In-House Counsel Prepare for Phase 2 of America Invents Act

Lisa Shuchman

Corporate Counsel

09-17-2012

The America Invents Act, the historic 2011 law that reforms the U.S. patent system, sees its second phase take effect this week, creating new rules in the complex world of patents that in-house counsel should not ignore. A third and final phase will be implemented in March of next year.

“This could be a real game-changer,” said Erika Arner, chair of the patent prosecution practice at Finnegan, Henderson, Farabow, Garrett & Dunner, discussing the second wave of patent reforms. “The provisions will create new ways to challenge patent applications and existing patents, and counsel will want to more closely monitor the patent landscape and their competitors.”

Among the more significant changes is a provision that will allow third-party submissions during examination of a patent. Unlike in the past, when the patent applicant and the U.S. Patent and Trademark Office were the only parties involved in the patent examination process, the new rules allow third parties who believe a patent should not be issued to be part of the process. A third party can submit prior art—a published patent application, a patent, or any other printed publication of potential relevance—to the patent examiner for consideration.

The change is intended to improve the quality of patents and get relevant information to USPTO examiners before a patent is granted—rather than through litigation after the patent is in place.

Beginning next week, third parties will also be able to request an inter partes review of any issued patent—a kind of mini-trial in which the validity of an existing patent can be challenged. This has the potential to be a powerful tool, attorneys say, because the review takes place in front of judges rather than examiners, and there is a statutory time limit placed on the process: a ruling must be made within one year from the time the patent was granted.

“This is a real, viable option that could change the face of patent litigation,” said Matt Kreeger, a partner at Morrison & Foerster in San Francisco. “The review can run parallel to litigation filed in a district court, and the court will stay the case while the patent is under review at the PTO.”

In-house counsel should also be aware of the new post grant review provision that will take effect in the AIA’s second phase, attorneys say. Like in the inter partes review, a third party can request a post grant review of an existing patent to challenge one or more of its claims. But unlike the inter partes review, which is entirely based on prior art, the post grant review may be requested on any grounds for invalidity, such as whether the invention should be considered patentable subject matter. It also comes with a time limit, and must be requested within nine months of the date the patent is granted.

“This applies to patents issuing from applications filed after March 16, 2013, when the final phase of the America Invents Act goes into effect, but in-house counsel should start thinking about it now because they only have nine months to file for a post grant review,” Kreeger said.

One specific type of patent—the business method patent—will be subject to post grant review immediately, however. Under this provision, a person who has been charged with infringement of a business method patent can request the USPTO cancel one or more claims of the covered business method patent on the grounds of prior art. Business method patents are often asserted by non-practicing entities (NPEs), commonly referred to as “patent trolls,” which have been blamed by many in the IP world for the dramatic increase in the amount of costly patent litigation in the U.S. “Everyone is going to be watching this, and we may see some filings as early as next week,” Arner said.

One other change in this phase is that patent owners will be able to request a supplemental examination of their issued patent. If the examination is granted, the owner can submit prior art to the USPTO that was not submitted in the initial patent application. This can inoculate patents against some litigation, Kreeger said.

These new ways to challenge and protect existing patents within the USPTO are intended to offer an alternative to litigation in district court—“a faster and cheaper way to resolve issues,” Arner said. They bring the U.S. more in line with patent systems in Europe—a move that will continue when the final phase of the law takes effect next March. At that time, the “first-to-file” provision of the AIA, which will for the first time in the U.S. make the first party to file for a patent—not the first to invent—the patent owner.

But the reforms also mean in-house counsel will have to make more strategic considerations, attorneys say. They should ask themselves, for example, whether it is more advantageous to have a particular case heard before judges at the USPTO or in front of a district court judge and jury. And they should consider whether it is in their interest to request an inter partes review with the USPTO and submit prior art in the challenge of a patent. “This could be a disadvantage later on in court because the particular challenge has already been addressed,” said Sasha Rao, a partner at Ropes & Gray.

Perhaps most importantly, in-house counsel also should carefully consider timing when taking advantage of the AIA’s new rules, attorneys say. A patent owner may want to wait to publicize a new patent until after 9 months have passed, for example, so that a challenge can only be brought under the more limited inter partes review and not the broader post grant review process. “The challenge will be to decide what best fits the situation,” said Steven Baughman, also an IP partner at Ropes & Gray. “There are going to be more choices that will require a balancing act.”

For in-house counsel, these latest changes brought about by the America Invents Act mean it’s now more important than ever to be vigilant and to set up monitoring systems for key patents of competitors and NPEs, attorneys say. The intricacies of the new law, which will only become more complex when the “first-to-file” provision takes effect in 2013, are likely—at least in the beginning—to keep in-house counsel busy. And it’s really going to fill up the schedules of outside patent counsel. “This is the biggest change in patent law in half a century,” said Kreeger, “and in any change of law, it’s the lawyers who are the true winners.”