Saturday, May 4, 2013

America Invents Act - Professor Abrams and Wagner's Poisoning the Next Apple: How the America Invents Act Harms Inventors

Is the America Invents Act a misnomer? It's beginning to look that way with respect to small entities. In a Stanford Law Review article, Poisoning the Next Apple: How the America Invents Act Harms Inventors, David Abrams and R. Polk Wagner of University of Pennsylvania Law School state: "The America Invents Act, the most significant patent law reform effort in two generations, has a dark side: It seems likely to decrease the patenting behavior of small inventors, a category which occupies special significance in American innovation history."

Mr. Abrams and Wagner note: "In this paper we empirically predict the effects of the major change in the law: a shift in the patent priority rules from the United States’ traditional “first-to-invent” system to the predominant “first-to-file” system.

While there has been some theoretical work on this topic, we use the Canadian experience with a similar change as a natural experiment to shed the first empirical light on the question. Our analysis uses a difference-in-difference framework to estimate the impact of the Canadian law change on small inventors. Using data on all patents granted by the Canadian Intellectual Property Office and the US Patent and Trademark Office, we find a significant drop in the fraction of patents granted to small inventors in Canada coincident with the implementation of first-to-file. We also find no measurable changes in patent quality and perform several additional analyses to rule out alternative explanations.

While the net welfare impact that can be expected from a shift to first-to-file is unclear, our results do reveal that, contrary to the conventional wisdom, the March 2013 implementation of a first-to-file rule in the U.S. is likely to result in reduced patenting behavior by individual inventors."

Although the America Invents Act was presented by Congress as reform that would lead to the "promised land," the article paints a different picture of the likely impact of the America Invents Act: a smaller fraction of US patents granted to small entities.

I also expect the America Invents Act one-year grace period will reduce the number of US patents granted to small entities. Small entities will engage in activities that may be later viewed as on sale or public use prior to the filing date. Arguing the activities are experimental may fail or prove expensive to establish. To understand why the one-year grace period has been narrowed, it should be helpful to review part of 35 USC 102, which sets forth the conditions for patentability, novelty and loss of right to the patent:

(a) NOVELTY; PRIOR ART.--A person shall be entitled to a patent unless--
(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or
(2) the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.
(1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE OF THE CLAIMED INVENTION.--A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if--
(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or
(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor.

Some suggest inventor disclosure triggers a one-year grace period that shields against an inventor's subsequent public use or offer for sale of the invention. I am uncertain how a court will ultimately interpret 35 USC 102, but note even this favorable interpretation does not answer whether or not third party public use or sales would be shielded. What if a subsequent sale or use pertains to subject matter that overlaps the inventor's disclosure? In the past, the Federal Circuit has not equated the different categories of prior art in 35 USC 102. Thus, "public use" and "on-sale" are not the same thing and do not require "disclosure." Is it better to disclose all the details of the invention when making an offer for sale or use before the filing date? That's a decision to forego trade secret at a time patent protection is in doubt. Will the Federal Circuit equate the different categories to help broaden this seemingly narrow grace period of the America Invents Act? Court decisions may not arrive for years. Until we get answers, the safer approach is to treat the one-year grace period as only shielding direct and indirect inventor disclosures.

Copyright © 2013 Robert Moll. All rights reserved.