United States switches from first-to-invent to first-inventor-to-file system in 2013

The Leahy-Smith America Invents Act (AIA), the most comprehensive review of American Patent Law since the 1950s, was passed into law in September 2011. Changes include switching from a ‘first-to-invent’ to a ‘first-inventor-to-file’ system, increased recognition of prior art from outside the United States, and the introduction of ‘prior user rights’. The first-inventor-to-file system comes into effect on 16 March 2013, bringing the United States more closely into alignment with the rest of the world, including New Zealand. On 26 July 2012 the United States Patent and Trademarks Office (USPTO) released proposed rules and guidelines for dealing with these changes, some of which are outlined below.

First-inventor-to-file

Until the AIA comes into effect the United States operates a first-to-invent system. The person(s) who first conceives an idea and reduces it to practice is the ‘inventor’ and owns the rights to the invention as of the date of conception – even if another conceives the same idea later but reduces it to practice and files a patent application earlier. Under the current system the first conceiver would have to bring interference proceedings against the second to prove that they were the true inventor. Thorough and accurate records of all activities are important in such a case.

Under the new first-inventor-to-file system, the inventor who files a patent application first (or their assignee) will own the rights to the invention, regardless of the relative dates of conception.

Prior art considerations

To be patentable, an invention must (among other things) be novel and non-obvious. Under first-to-invent these criteria are judged against the publications and disclosures (prior art) available at the date of conception. Under the new first-inventor-to-file rules they will be judged against the prior art available at the filing date.

Currently only public use, disclosure, and offer for sale within the United States are considered prior art when assessing a patent application (although publications describing the invention are relevant regardless of where they were published). Under the AIA, foreign equivalents will also be considered, shifting the criteria from ‘relative novelty’ to ‘absolute novelty’, as is the case in most other jurisdictions.

Grace periods and tactical disclosures – proceed with caution

The AIA introduces a revised ‘grace period’ for disclosure of an invention by the inventor.  Any disclosure by the inventor made up to one year prior to a patent application being filed cannot be used to attack the novelty or inventive step of that inventor’s patent application. For example, if a Company X conceives an invention in January and files for a patent in April, and Company Y conceives the same invention in February but files in March, Company Y would receive the patent rights. However if Company X had made a sufficiently detailed disclosure of the invention in February, this disclosure would be counted as prior art against Company Y’s patent application, but not that of Company X.

This has implications for the offensive and defensive use of disclosures with the United States system, and has led some commentators to dub the new system ‘first to disclose’.  However, caution must be exercised when considering this option, as disclosing an invention before a patent application has been filed will likely invalidate patent applications filed in most jurisdictions outside the US. It is also important to note that it is not clear whether, and in what circumstances, public use or offering an invention for sale will be covered by the new grace period.  We recommend that you always seek advice on the best patent strategy for your technology and commercial aims prior to disclosing information about an invention to any third party.

The AIA legislation provides for joint contribution to and ownership of patents, with disclosures within the grace period from any one party to a jointly owned patent being excluded from prior art considerations.

Trade secrets, derived inventions and prior user rights

With these changes IP security becomes increasingly important. Unintentional or malicious disclosures could result in loss of patentability, or rights being awarded to another party. However, a new form of proceeding, termed a ‘derivation proceeding’, is available to original inventors with substantial evidence that a third party’s patent application has been derived from their own invention without their consent. Maintaining internal documentation and records of invention are again vital, and policies for employee education, data storage and security, and debriefing of outgoing employees will also be important.

If an idea is independently conceived by another party then the first-inventor-to-file principles apply.

The AIA will also expand the ‘prior user rights’ defence to patent infringement beyond business method patents. Prior user rights are available where one party has developed and commercialised an invention, but has chosen to hold the details of that invention confidential as a trade secret, following which another party has been granted a patent covering that same invention. Provided the first party has put the invention to commercial use within the United States for a period exceeding one year before the filing date of the second party’s patent, prior user rights can be claimed, and the first party can continue to do so royalty-free in those locations where it was already in use.

Maintaining documentation to support a claim of prior use of the invention will be critical if a prior user defence is to be relied on.  It is also important to note that, unlike patent rights, prior user rights cannot be licensed or sold except with the sale of the entire line of business. Furthermore, university-owned patents are explicitly excluded; the prior user rights defence cannot be used against them.

When to file?

Selecting the optimum time to file a patent application is always of strategic importance. The changes under AIA bring new considerations to this decision. In some circumstances there may be advantages to filing in the limited time remaining while the first-to-invent standard is still in place.  Likewise, there may be situations where delaying until the first-inventor-to-file system is initiated is desirable. The potential for transition problems should be considered, especially if a disputed technology has filings under both systems; for example if a provisional application is filed before 16 March 2013 but the full application is filed after 16 March 2013, or when a PCT filing is entering national phase in the United States.

The guidelines issued by the USPTO state the intention that any application having one or more claims with a priority date prior to 16 March 2013 will be examined in accordance with AIA plus section 102(g) of the previous act, which allows for interference proceedings as described above. This essentially reverts the application to the first-to-invent examination procedure.  There are a number of administrative procedures that must be followed where applications effectively ‘straddle’ the changeover date.

The new provisions are complex, and in some cases their effect is not yet fully settled.  We recommend that businesses consult with their patent attorneys before taking any action in respect of a new invention, to ensure they are fully aware of any associated risks, and to confirm that their strategy is commercially sound having regard to the structure of the business and its commercial goals.

If you require further advice about intellectual property matters in the United States or elsewhere, please contact Richard Clement (richard.clement@baldwins.com).

This article was written with assistance from Harriet Sandstad.