3 Things Entrepreneurs Need to Know About Patent Law Reform

Antigone Peyton Feb 28, 2012 Tweet

If you have been thinking about protecting the Intellectual Property (IP) assets of your startup, then you’ve probably heard about the America Invents Act  (AIA). This law was enacted on September 16, 2011 and contains several important provisions that may affect startups’ U.S. patent rights.

Here are the top 3 patent law changes you need to be aware of when deciding what IP work should be initiated immediately and which projects you can afford to hold until additional funding arrives:

1. Hello “first-to-file” (sort-of)—The U.S. just converted from a “first-to-invent” system to a “first-to-file” system for determining who gets rights to overlapping or identical inventions. But our new system is not a true first-to-file system—the traditional first-to-file system in other countries requires that an invention be absolutely new and not previously available to the public if you are going to obtain a patent.

Under the revised U.S. system, the U.S. inventor will still have a personal grace period, which is not available to foreign inventors, to file their application at the U.S. Patent and Trademark Office (USPTO). If someone else independently creates and discloses the same invention before the first inventor files a patent application, however, they’re out of luck. This marks a major shift in the patent laws, and the new system will push startups and established companies to quickly prepare and file their patent applications at the USPTO. This new system goes into effect on March 16, 2013.

2. Making it harder for patent trolls—Many startups fear that they will be hit with an expensive patent infringement lawsuit before they have the money to pay for an adequate defense or to settle the case for an amount the patent owner is willing to accept. The AIA puts a little pressure on patent trolls (a generally disliked breed of patent owners) by creating new requirements that must be met by patent owners who want to bring suits against dozens of defendants in one infringement action. The working theory behind these new rules is that if they have to file individual lawsuits against each defendant, they will file fewer suits.

Under the new requirements, accused infringers may be joined in one lawsuit or have their suits consolidated for a single trial if: 1) they are working together on activities that are potentially infringing, or, they are jointly or individually liable for actions that may infringe the patent; and 2) there are common facts related to their alleged infringement or the claims they bring into the case. This means that as of September 16, 2011, patent owners who initiate lawsuits are no longer be able to sue dozens of defendants in the same litigation.

Many patent trolls quickly filed lawsuits against dozens of companies in early September before the new requirements went into effect. They are still filing lawsuits, but now they seem to be suing many companies individually in the same court. Personally, I haven’t seen a significant reduction in patent troll litigation activity since this change took effect. But it was a nice try.

3. New ways to attack a patent (the post-grant review process)—Now, if the USPTO issues a patent that you think is invalid, your startup can attack it in a less expensive Patent Office proceeding. A petition for a post-grant review must be filed within nine months after the patent is granted or a reissue patent is issued by the USPTO, so it’s important to that you work with a patent attorney to watch for patents that interfere with the technologies your startup developed.

A post-grant review may not be instituted, however, if you file a lawsuit to challenge the patent before the petition is filed with the USPTO. Also, the AIA includes some complex provisions relating to what issues you must bring to the Patent Office’s attention (or forever loose the opportunity to raise them). A startup should carefully consider the pros and cons of this option before it pulls the trigger on a post-grant proceeding.

***

If you have questions about the recent patent law changes feel free to contact me. While I cannot give you legal advice about your particular situation unless you become a Cloudigy Law client, I’m happy to answer general questions about the AIA and U.S. patent law.