Prior to passage of S. 23 by the Senate, the name of the bill was changed to the America Invents Act. Yesterday, Rep. Lamar Smith (R-TX), chair of the Judiciary Committee, introduced the bill into the House as H.R. 1249. The bill is very similar to the one passed by the Senate, but there are some striking differences.
The House version of the bill seeks to expand inter partes post-grant review over the Senate’s version. S. 23 only permits the first-window review within 9 months of a patent’s issuance, while H.R. 1249 would expand the time to 12 months.
Perhaps more importantly, the House version seeks to lower the threshold for instituting the review. S. 23 requires that the petitioner show that it is more likely than not that at least 1 claim of the patent is not patentable. H.R. 1249, by contrast, would merely require the petitioner to demonstrate a substantial new question of patentability. This is the current standard for instituting a reexamination proceeding. The PTO hardly ever denies the existence of a substantial new question of patentability in the current reexamination context.
Prior User Rights
Another major difference between the bills concerns prior user rights. Under current law, there is a limited defense of prior user rights as against business method patents. H.R. 1249 seeks to expand this defense to nearly all inventions and areas of technology.
Prior user rights is a defense to patent infringement. The accused infringer must prove that it actually reduced an invention to practice more than one year before the patent owner filed a patent application for the invention and that it commercially exploited the invention prior to the patent application’s filing date. The burden is on the party asserting the defense. It is currently limited to business methods.
Prior user rights reward parties that keep innovation secret and such rights weaken the value of patents. This is contrary to the goal of the patent system, which is the public disclosure of new inventions to add to the public knowledge. To be sure, trade secrets have their place, but the owner of a trade secret holds the technology in secret with the risk that it could be patented by someone else. An expanded prior user rights defense would provide an incentive to keep new inventions secret. Why bother with the patent system when you can simply practice your technology in secret and be shielded from liability for infringement of other parties’ patents?
It is clear that there will be a huge fight over this issue. John Vaughn, executive vice president of the Association of American Universities, decried prior user rights suggesting they would severely damage universities’ ability to protect patents. Similarly, Steven Miller, vice president and general counsel for intellectual property at Procter and Gamble, said that expanded prior user rights could be a sticking point for some stakeholders and could cause them to pull their support for the bill.
On the other side of the issue, Mark Chandler, senior vice president and general counsel of Cisco Systems, argued that switching to a first-to-file regime requires a robust prior user rights defense. Otherwise, challengers can hold companies hostage with bogus claims on improvements to existing products. PTO Director David Kappos argued that the defense is helpful to manufacturers and small businesses. The expanded defense is necessary to stop companies that are moving from the US to other countries that have a stronger prior user defense.
Meanwhile, a member of the Subcommittee on Intellectual Property, Competition and the Internet, Rep. Joe Sensenbrenner (R-WI), argued that prior user rights is “a get out of jail free card” for Chinese intellectual property pirates. He believes this issue could be the “poison pill” that kills the patent reform effort.
We should also expect to see the fight continue on the change from first-to-file to first-inventor-to-file. This provision is the same in both the Senate and House bills.
IPWatchdog has an extensive post on the prior user rights issue.