[Editor’s Note: I post this article on behalf of my friend, Robert D. Katz, Esq., an intellectual property law partner at the law firm of Eaton & Van Winkle LLP in New York. Bob is a long-time practitioner of IP law, representing large and small companies and individual inventors in virtually all areas of technology, as well as in the acquisition or enforcement of trademarks and copyrights. The article is particularly relevant considering some of the recent issues surrounding patents and banking innovation.]

By Robert D. Katz

On September 16, 2011, President Obama signed the America Invents Act (AIA), which made numerous significant changes to the patent laws, in an effort to improve the patent system, help harmonize it with those of other countries, and improve the quality of issued patents. These changes are particularly important to the banking innovation community, because patent activity has accelerated over the last few years as innovation has advanced. The most significant of these changes include:

NEW PROCEDURES

1. Change From a First to Invent System to a First to File System — If two inventors create the same invention, the one with the earliest filing date in the U.S. Patent and Trademark Office (U.S.P.T.O.) gets the patent for that invention. No more Interferences to determine the first inventor based upon inventive activity. This provision takes effect in March, 2013.
2. Derivation Proceedings — The only remaining remnant of an Interference involves a proceeding where one inventor asserts that another inventor improperly “derived” an invention from information received or obtained from the first inventor.
3. Post-Grant Review Proceeding — A member of the public has nine months from the date of patent issue to challenge a granted patent based upon any invalidity defense, including lack of an “enabling disclosure” that assertedly renders the claimed invention in the newly granted patent invalid.
4. Inter-Partes Review Proceeding — Nine months after issuance of a patent, a third party may file a petition to cancel one or more claims of a patent based only upon prior patents or printed publications. To proceed with an IPRP, the USPTO must first determine that “there is a reasonable likelihood that the petition would prevail.”
5. Requests for Supplemental Examination by the Patent Owner — A patent owner may request a supplemental examination after issuance to enable the office to “consider, reconsider, or correct information that may be relevant to the patent.” The Director must determine “whether information presented raises a substantial new question of patentability” before instituting the Supplemental Examination.
6. Business Method Patents — The Act creates an eight year transitional program for covered business method patents where persons sued for infringement may petition for review by the USPTO of the validity of a covered business method patent.

SUBSTANTIVE CHANGES

1. The Definition of Prior Art Has Been Revised — As of the effective date of the Act, a prior public use or sale need not have occurred in the United States to invalidate a patent. Also, a published national foreign application becomes prior art as of its filing date, not its publication date. Tax strategies cannot be patented.
2. One Year Grace Period — Applicants have one year after their first public disclosure to file a patent application. Third party disclosures, unless derived from the inventor, can invalidate the application or patent.
3. False Patent Marking — Claims for false patent marking brought by private individuals, as opposed to U.S. Government, can now only go forward if the claimant can show “competitive injury.”
4. Joinder of Multiple Unrelated Defendants — Prohibited in a single action unless there are common activities relating to same accused process or product, or facts common to all defendants in the action. Designed to curb filing of actions by non-practicing entities (“trolls”) naming multiple defendants in a single action.
5. Prior User Defense — A defendant may assert prior use of a process or any machine, manufacture, or composition used in manufacturing or other commercial process, if the use occurred more than a year prior to the filing date of a patent asserted as the defendant. This defense cannot be raised against a third party or against a university.
6. Failure to Disclose “Best Mode” – Failure by applicant to disclose the best mode of carrying out the invention will no longer result in patent invalidity.
7. Fee Changes – Accelerated Examination may be obtained for additional fee of $4,800. Paper (as opposed to electronic filing) incurs a $400 surcharge per application. 

CONCLUSION

The banking innovation industry was having enough trouble dealing with the fallout from the Supreme Court’s decision on business method patents (In re Bilski). Now this extensive statutory revision is added to the pile. Firms will have to follow developments in this field closely and the change to a first to file system will probably cause them to file more provisional patent applications in order to have on record their date of invention. There are numerous other changes, and in future issues we will discuss some of them, as well as some of the ones mentioned above in more detail. It should seem apparent to all that the patent system will present new and different challenges to those interested in protecting their inventions and avoiding the minefield of patent infringement.

About the Author: Robert D. Katz, Esq. is an intellectual property law partner at the firm of Eaton & Van Winkle LLP in New York, New York. He has represented large and small companies and individual inventors in virtually all areas of technology, as well as in the acquisition or enforcement of trademarks and copyrights. He can be reached at robertdkatz@gmail.com or 212-278-0508.