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Senate Passes Patent Reform Bill

Insight March 10, 2011

The Senate recently passed "The America Invents Act" which, if completed, would be the first major overhaul to U.S. patent law in more than half a century. 

          On March 8, 2011, the Senate overwhelmingly passed "The America Invents Act" with a bipartisan vote of 95-5.  If completed, this would be the first major overhaul to U.S. patent law in more than half a century. 

            The bill is the result of seven years of public debate swirling around patent reform that was sparked by a 2004 National Academy of Science's Report.  The Report recommended overhauling the patent system to address what it identified as questionable patent quality, rising transaction costs, and international inconsistencies in patent coverage.  The Report's specific recommendations included the introduction of a mechanism of post-grant challenges for newly issued patents, harmonization of U.S. law with European and Japanese patent law, and amendments to simplify and reduce the cost of patent litigation.   

            One of the most controversial provisions of the bill would be the shift of the United States patent system from a "first to invent" to a "first to file system."  Under current law, an inventor can challenge a patent application by documenting an invention date prior to the applicant's filing date.  However, under the new system, an inventor must be the first person to file a patent application on the invention in order to obtain a patent.  Changing the law to "first to file" would harmonize the U.S. patent system with that of every other major international jurisdiction, though critics claim the bill is a blow for small entrepreneurs lack the resources to rush applications to the Patent Office.

            The bill would also give the Patent Office the power to set its own funding.  This provision is likely to mean higher application fees but also greater resources to process an application backlog that exceeds 700,000.

            The bill also provides for an entirely new system of post-grant reviews that would be handled directly by the patent appeals board.  This post-grant review process provides a nine month window following the issuance of a patent in which a third party can challenge the patent on abroad range of issues.  The Patent Office would proceed upon a showing that "it is more likely than not that at least one of the claims challenged in the petition is unpatentable."   

            The proposed reform would also eliminate the right of "any person" to file a false marking claim.  Those claims would now be limited to individuals who have actually "suffered a competitive injury.

            Finally, the bill would create a new type of entity termed a "micro entity" that has fewer than five patent applications.   Micro entities would qualify for reduced fees.

            The bill passed only after lawmakers dropped the most controversial issue: whether to narrow damages for patent infringement.  The bill essentially leaves the matter of damages up to the courts though it includes an explicit requirement that the court "identify the methodologies and factors that are relevant to the determination of damages."  While this provision may create a greater likelihood of appeal, it does not necessarily limit damage awards.  Along with significant damage reform, the bill also ultimately dropped revisions to the venue statute and revisions to the willfulness standard. 

            Patent reform next heads to the House of Representatives which must now choose whether to adopt and debate "The America Invents Act" or propose a separate bill.  If you would like to learn more about this development, please contact Rimon's lawyer at info@rimonlaw.com.