America Invents Act Update 1

The U.S. Patent and Trademark Office (USPTO) has published two reports to Congress, as mandated by the America Invents Act of 2011 (AIA).  The report “International Patent Protection for Small Businesses” analyses the challenges faced by small US companies seeking patent protection outside the US. 

The “Report on the Prior User Rights Defense” analyses several questions about the AIA’s expanded “prior user rights” defence to infringement. The USPTO published both reports on 13 January 13, to meet the mid-January deadlines imposed by the AIA for the reports.

Provisions requiring such reports are often included in legislation passed by the US Congress and are intended to guide Congress in generally shaping relevant policy and in considering possible revisions to the legislation. 

The AIA mandates a number of other reports to follow these first two, on the following topics:

• patenting of genetic diagnostic tests (due June 16, 2012);
• the effect on small businesses of switching from a first-to-invent to a first-to-file patent system (due September 16, 2012);
• the effect of patent litigation by non-practicing entities (due September 16, 2012);
• the effect of the AIA’s statute of limitations on disciplinary proceedings for patent attorney misconduct (due every two years);
• the establishment of USPTO satellite offices (due September 30, 2014);
• the effectiveness of the AIA’s virtual patent marking provisions (due September 16, 2012); 
• the USPTO’s implementation of the AIA (due September 16, 2015).

Small businesses and patenting

The report “International Patent Protection for Small Businesses” does not address specific provisions of the AIA.  Instead, the report considers the problems small businesses face in obtaining patent protection outside the US.  The report quotes statistics showing that small businesses are important to the US economy because they provide a disproportionately large share of US job growth.  Yet these small businesses typically have insufficient funds to pursue patents widely outside the US.

The report explains that unlike the USPTO, which reduces fees by 50 per cent for “small entities” and now by 75 per cent for “micro entities” under the AIA, most foreign countries provide no such discounts for small businesses.

The report compares the cost of filing a patent application at the USPTO and a similar application at the European Patent Office (EPO) for a small business qualifying for the USPTO small entity discount and finds the cost is over ten times higher at the EPO, which has no discounts for small businesses.  Moreover, translation fees and fees to foreign patent counsel add considerably to the cost of patenting overseas.

Pursuing foreign patents

Many small businesses initially focus on domestic patents; when foreign markets later become important to a small company, it may be too late to pursue foreign patents because these were not initiated soon enough.  The report provides a case study demonstrating how that omission can significantly limit growth of a small business.

The report considers ideas for aiding small businesses in obtaining foreign patents, but concludes that government grants or loans are not necessarily an appropriate solution.  Instead, the report recommends that the US pursue harmonisation of patent law among key trading partners to reduce the cost of obtaining foreign patents.  The report also recommends that the USPTO assists with expanding programmes for educating small businesses on the importance of international patent protection.  Additional surveys and economic studies are needed to inform Congress on how best to increase availability of foreign patents to small businesses, the report concludes.

Prior use defence

The report on the Prior User Rights Defence concludes that the AIA’s provisions on the prior use defence do not require revision, because these provisions would not hinder innovation or negatively impact venture funding, small businesses, universities, or independent inventors.  The report says these provisions appropriately balance trade secret protection and patent law and do not conflict with corresponding provisions of key trade partners. 

In terms of the prior use defence provisions of trade partners, the report provides a table comparing the AIA’s provisions with those of other countries including France, Germany, and the United Kingdom.

The prior use defence protects a prior commercial user of an invention against liability for infringement of an after-arising patent.  Specifically, the defence applies to “commercial use” over one year before patent filing date.  The defence is limited to specific activities actually carried out and improvements thereon, but does not necessarily extend to the full scope of the patent claims. 

Before the AIA came into effect, the prior use defence was available solely as a defence against business method patents.  The AIA expanded the prior use defence to include all technologies.  At the same time, the AIA made the prior use defence unavailable against patents owned by universities or their technology transfer organisations.

AIA was enacted on September 16, 2011.  Foley & Lardner LLP plan further articles on the implementation of this important legislation.

By Rouget F (Ric) Henschel of Foley & Lardner LLP.