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IP Alert: Summary of the Leahy-Smith America Invents Act

September 16, 2011

UPDATE: As expected, President Barack Obama signed the Leahy-Smith America Invents Act (the “Act”) into law on Friday, September 16, 2011. This legislation is a major rewrite of the patent laws of the United States. The new law adjusts the landscape of patent law in several ways, including changing the U.S. patent system from a “first to invent” system to a “first to file” system and adding new post-grant patent review processes, among other changes. The following is a summary of some of these changes.

“First to File”

Effective for patent applications filed on or after March 16, 2013, the definition of “prior art” will be adjusted to emphasize awarding patents to the first inventor to file an application instead of being awarded to the first inventor to invent the claimed subject matter. This change is made to be more in accord with the patent laws of many other countries throughout the world.

When these provisions take effect, public disclosures of subject matter made prior to the filing of a patent application will be considered to be prior art, with certain exceptions. Art disclosed after a public disclosure by the inventor, where the inventor’s public disclosure is made one year or less before the filing of the patent application, will not be considered prior art to that application. This makes the U.S. approach to “first to file” different from most other countries. Also, patents or patent applications disclosing subject matter obtained from the current application’s inventor will not be considered prior art, nor will patents or applications co-owned with the current application at the time of filing of the current application.

We note that publication of an inventor’s disclosure prior to filing may preclude later disclosures from being considered prior art in the U.S., but such a disclosure could adversely affect foreign patent rights. Accordingly, consultation with a patent professional is necessary when deciding how best to protect and market innovations under the new Act.

Effects on Practice Before the United States Patent and Trademark Office

The Act introduces several changes to the patent application process at the United States Patent and Trademark Office (USPTO):

Filing of a Patent Application
The Act sets out requirements for statements by the inventor to be submitted with the patent application. A substitute statement can be submitted if an inventor is not available to sign declaration papers or is obligated to assign the application to another and refuses to sign the declaration papers. Of considerable interest, the Act explicitly authorizes combining the Declaration or Oath with an assignment of the inventor’s interest to another party. This provision will reduce the number of papers that inventors need to file when filing a patent application.

Importantly, the law provides for a 15% increase in many USPTO fees as of September 26, 2011. If there are matters to be filed in the short term that will incur payment of USPTO fees, one should consider whether to expedite those filings to avoid payment of the 15% surcharge.

Micro Entity
The Act establishes a new “micro entity” status for patent applicants. Applicants that qualify for this status will be entitled to a 75% discount on USPTO fees. The criteria for qualification are as follows: 1) an applicant must qualify as a small entity under the current standard; 2) the inventor must not be a named inventor on more than four applications, excluding applications obliged to be assigned to previous employers; 3) the applicant’s gross income must be less than three times the median U.S. household income for the previous year; and 4) the application cannot be subject to assignment to an entity that fails these tests.

Prioritized Examination
The Act provides for the optional payment of a $4,800 fee to have a patent application’s examination prioritized ahead of other applications. Such applications can have no more than 4 independent claims and 30 total claims.

Derivation Proceedings
As a side effect of the shift to a “first to file” system, patent interference proceedings that settle disputes over which inventor was the first to invent and thus entitled to a patent will be discontinued. Instead, “derivation” proceedings will be instituted to handle disputes over whether an earlier filed patent application was derived or stolen from the actual inventor’s subject matter. Also, the Board of Patent Appeals and Interferences will be renamed as the “Patent Trial and Appeal Board.”

Satellite USPTO Offices
The Act authorizes the USPTO to open three or more satellite offices throughout the country. We note that the USPTO had previously announced intentions to open a satellite office in the Detroit area.

Tax Avoidance Strategies
Patent applications pending as of the enactment of the Act that claim tax avoidance strategies will be considered in the prior art and thus are not patentable. This provision explicitly does not apply to tax return preparation or financial management strategies.

Patents on “Human Organisms”
The Act prohibits issuance of a patent claim “directed to or encompassing a human organism.” The Act does not appear to define the expression “directed to.”


The Act introduces one new defense to patent infringement and takes one away. The Act also limits the ability to join multiple defendants in a single patent infringement lawsuit.

Prior Use Defense to an Accusation of Patent Infringement
The Act creates a new defense to a charge of patent infringement. Subject matter that is accused of infringing a patent is exempted from a finding of infringement of the patent if the subject matter was “a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process” that was used in good faith commercially in the U.S. at least one year before the effective filing date of the patent or invention public disclosure on which the patent is based. This defense is effective against any patent issued after September 16, 2011.

The prior use defense cannot be assigned to another entity and cannot be expanded beyond the original commercial use that was the basis for the defense. The defense does extend, however, to customers through application of the patent exhaustion doctrine.

Repeal of the Best Mode Defense
The Act removes the failure of a patent to disclose the best mode to practice the claimed invention as a defense to a claim of patent infringement. Disclosure of the best mode is still required, however, as part of the patent application.

Under the Act, a patent owner may only join multiple parties in a single patent infringement lawsuit if the defendants’ acts arise out of the same transaction or series of transactions and there are questions of fact common to all the defendants. Infringement of a single patent is not sufficient for joinder, although defendants can waive this joinder restriction. The Act also prohibits a court from forcing a joinder in these same regards.

Willful Infringement
The Act affirmatively states that failure to obtain an opinion of counsel regarding patent non-infringement cannot be considered when determining a finding of willful infringement.

The law dictates that providing an ATM location, in and of itself, is insufficient to establish venue against a defendant.

Post-Grant Patent Review Procedures at the USPTO

The Act authorizes a new post-grant review process for patents and directs the USPTO to issue regulations for another post-grant review specifically directed to business method patents. We note that “business method patents” is not yet a precise expression and has, in the past, meant different things to different observers.

Post-Grant Review
First, the Act creates a process for third parties to petition for review of a patent under any ground for invalidity within nine months of the patent’s issuance. The process is to be completed within one year of the USPTO’s determination that it is more likely than not that at least one claim is unpatentable or that the petition for review raises a novel or unsettled question of law. That one-year window can be extended by the USPTO by another six months. The patent owner may respond to the petition for review and will have one opportunity to amend the claims, with additional opportunities to amend allowed claims with consent of the requesting party.

The requesting party will not be able to raise again in a later proceeding the issues that have already been raised or that could have been raised during the post-grant review. The review can be stopped by settlement of the parties and submission of the settlement agreement to the USPTO.

New Inter Partes Review
Second, the Act replaces the current inter partes patent reexamination process with a new “inter partes review” process. A third party can request the review after nine months following issuance of the patent based only on patent documents and printed publications. The petition for review will be granted if the USPTO determines that there is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition,” which replaces the previous substantial question of patentability standard for inter partes reexamination.

In nearly every other way, the inter partes review will be handled identically to the post-grant review process. For instance, the Patent Trial and Appeal Board will handle the inter partes review, and the patent owner will have one opportunity to amend the claims, with additional opportunities to amend allowed claims with consent of the requesting party. Also, the USPTO is to issue a final decision on the review within one year of granting the petition to review the patent, with a six-month extension available, and estoppel applies to the requesting party.

Supplemental Examination
A patent owner can submit information for consideration by the USPTO. If the USPTO determines within three months of the submission that it raises a substantial new question of patentability, then the USPTO will institute an ex parte reexamination proceeding. This portion of the Act explicitly states that information submitted through this process cannot be used as a basis for holding a patent unenforceable in a later proceeding, although this process cannot cure inequitable conduct based on fraud.

Business Method Patent Review
The Act requires the USPTO to issue within one year regulations for conducting a post-grant review of business method patents. Third parties will be able to request review by the USPTO of a patent they are accused of infringing if the patent relates to business methods. There will be an eight-year sunset on this procedure.

Miscellaneous Provisions

Third-Party Submissions to the USPTO
Third parties are allowed to submit information relevant to the examination of a pending application. The information must include a statement of the relevance of each submitted document to the application and must be submitted, at the earliest, before a notice of allowance is mailed or, at the latest, six months after publication or the date of first rejection of the application.

The Act limits standing for filing lawsuits over false marking to parties that suffer a competitive injury as a result of the alleged false marking. The Act also authorizes a patentee to mark products with the word “Patent” or “Pat.” along with an Internet address that, when accessed, provides a listing of the patents that cover the marked product.

USPTO Studies
The Act directs the USPTO to study various aspects of the Act and other aspects of intellectual property law and provide various reports to Congress on these studies.

It is expected that this new legislation will engender interpretive disputes going forward. We encourage you to monitor the Fitch Even website as the interpretation of the new statute develops. In the meantime, if you have questions regarding the Leahy-Smith America Invents Act, please contact Fitch Even partner Nicholas T. Peters, the author of this alert. 

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