific provisions of Bayh-Dole to illustrate the central practical problem of AIA for US universities that many of us have been trying to get across. WARF gets it, as do a handful of other universities. But too many are still hearing or spouting vacuous and unsupported rhetoric about “harmonization” and interference avoidance (talk about a red herring) to really think about how the strategic adaptation to the provisions of Bayh-Dole have benefited universities for years and how the rug is about to be pulled from under them.

  5. Another puff of smoke and flash of mirror is the Micro-entity Fee reduction.

    If AIA passes, universities will need to spend more money upfront in additional applications (see the Ron Katznelson articles). The artificail ceiling of four applications per entity all but guarantees that no University will be able to claim the reduced fees for Micro-entity even though the that fee reduction is being broadly proclaimed as a great victory for academia.

    I have passed on this and other comments to my elected officials who, unfortunately still voted for the verious forms of “Patent Reform.”

  6. Stan, Brad and Anon,

    Thanks for the comments. Yes, the AIA follows the Law of Unintended Consequences (pardon the pun) when it comes to federal legislation. Congress’ view is so myopic and special interest driven that they’re completely oblivious to the collateral damage caused by such legislation. For example, as Dale Halling has aptly pointed out, Oxley-Sarbanes did nothing to prevent another Enron during our 2009 financial meltdown, yet has almost squelched the ability of any start up to offer an IPO. I’m generally happier when Congress doesn’t enact legislation, especially legislation like the AIA which is so poorly thought through as to its potential adverse impact on other existing laws.

  7. Anon-
    Very well said as regards this smoke and mirrors attempt at *Patent Reform* that the House seems to be purveying. Unconstitutional perhaps on two or more fronts, and it still allows Congress to steal more than $100,000,000 per year historically, which are paid for by inventors to the USPTO to provide a very important service, as in perhaps granting me a reasonably unassailable US Patent.

    David Kappos and Gary Locke have been trying Very hard to try to get us what we need, but Congress has once again performed their Lucy/Charlie Brown tactic of Lucy yanking the football out of the way before Charlie can get his foot into it. All I have is one Senator who hates all this reform baloney, and another Senator Patty Murray (D-WA) who Unfortunately voted in favor of the S. 23 Senate *Patent Reform* bill, much to my disappointment. The ladies from the great state of Washington are very clever though, so perhaps Maria can persuade Patty to smell the coffee and see the light. It might be a very good time to start contacting your Senators and let them know what you don’t like, so where do I start? First Inventor to File will put the Universities basically out of business, because the one year grace period will be all goofed up in confusing ways, and PUR’s will probably steal most if not all of the Thunder of most rights to any particular inventions that they might need some time to make into actually valuable *inventions*

    The staid Tech Tranfer folks don’t seem to get it as Brad very clearly points out though. Less than a year if this passes, and they will very possibly be out of their jobs, or maybe two years by being very optimistic. And that is not even to mention what independents like myself think of this bill, which ia the result of probably $400,000,000 spent over the last ten years or so to *buy* US patent laws that suit their business models, and probably nobody else’s. I heard one report that large corporations could improve their profit margins by about One Quarter of One Percent, if they could eliminate any competition from independents and the small companies that they might engender.

    So kill the small guys just because you have the money, and don’t care what new things they might have invented? What if they invented a new way to make your wife look lovely? Cheap shot I know, but I am really struggling to understand Why the IT folks are so greedy. Money for nothing, and Tricks for Free as Mark Knopfler opines in a song.

    Dasvedanya-
    Stan~

  8. To all:

    A minor faux pas in my article. Bayh-Dole was enacted in 1980, not 1982 (that’s when the Federal Circuit came into being).

  9. To all:

    For an interesting, if misguided view of the purpose of the invention/patent rights provisions in Bayh-Dole, go to: http://rtei.org/blog/2011/07/01/the-road-to-serfdom-patent-reform-version/ .

  10. [...] in an earlier article on the impact of the AIA on compliance with Bayh-Dole obligations.  See Bayh-Dole Compliance Obligations Meet America Invents Act.  But what I said in that earlier article bears repeating.  Under the current “first to [...]

  11. [...] Bayh-Dole Compliance Obligations Meet America Invents Act [...]