House Passes Patent Reform – Keeps Senate’s “First-To-File”, Differs on PTO Funding
By Albert Wang – Edited by Matt Gelfand
On June 23, 2011, the House passed the Leahy-Smith America Invents Act. Sponsored by House Judiciary Committee Chairman Lamar Smith (R-Tex.) and passed by a vote of 304 to 117, the legislation implements a first-to-file system, a post-grant review system, and a fund for PTO fees, among other procedural changes. Smith promised in a statement that the bill would help “to encourage innovation, job creation and economic growth” by reducing the application backlog and attacking frivolous patent litigation. The Act’s purpose is to “promote industries to continue to develop new technologies that spur growth and create jobs across the country which includes protecting the rights of small businesses and investors from predatory behavior that could result in the cutting off of innovation.”
Originally passed in the Senate by a vote of 95 to 5 (previous Digest coverage), H.R. 1249 includes a number of changes relative to its Senate counterpart, S. 23. Of note, H.R. 1249 retains the Senate bill’s first-to-file regime, which makes the “effective filing date” of a claimed invention the actual filing date, thus dismantling the existing first-to-invent regime. First-to-file has been criticized by the Inventors Network of the Capital Area and Tea Party politicians like Phyllis Schlafly for unfairly advantaging large companies, foreign actors, and other parties with the resources to file patents quickly, according to Mother Jones. Your Patent Guy argues in contrast that resource advantages already work to bias interference proceedings, and that the bill gives institutional actors no advantage that they did not already enjoy under the existing system.
Section 22 of the bill establishes the Patent and Trademark Fee Reserve Fund, which retains any fees the PTO collects in excess of its appropriation for that fiscal year. Only the PTO may draw upon this Fund, and only for official business, in contrast to the existing PTO Appropriation Account, 35 U.S.C. § 42, which is part of the U.S. Treasury and which Congress may use for other matters. However, and in contrast to the Senate version of the bill, the PTO must still give Congress notice before accessing the Fund. Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.), a major sponsor of the bill, expressed disappointment at the change, but supports the House bill nonetheless, according to Main Justice.
Also new to the House bill is H.R. 1249 § 19, which strips state courts of jurisdiction over patent, copyright and plant variety protection claims, while granting the Federal Circuit exclusive jurisdiction over appeals regarding patents or plant variety protection. Section 5 of the bill expands the 35 U.S.C. 273 prior commercial use defense to cover processes and machines used in manufacturing or commercial processes. Section 16 creates a “virtual marking” regime whereby an address to an Internet posting containing the patent number may take the place of a traditional patent notification. Section 18 extends post-grant review to business method patents. Finally, HR 1249 includes provisions for studies on the implementation of the Act by the PTO, second-opinion genetic diagnostic testing, the diversity of patent applicants, ways to help small businesses with international patent protection, and “the consequences of litigation by non-practicing entities, or by patent assertion entities . . . “ HR 1249 § 34.
H.R. 1249 removes S. 23’s § 4, which would impose a sufficiency-of-evidence standard on damages proceedings and establish treble damages for willful infringement.
Also adopted without modification is S. 23 § 6, the provision for attacking an existing third-party patent. Petitioners may obtain inter partes review of a patent on the grounds of prior art consisting of patents or printed publications only. Petitioners may also seek post-grant review on the grounds of § 282 invalidity. Rep. James Sensenbrenner (R-Wis.) attacked these provisions as allowing filers to fraudulently obtain patents as long as they cure the fraud with corrected information after the fact.
According to The Next Web, Patent Baristas, and the Wall Street Journal Law Blog, the bill enjoys support from the U.S. Chamber of Commerce, the Biotechnology Industry Organization, and companies like Apple, Google, IBM, Caterpillar Inc, 3M Co., and General Electric Co.
Due to the differences between the two bills, the Act will have to undergo reconciliation proceedings before it goes to the White House for signing.