By now, virtually everyone who represents business clients has heard of the America Invents Act (AIA) and understands that it has changed the landscape for acquiring both utility and design patents in ways that many did not expect. Some may also know that patent assertion entities (PAE), and nonpracticing entities (NPE), (both also known as patent trolls) have changed the landscape for patent enforcement action by commencing a record number of infringement litigations. It is the purpose of this article to discuss the impact these two facts have on counsel's advice to business clients and best practices for clients operating commercial entities. Regardless of the business under consideration, these facts advocate for timely and accurate record-keeping, even if the client is not interested in pursuing a utility or design patent. And, if the client is interested in pursuing a patent, they highlight the importance of filing patent applications as early as possible.
Looking first at the circumstance where there is a potential for the client to file a utility or design patent, the first-to-file requirements of the AIA make the filing of a patent application a race to the patent office. The AIA essentially eliminated the familiar "first to invent" standard in the prior statute for granting patents and ushered in the "first to file" system.
As a result of the first-to-file system, an inventor cannot avoid the application of a prior art reference by demonstrating an earlier "conception date" for the claim inventions that predates the public availability date of the reference in order to have it removed from consideration. This practice, often known as swearing behind a reference, is no longer available for applications filed on or after March 16; however, it is still available for patent applications filed before March 16. Clients need to keep this change in mind when they are potentially interested in filing either a utility application or a design application and follow the development of the potential invention. Once the invention is sufficiently developed and there is sufficient information to enable the filing of an application, a decision should be made about whether the invention is developed enough to justify a nonprovisional application, or whether to file a provisional application because additional refinements are needed.
The determination of which application to file is largely dependent on the state of the invention's development. If the invention is not fully developed, a provisional application will establish an effective filing date that can benefit the later-filed nonprovisional application. The provisional application has two additional advantages if the invention is not fully developed. One, the official filing fee is less than the nonprovisional filing fee, and two, you can add additional description to the nonprovisional. If the additional description is supported by the provisional filing, it will have the same effective filing date as the provisional application.
An additional aspect of the filing urgency since AIA came into effect is the radical change it brought to what had been known as the inventor's one-year "grace period." Under the prior statute, a reference was not prior art if it was patented or described in a printed publication anywhere, or on public use or on sale in the United States one year or less before the inventor's filing of the patent application. In many cases, this was seen as an opportunity for an inventor to begin exploring the commercial value of the invention without the fear of losing rights to the invention. With the change to a first-to-file system, this grace period was virtually eliminated as to any activity that was not directly related in some way to the inventor's actions. The current grace period is limited such that disclosure is not prior art if, and only if, it is a disclosure of the subject matter by the inventor or the result of someone obtaining the disclosed subject matter from the inventor. However, the blanket protection against a reference that was not publically available for more than one year prior to the inventor's filing date was removed. As a result of this change, a publication anywhere in the world by another who did not receive the information from the inventor is an effective reference if its publication date is before the effective filing date of the inventor's earliest patent application.
Looking to the circumstance where there is a potential to be exposed to a PAE, an NPE, or a patent troll who asserts one or more patents in an infringement litigation, there is a potential to avoid liability if the client can prove that the accused infringement was made one year earlier than the effective date of the asserted invention. This concept of "prior user rights" existed in the pre-AIA statute, but it was expanded in the AIA to cover all subject matter. Although there are some limitations on this defense, it is an important personal defense for an entity that is attacked over a commercial practice that it has been using. In the current litigation environment, many businesses that did not consider themselves to be engaged in a technology field have found themselves on the defensive for having websites or using the Internet to attract customers. Whether they are rightly subject to jurisdiction for litigation purposes is beyond the scope of this article. What is of interest here is the value of having maintained good record to establish when the practice was instituted and what was the scope of the practice at that time and since.
If a business is to take advantage of the prior user right, it will need to establish the nature and scope of its practices in sufficient details to show that its practice is essentially the same as the asserted patent claim. Stated in another way, a prior user will need to demonstrate that if its practice is an infringement, then it existed in that allegedly infringing form one year before the effective filing date of the invention recited in the asserted or alleged claim. This appears to be relatively straightforward and simple; however, it can be difficult and highly technical. Consider the nature of such proof for an Internet retailer or an Internet banker. In areas where the technology and the market demands change quickly, it is possible for the practice in question to change quickly and frequently. On the one hand, such changes may only be reflected in the output to a customer or client; on the other hand, the output may appear constant but there may have been many changes in the back end operation.
With respect to record-keeping, it is critical for the client to have a policy, preferably written and dated, and a system or procedure for complying with the obligations set forth in the policy. Many businesses may find it easier to place the policy on their computer systems or intranets. If this is the case, there needs to be clear and precise information about where and how to find the policy information. If the information is hidden and employees are surprised to learn that there is a policy, there is little to no chance that there is substantial compliance with the policy. If the policy is in a manual or memorandum, efforts should be made to make sure that each employee receives a copy of the policy. In either case, it is necessary to provide training on what is to be saved, where and how it is to be saved, and the process for making management aware of what is being saved. Management cannot make timely decisions about the subject matter if it does not learn of the information until long after the fact. The AIA did not eliminate the need for good, accurate records, it merely changed the use or focus on it.
A handy and useful summary of the changes as a result of the AIA is available from the Intellectual Property Owners Association at http://goo.gl/8DV7oT. Additional information and responses to FAQs can be found on the U.S. Patent and Trademark Office website at www.uspto.gov.
Although it is not solely a concern because of the AIA, the current age of employee mobility creates issues of record-keeping as they relate to assignments and ownership of intellectual property rights. At some point in the life of a project for the development of a new product or new software, employees, contractors or consultants are likely to be involved in one or more phases of the project. It is important to have clearly established on the record that the result of the project is owned by the company and that each employee, contractor or consultant has assigned all of the work associated with the project to the company. As employment practitioners can attest, employees who have been terminated or quit and contractors or consultants can be very uncooperative when assignments are requested post their employment or when the engagement is ended. The time to raise such issues with all of them is at the outset of the engagement. From that time forward the emphasis should be on the policies and procedures for creating and maintaining good records.
The focus here is to encourage continued or increased vigilance on record-keeping as it relates to a couple aspects of the AIA. However, it is not the intent here to suggest that these are the only reasons for good record-keeping. Memories fade, time runs together and personal motives can change. Good records may not always prove what you had hoped they would, but they are not subject to personalities or mood changes.
As a final note, it is important to remember that there is no developed case law around the AIA so we have no guidance as to what may be critical or even important in the realm of intellectual property going forward. This argues for vigilance in record-keeping as a safeguard against an unknown legal landscape.
ANTHONY S. VOLPE is a shareholder at Volpe and Koenig, an intellectual property law firm with offices in Philadelphia and Princeton, N.J. He has corporate and private-practice experience in securing, licensing and enforcing all aspects of intellectual property rights.