The battle over Patent Reform continues. Judiciary Committee Chairman Lamar Smith (R-TX) has introduced an amendment to H.R. 1249 that includes changes to a number of provisions.
Chairman Smith’s Amendment
First, in a bout of extreme modesty, he proposes to change the name of the bill yet again, to the “Leahy-Smith America Invents Act.”
The amendment changes the wording of the prior commercial use defense. The elements of the defense were previously covered here and are largely unchanged. This defense rewards those who commercially use an invention for more than one year before the application of the patent, but otherwise keep the invention secret. The amendments since the bill’s introduction have provided for exceptions to the defense for patents owned by universities or technology transfer organizations because they decried the defense most loudly. The defense is also not available if the commercial use was abandoned prior to its assertion. This is a terrible provision that seeks to reward not those who disclose their inventions to “promote the progress of science and the useful arts,” but those who conceal their inventions.
The amendment conforms the post-grant review timing provisions with the Senate version of the bill, reducing the time for filing a post-grant review petition from 1 year to 9 months after the patent issues.
The amendment now specifically defines universities or other institutions of higher learning as “micro entities” for fee purposes.
Interestingly, given the congressional opposition to the director’s fee-setting authority, the amendment increases the sunset provision from 6 years to 7 years for such authority.
The amendment adds a defense for activity that would otherwise infringe a patent that relates to genetic diagnostic testing, obviously directed toward the Myriad case. If the district court got the case right, why would this defense be necessary?
The amendment includes a new section that “no patent may issue on a claim directed to or encompassing a human organism.” Who knows what this section is intended to mean. No patents can currently claim a human organism. The amendment does indicate that this section does not affect the validity of any currently issued patents.
Other Proposed Amendments
Numerous other amendments have been proposed by various members of Congress.
Reps. Baldwin (D-WI) and Sensenbrenner (R-WI) seek to remove the prior user rights defense. Rep. Terry (R-NE) would require a study to be undertaken to determine that this defense would not harm the patent system prior to its taking effect.
Reps. Conyers (D-MI), Manzullo (R-IL), and Sensenbrenner (R-WI) seek to strike nearly the entire bill, except the PTO’s fee-setting provisions.
Reps. Conyers (D-MI) and Rohrabacher (R-CA) seek to preclude a change to first-to-file until at least one other major patent office adopts a one year grace period. Rep. Sensenbrenner (R-WI) would simply seek to strike the provisions changing the US to first-to-file. In a separately proposed amendment, Rep. Terry (R-NE) also seeks to strike this provision.
Rep. Lofgren (D-CA) seeks to fully restore the current one year grace period.
Rep. Manzullo (R-IL) seeks to eliminate the PTO’s fee-setting authority.
A number of other proposed amendments seek to implement preferences for minority or women-owned businesses in the patent system or to at least study and collect information on the number of minority or women inventors.
Patent Docs reports that Chairman Smith and Sen. Tom Coburn (R-OK) have responded to the letter from Reps. Rogers (R-KY) and Ryan (R-WI) opposing the PTO’s ability to set fees and keep the fees it collects. Patent Docs also reports that Reps. Conyers (D-MI), Kaptur (D-OH), Manzullo (R-IL), and Sensenbrenner (R-WI) have circulated a letter urging their fellow congressmen to vote no on the bill.
The bill had a ton of momentum when it resoundingly passed the Senate in March. Happily, Congress has now slowed it down a bit and will hopefully seriously consider all of the implications of the bill. Recently, a fair amount of opposition to the bill has arisen from those involved in venture capital, several from the media, and from within Congress itself. Is it enough to significantly alter or kill the bill? It still remains doubtful. Most of the opposition and significant proposed amendments are from the same group of representatives. They will need to rally significantly more opposition to achieve their ends.
I have generally withheld judgment on the bill because I do think that the patent system does need some improvements. After further consideration, I think the bill presents too many problems and I would now oppose it.
I am in favor of permitting the PTO to set and keep its own fees. If the provisions prohibiting fee diversion are removed, as advocated by some congressmen led by Reps. Rogers and Ryan, the bill should be defeated in its entirety. IP professionals that practiced under previous administrations that were adverse to patent applicants have difficulty granting the Office so much power. Director Kappos has entirely reversed this trend to the point that IP professionals and applicants can and should trust him to do the right thing.
But the theft of fee diversion must be ended immediately. Estimates are that Congress has stolen close to $1 billion from the PTO in the last decade or so. As a user-funded agency that gets no tax dollars, the PTO must be permitted to keep all of the fees that it collects.
But, the bill also has numerous problems.
- Prior user rights. This is an awful provision that rewards users who keep their technology secret. This is entirely at odds with the purpose of the patent system which is to promote the progress of science and useful arts. Such progress is only promoted if inventors share their new innovations with the public so that other may build on it “by standing on the shoulders of giants.” There is simply no reason for a blanket defense that promotes such secrecy. If this defense is so great and so necessary, why the university exception?
- Near elimination of the grace period. Although this provision may be fixed by amendment, it is hard to understand how or why this provision got as far as it did. Under current law, patent applicants can use evidence of inventive activity to pre-date third party references and the inventor’s own public activity that occurred within a year of the application’s filing date.
Even under a first-to-file regime, inventors should be able to pre-date prior references that are used for obviousness rejections. The current bill eliminates the grace period for all third party activity and for the inventor’s own activity of public use or sale.
The way Congress has botched this provision of the bill shows how complicated § 102 of the current patent act is. When one asks what the definition of “prior art” is, the answer is not always easy. The answer is basically whatever § 102 says it is. By completely changing the system, we disrupt the delicate balance created by the various subsections of § 102. This will create uncertainty for a number of years until sorted out by the courts.
- Switch from first-to-invent to first-to-file. Virtually, the only arguments in favor of this change are (1) second filers never win interferences anyway so why have them, and (2) harmonization. This issue relates to issue 2 to some extent. If interferences are not a big deal, why make the change? The new derivation proceedings would seem to be quite difficult for a smaller party to win over a larger entity.
First-to-file will understandably create a rush to file new applications at the PTO. Our patent system has strict requirements of written description and enablement of the invention. Applicants who file later after trying to make sure their inventions are perfected and ready may be disadvantaged by waiting too long. They may lose the race to file first. Applicants who file early may find they don’t have enough support or details of the invention in the application to gain patent protection. Thus, a patent attorney’s advice to potential clients would be to file early and often: try to win the first to file race and try to file applications that meet the disclosure requirements. Small inventors and start-ups who now barely have enough money to file one application will be at a severe disadvantage to larger companies with larger patent budgets. This will be a significant change to our patent system.
The US has been the most innovative country in the world and has arguably the best patent system. Why are all calls for harmonization for us to harmonize our laws and not for others to harmonize with us?
- Failure to eliminate secret prior art from obviousness rejections. While we’re on the topic of harmonization, it is worth noting that most of the world does not permit unpublished or secret prior art to be used for obviousness rejections, but only for novelty defeating purposes. This is especially important when making a change for first-to-invent to first-to-file and virtually eliminating our current grace period for third party activities. Why not harmonize with respect to this issue?
Thanks to Hal Wegner for bringing these amendments to my attention.