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Patent Reform is On the Way…Maybe

For the past several years, Congress has debated several bills that would change the way that patent laws are currently written. The amendments that have been discussed would have significantly changed the way companies, both big and small, do business. The major stumbling block for all past failed bills was the proposed move by the U.S. from a “first to invent” (FTI) system to a “first to file” (FTF) system. As of today, the U.S. is the only country in the world to still use a FTI system. Canada and the Philippines had similar FTI systems, but changed to FTF systems in 1989 and 1999, respectively.

On March 8, 2011, the Senate passed the American Invents Act (“Act”) by a 95 to 5 vote. The Act aims to reform the patent laws as we currently know them. Primary changes in the legislation include adoption of the FTF system, expansion of the post-grant review opportunities, addressing the current lawsuit epidemic with the patent marking law, and fully funding the Patent Office.

Of all of the changes contained in the Act, the most significant is the implementation of the FTF system. Moving from an FTI to FTF system will impact everyone who seeks patent protection for an invention. This move will cause both individual inventors and companies to look more closely at their intellectual property (IP) strategies and, more specifically, at how they use provisional applications to protect inventions. The FTI system was designed so that the first party to invent was the one entitled to a patent on that invention, so long as all other patentability requirements were met. This was the case even though the first party may not have been the first to file a patent application for the invention.

The passed Senate bill replaces the current FTI system with the FTF system although, not surprisingly, it has a twist that is unique only to the U.S. Generally, the FTF system sets up a race: the first person to file an application on an invention gets the patent rights to that invention. However, the Senate bill provides that, when the first party to file “derived” the invention from the second party to file, a derivation proceeding may be brought by the second party. This derivation proceeding essentially replaces the current interference proceedings administered by the United States Patent and Trademark Office (USPTO). The derivation proceedings will be used by the USPTO to determine whether the first party “derived” its invention from the second party. If it is found that the second party is the true inventor of the invention, then the second party will be entitled to the patent rights, even though it had the later filing date. As is typical with new laws, the Senate did not define the key term “derived” in the bill, so the Courts will be charged with clarifying how to interpret this word and what will need to be established in order to qualify as being “derived.”