What Effects Will the America Invents Act Have on U.S. Patent Law?

After years of criticism regarding the state of U.S. patent law, the Senate on Thursday passed the America Invents Act, which is being called the most sweeping patent reform in half a century. But many intellectual property lawyers, including a prominent former judge, are taking a wait-and-see approach toward the bill. It could improve patent law in the long run, they say, but for now, uncertainty hangs over this increasingly important corner of the legal profession.

"There will be heightened uncertainty for the rest of the decade," says Paul Michel, a retired judge of the U.S. Court of Appeals for the Federal Circuit, in evaluating the provisions of the new legislation. "The bill makes fundamental changes, and many sections are poorly written and ambiguous."

One such fundamental change is the shift to a "first-to-file" system, in which a patent is granted to the first person to apply, from a "first-to-invent" system, in which it is granted to the first person to conceive of an invention and reduce it to practice.

The shift to first-to-file means more work for in-house patent lawyers, according to Michel. If a company has an invention in the works, its lawyers may need to continually file new patent applications for that invention or risk a competitor beating them to the patent office, he says.

"Now that everyone knows that the first filer wins, there will be pressure on all companies to act as fast as possible, even if there is research left to do," Michel says. "[Businesses] may need to file three or four patent applications over the course of one or two years. In the past, they would have quietly kept working and then filed one application at the end."

A less well-known section of the act tinkers with the so-called inventor "grace period." That period is a statutory exception to the general rule that one can't patent an invention that is already publicly available; it gives inventors one year to freely publicize and test the market for an invention without waiving their patent rights. After considerable debate by Congress on the future of this uniquely American grace period, the final version of the America Invents Act keeps it at one year but redefines what "disclosures" inventors can make.

Unfortunately, that section of the act is "full of ambiguities" says Michel. "Companies of all sizes will have to guess what the courts will conclude are the key words."

It will take years for the courts to clarify that gray area, agreed James Mullen III, a partner at Morrison & Foerster in San Diego. In the meantime, "if you start talking about your invention to raise money, you have to be far more careful in what you say," he says.

If a company is beaten to the patent office, its lawyers have a new mechanism through which they can block a rival inventor's patent: the "post-grant review" procedure, which unfolds in the patent office, not the courts.

"We just don't know what level of review the patent office is going to require in those proceedings. We have to wait and see how this new regime will be applied," says Mullen. "Hopefully it will reduce litigation, but we don't yet know at what cost."

Because patentees will at first be skittish about availing themselves of a new administrative procedure, "it could be years before use of post-grant review picks up," Mullen predicts.

A downside to the post-grant review process is that "there will be a greater uncertainty over issued patents than ever before," says Michel. "Venture capitalists may wait to see what happens in those post-grant review proceedings before investing."

As skeptical as he is of the patent-law overhaul, Michel says one quick fix would trump all the downsides: a provision allowing the U.S. Patent and Trademark Office to keep all the revenue it generates through fees. Senator Tom Coburn (R-Okla) proposed such an amendment during the final stages of negotiations, but it was defeated 50-48.

Because Congress diverts its revenue to other agencies, the patent office is "chronically under-funded," says Michel, which can delay rulings on patent applications and stymie innovation. "The single most important thing for the patent office is increased funding."