Boost for inventors as changes in patent law bring US into line with rest of world

Across the globe the first inventor to file a patent – rather than the first to invent – is the one who takes the spoils, regardless of who might have done what before them. This system, while potentially unjust in some situations, is efficient and has served most of the world very well for decades.

Except for our friends across the pond, that is. Enshrined in US Constitution Article 1, Section 8, is the guarantee that "The Congress shall have Power . . . to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

The Leahy-Smith America Invents Act (AIA), which was signed into law in September 2011, begins to take effect only this year. This act shifts the protective emphasis from the inventor to whoever files the patent first.

"From a US perspective it's a huge change because it alters the whole premise on which patent rights were granted from a 'first to invent' system to a 'first to file'," explains Alistair Payne, partner and head of the Intellectual Property group at Matheson.

“Now it’s possible to treat the US like any other country. This will makes things significantly easier for people. The old practice of filing simultaneously is no longer as crucial as it was. However, the practical reality is that many US investors will still like to see a US patent application. But the new system allows people to take advantage of international filing.”

Why it has taken so long for the Americans to fall into line with the rest of the world is not totally clear. But a combination of misguided nationalism, a perceived philosophical position and sheer sluggishness have not helped.

"Americans have always attempted to frame their patent law as advantageous for US companies, but patent law is blind to nationality," explains Conor Boyce, patent attorney at Hanna Moore & Curley.

“The nationalism that might have driven developments in US patent law in the past has been realised as a faint hope on their part. Now they’re concentrating on modernising their patent system and making it more efficient for everybody. Everybody benefits.”

Specialised area
Old habits die hard and this has not helped the situation either. "The American system has been used to this notion of 'first to invent' for some time," explains Naoise Gaffney, European patent attorney and US patent agent for Tomkins.

“So any individual or company’s commercialisation strategy didn’t need to put patent filing at the top of the priority list. As long as you kept basic notebooks documenting your research, you could in theory turn around and show proof that you invented something first.

“In practice, however, taking a case like this was beyond the reach of most people. It is an extremely specialised area of patent law. Patent lawyers are a rare breed and they’re not cheap. So in essence it was more of a philosophical position than anything else.”

The biggest problems for US patenting in the past 25 years have been found in the fast-moving fields of biotechnology and software development where keeping up to speed on developments is tricky even for the savviest of patent and technology lawyers. The model also created a breeding ground for patent trolls.

“The law, as it stood, had a tendency to favour what they call non-practicing entities, which is a kind way of describing patent trolls,” says Boyce. “These are people who acquire patents of tenuous validity and tout them around. Other corporations had to take these threats seriously and, in many cases, licence fees were paid to trolls.”

New opposition procedures have been introduced also. The Post Grant Review and the Inter Partes Review will replace the old Inter Partes Reexamination. “There are also additional provisions for challenging certain business method patents,” says Gaffney.

"This provision was on foot of heavy lobbying from US banks, who were getting hit with costly patent infringement lawsuits for business method-type patents. The cumulative effect of all these changes is that it puts more weapons in the arsenal of third parties who might want to challenge the validity of a granted US patent.

Beneficial owner
"The vast majority of horror stories about patent trolls emanate from the US, and particularly ones that threaten to litigate based on patents of questionable validity.

“These changes could be seen as an attempt to counterbalance the system in light of criticisms that the US Patent & Trademark Office is granting such patents without the proper level of scrutiny. However, the most vociferous critics say that these changes go nowhere nearly far enough in stemming the tide of bad patents.”

The AIA also attempts to clear up another area of patent law which had caused much complication in the past. Patents are now granted to the beneficial owner. Before this change, the patentee was the inventor. Regardless of whether someone was employed by IBM or Microsoft or some other multinational when inventing, it was the individual inventor's name that appeared as the assignee on a patent.

“There was always this weird fiction in the US that an individual inventor working for a larger entity would still be the patentee and enjoy some residual rights to it,” says Boyce.

“So hypothetically a situation could arise where an employee might have invented for an employer but then subsequently left that employer without signing any waiver to their patent rights. This could cause a lot of difficulty for that employer if the individual later claimed rights over the patent.”

The real benefit of AIA is the clarity it gives to an already complicated legal area. “It gives terrific certainty to anybody looking at European or Japanese patents,” says Boyce.

“They can see the date of filing and when they see that they know what date they have to beat. Certainty is the main dividend that’s been given by the passing of this Act.”