Patent Reform 2009 Submitted to Congress
By: MIA E. MENDOZA
March 10, 2009
Patent reform bills submitted to the Senate and the House on March 3rd seek to change how patents are obtained, challenged and litigated. The software industry has voiced support for the bill, known as the Patent Reform Act of 2009, while the pharmaceutical industry has opposed various aspects of the bill. A central point of disagreement is the damages portion of the bill, which is seen as reducing the amount of damages available to patent holders. Medical technology trade associations, AdvaMed and Medical Device Manufacturers Association, have both expressed opposition to the damages provision. The key reforms include:
Damages – A patent holder may seek a reasonable royalty for infringement of its patent. Under the bill, a reasonable royalty may be based on the entire market value of the product only if the invention’s specific contribution over the art is the predominant basis for market demand for the product. Alternatively, the reasonable royalty may be determined based on nonexclusive licenses for either the claimed invention or for sufficiently similar noninfringing substitutes. If neither of these can be shown, then the reasonable royalty is determined based upon the portion of the infringing product’s value which is due to the invention’s “specific contribution over the prior art,” rather than on the entire market value of the product.
Willful Infringement – The bill would also change the circumstances under which willful infringement may be found, entitling a patent holder to treble damages. Under the bill, a plaintiff must prove with clear and convincing evidence that an infringer acted with “objective recklessness” after receiving written notice from the patentee specifically identifying the alleged infringement. In defense, an infringer can plead that it acted in good faith.
First to File – Under the current system, an inventor may be awarded a patent if the inventor was actually the first to invent, even if the inventor was not the first to file a patent application. The proposed legislation would determine the right to a patent based on the date when the patent application was filed, regardless of when activities occurred prior to filing the application. This change would bring the United States into alignment with most other countries, which already follow this first to file rule.
The bill would also change the rules regarding what constitutes prior art which may make an invention unpatentable. The one year grace period provided in the current rules would be eliminated. Instead, publications that occurred any time prior to the filing date of the application would be considered prior art unless the disclosure was made by the inventor or derived from the inventor or the subject matter of the disclosure and the invention were commonly owned.
Post-Grant Review – The bill would expand the evidence that may be used by a party seeking reexamination and would establish a new administrative post-grant review system under which a patent could be challenged within 12 months of issuance or reissue.
Third Party Submissions – For pending patent applications, the bill would allow third parties to submit prior art and a statement regarding the relevance of the art within six months of publication of the application or before the first Office Action.
Patent Litigation Venue – The bill seeks to reduce forum shopping by limiting the locations in which suits may be brought for patent infringement or for declaratory judgment to: where a defendant is incorporated or has a principal place of business; where a defendant has committed substantial acts of infringement and has a physical facility that conducts a substantial portion of its operations; or where the plaintiff resides, if the plaintiff is an institute of higher education or a nonprofit patent and licensing organization or is a micro-entity.
Interlocutory Appeals – The bill would allow the appeal of claim construction decisions during the course of a trial when approved by the trial court.
Other changes in the bill include: allowing applicants to submit a substitute statement in place of an inventor’s oath or declaration in certain circumstances; replacing the Board of Patent Appeals and Interferences with a new Patent Trial and Appeal Board for reexamination proceedings, post-grant review and derivation proceedings; giving the Patent and Trademark Office the power to set fees; and repealing the requirement that Federal Circuit judges reside in the District of Columbia.
Notable patent reform provisions which have been considered previously but which are not included in the bill include the publication of all applications within 18 months of filing and Applicant Quality Submissions, which would have required applicants to submit prior art search information to the Patent Office. Inequitable conduct is also not addressed in the bill.
If passed, the Act would take effect 12 months after enactment and would apply to any patent issued on or after the effective date.
If you have questions regarding the Patent Reform Act of 2009, please contact your Fredrikson & Byron attorney.