MVS Filewrapper® Blog: Federal Trade Secret Protection Proposed in the Senate

Defend Trade Secrets Act of 2014

 

Senators Chris Coon (D-DE) and Orrin Hatch (R-UT) proposed a bill on April 29, 2014 that would provide federal protection for trade secrets. Under the current state of the law, trade secrets are protected by a combination of various state statutes, state common law, and aspects of contract law.  There is no private federal cause of action for appropriation of trade secrets, although 18 U.S.C. 1832 is a criminal statute prohibiting theft of trade secrets.

The Defend Trade Secrets Act would allow an owner of a trade secret to pursue civil action in federal court for misappropriation of a trade secret used in interstate or foreign commerce.  The proposed bill would also authorize the court to issue orders for the preservation of evidence in a civil action, including making a copy of electronic storage where the trade secret is located or allowing seizure of any property used to facilitate the theft of the trade secret. However, this seizure is limited to that which is not merely incidental and so long as the seizure does not interrupt the normal and legitimate business operations unrelated to the trade secret. This seizure will essentially be enforced through the requirements in paragraphs (2)-(11) of the Trademark Act of 1946.

The bill also provides for remedies including the granting of injunction against any actual or threatened violation of the Act and if appropriate, affirmative actions to protect the trade secret. Additionally, if injunction is inequitable, the court may condition the future use of the trade secret on the payment of a reasonable royalty for the time for which use could have been prohibited. The court may also award damages for actual loss and for any unjust enrichment caused by the misappropriation. Finally, if the trade secret is wilfully or maliciously misappropriated, the court may also award exemplary damages not to exceed three times the amount of actual damages. The Act would also allow for the granting of attorney's fees in this instance and in the situation where the claim of misappropriation was made in bad faith.

It is important to note that misappropriation is defined within the statute as using improper means to acquire the trade secret including: theft bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. However, improper means does not include reverse engineering or independent derivation.

The text of this Act reads very similar to the Uniform Trade Secrets Act (USTA) which has been enacted by 48 states (New York and Massachusetts have not adopted this legislation). However, each state often modifies the UTSA allowing for different interpretations.  Notably, the Defend Trade Secrets Act states that nothing in the Act would "preempt any other provision of law" and does not contain the language of the USTA which states that it "displaces tort, restitutionary, and other laws." Ultimately, this means that the Defend Trade Secrets Act still leaves the possibility for state law variations and allows plaintiffs to choose federal or state court for their action.

The Senate Judiciary Committee, Subcommittee on Crime and Terrorism held a hearing on May 13, 2014 concerning economic espionage and theft of trade secrets, including the proposed bill, and heard testimony from two panels of witnesses. No action has been documented since that date.

 

 

MVS Filewrapper® Blog: Senate Bill Aimed at Combating Cyber Espionage

Senator Carl Levin (D-MI) has introduced a bill called the "Deter Cyber Theft Act" to the Senate floor that would require the Director of National Intelligence to report annually to congressional committees concerning foreign countries that engage in economic and industrial cyber espionage relating to intellectual property and proprietary information owned by U.S. companies.

 

Under the proposed regime, each report would include:

·         A list of foreign countries engaging in economic or industrial cyber espionage against U.S. entities, including a watch list of the worst offenders;

·         A list of U.S. technologies or proprietary information being targeted, and if possible, a list of the information that has been stolen;

·         A list of items manufactured or services provided as a result of the stolen technologies and information;

·         A list of foreign companies benefiting from such theft;

·         Details of the espionage activities of foreign countries;

·         Actions being taken by U.S. federal agencies to combat cyber espionage.

 

The bill went before the Senate on May 7, 2013 and was referred to the Committee on Finance. Although no action on the bill is currently pending, Senator Levin has stated that his renewed efforts to move this bill through Committee are prompted by recent events concerning cyber espionage.  Senator Levin's complete comments on the bill can be found here. 

MVS Filewrapper® Blog: Senate Consideration on Patent Transparency and Improvements Act Stalls Out

With the House of Representatives passing H.R.3009 Innovation Act in December 2013, the question is now whether the Senate will pass their version of an Innovation Act in the coming months. The Patent Transparency and Improvements Act (S.1720) is similar to the House text, with eight of the eleven major Senate provisions included in the bill approved by the House. The primary distinction is that while the House appears to focus on rules of procedure, specifically those regarding joinder and discovery, the Senate does not include those provisions but rather promotes a heightened layer of transparency for parent entities who are transferred patent rights. Three provisions discuss parent entities in detail, leading to the ultimate conclusion that nondisclosure of a transfer of rights to a parent entity after the three-month grace period is considered misconduct that will enable fee shifting and the possibility for recovering increased damages. It appears that this Senate bill represents a compromise between the House patent reform bill and the current law.

 

S.1720 was repeatedly slated for consideration by the Senate Judiciary Committee, which held a primary hearing on December 17, 2013. Testimony was heard from two panels of witness testimony, including intellectual property counsel for private corporations as well as the Executive Director of the American Intellectual Property Law Association. In addition, a number of organizations—including the American Bar Association—have addressed letters to the Judiciary Committee voice their support and concerns for the bill.

 

S.1720 has been removed from the Judiciary Committee agenda as of May 21, 2014.  Senator Leahy, chairman of the Judiciary Committee, has cited insufficient support behind any comprehensive deal as the reason for taking the patent bill off the Senate Judiciary Committee agenda.  The press release from Senator Leahy is available here.

 

In light of this stall in the Senate, it is extremely unlikely that any patent reform legislation will be enacted this year.

MVS Filewrapper® Blog: Bring on the New Year—What is in Store for IP in 2014?

Happy New Year to all of our FilewrapperÒ followers! We hope 2013 was a productive year and wish you the best in 2014. As the New Year quickly approaches we would like to share with you a few predictions for 2014 for you to look forward to and for which to prepare!

·         Increased opportunities for quasi-litigation under AIA.  Various new mechanisms are available to challenge patents under the America Inventors Act (also referred to as “AIA” or “Patent Reform”) many provisions of which took effect in 2013. New strategies are available to challenge patents at the USPTO instead of challenging in court, providing distinct advantages—and some disadvantages.  Inter Partes Review, Post-Grant Review and transitional programs specific for business method patents are quasi-litigation proceedings which are heard by a panel of USTPO administrative law judges.  Ex Parte Reexamination—which has been available since 1981—also remains to allow a patent challenge to be heard by a patent examiner, requiring little from the challenger other than filing required papers with some evidence of patent invalidity.  The cost for ex-parte reexamination has significantly increased, although it remains a far less expensive option than litigation with the courts.

·         (Finally) an international design patent application is available!  Design patents protect a product’s new, original and ornamental design.  Design patents present a smart option for investment in protecting a product, since they cost significantly less than utility patents and are generally granted at a much faster rate.  In addition to these benefits of filing design patents, changes in international design registration under the Hague Agreement may facilitate more effective international protection for your design inventions.  Effective December 18, 2013 a single international application designating a variety of countries for protection can be filed through the International Bureau of WIPO.  This is beneficially a single international application to be filed at one location, which will ultimately be examined by many different Offices thereafter to provide more prompt and cost effective options for design protection.  Over 60 countries and territories—including the European Union—are members of the Hague Agreement.  However, there are various countries that are excluded from this treaty (e.g. Australia, Canada, China, Mexico, Japan, India, and Brazil), which would require a separate application as has been done in the past for foreign design patents.  Nonetheless, the Hague Agreement provides significant improvements for international design protection.

·         (Some USPTO) Fees Decrease January 1, 2014.  In addition to the new classification of “micro-entity” status for Applicants to receive 75% reduction of some USPTO fees that took effect in 2013, the New Year also brings certain fee reductions.  Notably, Issue Fee payments for granted patents are substantially reduced (from $1,780 to $960 for large entity), along with the removal of publication fees and assignment recordation fees.  Reissue patent, design patent and plant patent issue fees are also decreasing.  In addition, in 2014 certain PCT fees will be eligible for payment under small and micro entity status.

·         The search continues for a test to determine patentable subject matter under §101.  The Supreme Court will hear CLS Bank v. Alice in 2014 after the Federal Circuit’s en banc decision in 2013 found many software patents to be ineligible.  The Supreme Court will again try to define an abstract idea in considering whether claims to a computerized method (using a computer-readable medium and a computer to implement instructions) is patentable subject matter.  Both the Federal Circuit and patentees are still searching for a test under §101 that is “consistent, cohesive, and accessible [to provide] guidance and predictability for patent applicants and examiners, litigants, and the courts.”

·         We may receive further guidance on Claim Indefiniteness.  The Supreme Court is expected to grant certiorari on Nautilus v. Biosig Instruments involving indefiniteness under §112, second paragraph to determine whether claims having multiple reasonable interpretations are too ambiguous and would render a patent unenforceable for lack of written description.

·         Protecting American from “Patent Trolls.”  As previously reported on FilewrapperÒ, there is legislative movement in the House and Senate to limit lawsuits which can be filed by non-practicing entities (NPEs or Patent Trolls).  There seems to be great energy around limiting “frivolous” lawsuits in our court system.  In early 2014, the Senate will consider a companion bill to Senate 1720 ("Patent Transparency and Improvements Act of 2013"), which is said to already have support from the White House.  If legislation passes the Senate, then the House and Senate bills will need to be reconciled before being sent to the President.

·         New Patent Director.  Stay tuned for further administrative changes at the USPTO as the new Director, Michelle Lee, takes office January 13, 2014. The former Google executive has been made deputy director of the USPTO, and in that capacity will take on the duties of acting director.  Lee has issued statements planning to “attack” the backlog of unexamined patents (remains at more than 500,000) and improve patent quality with improved inter partes review.

MVS Filewrapper® Blog: H.R. 3309 – The Innovation Act

On December 5, 2013, the U.S. House of Representatives passed H.R. 3309, the "Innovation Act", with bipartisan support by an overwhelming margin of 325-91 votes.  H.R. 3309 was drafted to address the perceived growing problem of abusive patent litigation attributed to alleged “patent trolls.”  Early next year, the Senate will likely consider a companion bill, S. 1720, the "Patent Transparency and Improvements Act of 2013", previously introduced by Senator Leahy (D-VT).  While S. 1720 has similar goals of H.R. 3309, the bills have many provisions that are not shared or coextensive.  Thus, it remains to be seen what impact H.R. 3309's passage will have on Senate deliberations in light of the fact the bill enjoys support from the White House.  If legislation passes the Senate, then the House and Senate bills will need to be reconciled in conference committee and sent to the President's desk for signature.  In the meantime, the Senate Committee on the Judiciary will address the issue by holding a hearing entitled "Protecting Small Businesses and Promoting Innovation by Limiting Patent Troll Abuse" on December 17, 2013.

 

Supporters of H.R. 3309 praised its passage as instituting important patent reforms made necessary after the passage of the America Invents Act (P.L. 112-29).  Particularly, the bill heightens pleading standards; requires patent plaintiffs to name anyone who has a financial interest in the patent being litigated; requires courts to delay the discovery process until after claim construction is determined; creates a voluntary process for small businesses to postpone patent lawsuits while their larger sellers complete similar patent lawsuits against the same plaintiff; and, allows a manufacturer to intervene in a lawsuit against its customers and have the action stayed for the customer if both the customer and manufacturer agree.  The centerpiece of the legislation is a fee-shifting provision that requires courts (with some exceptions) to award prevailing parties reasonable attorneys' fees and other expenses when parties bring frivolous lawsuits or claims that have no reasonable basis in law or fact.  Proponents of this legislation include broad support from the technology sector, including internet companies such as Google, Microsoft, Amazon, and Apple.  H.R. 3309 is also favored by brick-and-mortar industries such as restaurants, retailers, realtors, hotels, casinos, airlines, and the auto industry.

 

On the other side, opponents of H.R. 3309 are concerned that the fee-shifting provision would likely favor wealthy parties while discouraging small inventors from pursuing legitimate patent infringement claims.  Opponents include members of the biotechnology and pharmaceutical industries, the Intellectual Property Owners' Association, patent attorneys, and even universities—which warned that the legislation would harm their patent-licensing revenues.  Notably, the Biotechnology Industry Organization ("BIO") believes that the Act will undermine biotech research and innovation, as it would ultimately make it more difficult for patent holders with legitimate claims to protect their intellectual property.  In a press release, BIO stated "[p]rovisions in the legislation would erect unreasonable barriers to access justice for innovators, especially small start-ups that must be able to defend their businesses against patent infringement in a timely and cost-effective manner, and without needless and numerous procedural hurdles or other obstacles."

 

Additional information about H.R. 3309 and S. 1720 will be available shortly from MVS. 

MVS Filewrapper® Blog: USPTO Proposes Rule Changes for International Design Applications

The U.S. Patent and Trademark Office is seeking comments on it proposed rules for implementing the provisions of Title I of the Patent Law Treaties Implementation Act of 2012.  The law is the implementing legislation for the 1999 Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (“the Hague Agreement”).  The rules proposed rule changes under the law will allow applicants to file a single international design application; U.S. applicants will be able to file a single application, potentially seeking protection of an industrial design in more than 40 territories.

Under the proposed rules, international design applications could be filed by U.S. applicants in the USPTO as an office of indirect filing, meaning that the USPTO would transmit the international design application to the International Bureau of the World Intellectual Property Organization (“WIPO”).  The International Bureau would review the application for compliance with the applicable formal requirements under the Hague Agreement. Where these requirements have been met, the International Bureau would register the industrial design in the International Register and, subsequently, publish the international registration and send a copy of the publication to each designated office. Since international registration would only occur after the International Bureau finds that the application conforms to the applicable formal requirements, examination before the Office would generally be limited to substantive matters.

According to the USPTO proposal, the “major changes to U.S. practice in title I of the PLTIA pertain to: (1) Standardizing formal requirements for international design applications; (2) establishing the USPTO as an office through which international design applications may be filed; (3) providing a right of priority with respect to international design applications; (4) treating an international design application that designates the United States as having the same effect from its filing date as that of a national design application; (5) providing provisional rights for published international design applications that designate the United States; (6) setting the patent term for design patents issuing from both national design applications under chapter 16 and international design applications designating the United States to 15 years from the date of patent grant; (7) providing for examination by the Office of international design applications that designate the United States; and (8) permitting an applicant's failure to act within prescribed time limits in an international design application to be excused as to the United States under certain conditions.”

Additional information, including the specific proposed rules and information on how to submit comments, is available here.

MVS Filewrapper® Blog: Flawed Evidence Undercuts "Charbucks" Trademark Suit

In Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., the U.S. Court of Appeals for the Second Circuit affirmed a district court’s decision denying injunctive relief in Starbucks’ trademark case against Black Bear Micro Roastery over Black Bear’s use of “Charbucks” for coffee. 

 

Starbucks sued Black Bear in 2001, alleging, among other things, trademark dilution in violation of 15 U.S.C. §§ 1125(c), 1127.  In December 2005 the district court ruled in favor of Black Bear and dismissed Starbucks’ complaint.  Starbucks appealed this original decision, but while the appeal was pending, Congress passed the Trademark Dilution Revision Act of 2006 (“TDRA”), which amended portions of the federal trademark law relevant to the case, resulting in the case being remanded.   The district court again ruled in favor of Black Bear, and Starbucks again appealed.  On appeal, the Second Circuit remanded again, instructing the district court to reconsider Starbucks dilution claim based on its interpretation of the TDRA provisions.  Once again, the district court found in favor of Black Bear, and once again Starbucks appealed.

On appeal, the Second Circuit made its own conclusions regarding the elements of Starbucks’ dilution case, under the TDRA.  The appellate court refused to revisit its previous conclusion that the “Charbucks” mark is only minimally similar to Starbucks famous mark.  The court also rejected Starbuck’s arguments that Black Bear’s admitted intent to create an association raises a strong presumption of actual association, and that Starbuck’s proffered survey evidence proved a high degree of association.  The court then conducted its own weighing of the factors, and concluded that—although four of the six factors favored Starbucks—the overall determination based on the weight afforded each factor favored a finding that there was not a likelihood of dilution. The court concluded that what ultimately tipped the balance was that Starbucks meet its burden due to the combination of fundamentally flawed survey evidence and minimal similarity of the marks.

The full court opinion is available here.  

New and Useful - January 23, 2013

·         In Wax v. Amazon Techs., the Federal Circuit upheld the TTAB’s denial of registration of the mark AMAZON VENTURES.  Applicant filed and intent-to-use application to register the mark for “investment management, raising venture capital for others, . . . and capital investment consultation.”  Amazon Technologies, Inc.—online retailer and owner of several AMAZON.COM marks—opposed the registration.  The TTAB concluded that Amazon Technologies, Inc. had priority in the AMAZON.COM marks, and that there was a likelihood of confusion between Amazon Technologies’ marks and those of the applicant.  The Applicant challenged the TTAB’s findings that (1) Amazon Technologies’ marks are famous, (2) the similarity of Amazon Technologies’ mark to AMAZON VENTURES, and (3) the similarity of the parties' services and channels of trade.  The Federal Circuit confirmed the TTAB’s findings, based in part on the wide latitude of protection afforded to Amazon Technologies’ on account of its fame within the buying public.  

·         The Eighth Circuit Court of Appeals affirmed a district court’s judgment and damages for Hallmark Cards, Inc. against a former employee for breach of contract and misappropriation of trade secrets.  The district court entered the jury’s award of damages in the amount of $860,000.  The Eight Circuit affirmed $735,000 of the damages as they related to breach of contract and disclosure of trade secrets, but overturned $125,000 the former employee earned in compensation from a competitor. 

·         The Federal Circuit has dismissed as moot an appeal from a patent infringement suit.  Allflex U.S.A., Inc. sued Avid Identification Systems, Inc. seeking a declaratory judgment that six of Avid’s patents were unenforceable due to inequitable conduct.  The district court granted partial summary judgment in favor of Allflex, at which time the parties entered into a settlement agreement that resolved all of the claims and issues between the parties upon payment of $6.55 million from Avid to Allflex, except for a provision that allowed Avid to appeal three specific issues.  The agreement further provided that Allflex could contest any appeal on the merits, but could not dispute the existence of a live case or controversy, and that if Avid were successful on any issue on appeal, the payment to Allflex would be reduced by $50,000.  The district court accepted the settlement agreement and entered a stipulated order of final judgment that stated the case was dismissed with prejudice with the exception of findings the court considered “final and ripe for appellate review.”  Avid then appealed to the Federal Circuit, but Allflex declined to file a brief defending the judgment of the district court. 

The Federal Circuit concluded that the appeal was moot.  Avid argued that, although the case would be moot if it were not for the $50,000 contingency payment, that payment ensured that there was a real controversy between the parties.  The court dismissed Avid’s argument, concluding that while the district court’s decision was effectively final and therefore appealable, Allflex no longer had a legally cognizable interest in any of the issues in the case, and the payment was insufficient to create any interest

·         The USPTO has announced the new fee schedule.  The changes, initiated under the Leahy-Smith America Invents Act, are set to take effect March 19, 2013.  Among the notable changes are:

o   A 75% reduction in most fees for micro entities, including Universities.

o   Increase in basic filing fee:  $1,600 (large entity); $800 (small entity); $400 (micro entity)

o   Increase in appeal fees, due in large part to a new “Appeal Forwarding Fee for Appeal in Examination or Ex Parte Reexamination Proceeding or Filing a Brief in Support of an Appeal in Inter Partes Reexamination”:  $2,800 (large entity); $1,400 (small entity); $700 (micro entity)

o   Decrease in issue fees:  $960 (large entity); $480 (small entity); $240 (micro entity)

o   Increase in maintenance fees:

§  First (3.5 years):  $1,600 (large entity); $800 (small entity); $400 (micro entity)

§  Second (7.5 years):  $3,600; $1,800; $900

§  Third (11.5 years):  $7,400; $3,700; $1,850

o   Decrease in supplemental examination fees:  $16,500 (large entity); $8,250 (small entity); $4,125 (micro entity)

The complete finalized rules are available here.

Leahy-Smith America Invents Act Reforms Patent Law

The Leahy-Smith America Invents Act goes into effect beginning September 16, 2011.  This Act represents the most comprehensive legislative change to patent law since the 1950s.  Most significantly, it changes how priority is determined for an invention and expands and revises procedures for administratively challenging patents through the Patent Office instead of the court system.  Some of the provisions have immediate effect, but many of the most significant changes will not go into effect until 18 months or one year from its effective date.  This summary covers the most prominent provisions of the Act.

First-inventor-to-file

The Act brings the United States into conformance with the rest of the world by converting from a first-to-invent regime to a first-to-file regime.  Under present law, whoever first conceives of an invention is entitled to the patent (as long as the inventor worked diligently to reduce it to practice, and did not abandon, compress or conceal it), even if another inventor beat them to the Patent Office.  Under the new Act, if two people separately invent the same invention, the first person to file a patent application will take priority and be entitled to the patent. 

This also means that applicants will not be able to avoid prior art that is dated less than one year before their filing date by “swearing behind” it.  Currently, if the Patent Office cites a reference that is less than one year prior to an applicant’s filing date, the applicant can overcome it by swearing that he or she invented his or her invention prior to the date of the reference.  That will no longer be possible after this provision takes effect.

Currently if two inventors file a patent application for the same invention, an interference proceeding is held to determine who was the first to conceive and not abandon the invention.  The new Act eliminates the interference proceeding.  However, a similar proceeding is created by the new Act for instances where the earlier filing applicant is alleged to have derived the invention from the later filing inventor.

In light of switching to a first-inventor-to file regime, it will be more important to file patent applications quickly in order to have an early filing date.  In general this will favor entities that establish procedures for getting inventions identified and evaluated early.  It will be a disadvantage to inventors who want to try to  monetize their inventions before filing applications, and to unsophisticated companies who don’t realize the importance of early filing.

The first-inventor-to-file provisions go into effect in 18 months.  Issued patents, and pending applications filed before March 16, 2013 will still be governed by the first-to-invent scheme. Furthermore, an application filed after March 16, 2013 that claims priority to an application filed before that date will get treated under the first-to-invent rules, unless it also includes a claim for priority to an application filed after that date.  In other words, the first continuation application filed after March 16, 2013 is entitled to get the more favorable treatment of the first-to-invent regime; whereas subsequent continuation applications will be judged under the new regime.

Expanded Administrative Challenges

The Act expands the ability to administratively challenge the validity of patents through the Patent Office rather than through the court system.  These procedures go into effect beginning September 16, 2012.

Preissuance Submissions by Third Parties

The Act provides a procedure for third parties to submit relevant prior art in pending applications.  The third party can submit any printed publication they believe to be prior art, along with a concise statement of why the prior art is relevant.  Such statements will be considered by the Patent Office as long as they are submitted within six months of the publication of the application.

Post Grant Review

For the first nine months after a patent has been issued, a third party can seek review of a patent on any ground that is a condition for patentability—including any type of prior art and failure to comply with more technical requirements as to form and content.  Under current practice review can only be sought based on prior art printed publications.  The party requesting review will not be able to later raise as a defense any issues that were or could have been brought in the post grant review proceeding.

Inter Partes Review

After nine months, a third party may request an inter partes review, which is more limited than the post grant review, and can only be based upon a prior art printed publication.  A third party that institutes an inter partes review will be precluded from later asserting a defense to the patent based on any prior art that was or could have been included in the review.  Inter partes review is very similar to the existing inter partes reexamination, but differs from current practice in that it authorizes the parties to settle the case without approval of the Patent Office and requires a litigation defendant to institute a request for review within nine months of being served with a complaint for patent infringement.

Supplement Examination

The patent owner can request supplement examination of their own patent to consider any issues that may affect the validity of the patent.  This procedure is similar to current ex parte reexamination, but is not limited to printed prior art.  Supplement examination cannot be used to correct fraud perpetrated on the Patent Office.

In light of these expanded administrative challenges, it will be more important to closely follow published and newly issued patents in order to take advantage of the enhanced ability to challenge patents outside of formal litigation.

False Marking

The Act largely eliminates the false marking claims that have recently proliferated.  Prior to the Act taking effect, virtually anybody could bring a claim against a party that was falsely marking their product as covered by a patent (including marking with an expired patent number).  Under the new Act, only a competitor that is actually injured by the false marking can bring a claim.  Furthermore, there is now a safe harbor for marking a product with a patent number for three years after the patent expires. 

The Act also creates a new way of satisfying the marking requirements.  A patent owner can mark its products with a notation saying patented or “Pat.” and indicating an Internet address where the patent number or numbers can be accessed.

Litigation Issues

The Act eliminates failure to disclose the best mode of practicing an invention as a defense to patent infringement.  Section 112 of the Patent Act still requires an applicant to disclose the best mode of practicing the invention.  However, an accuser can no longer try to show that the inventor actually knew of a better mode as a defense to patent infringement.  While the Act is silent on the issue, it is expected that intentional failure to disclose the best mode would likely still make the patent unenforceable due to inequitable conduct.

The Act also limits the ability of patent owners to name multiple defendants in a single lawsuit, unless the defendants are named jointly, severally, or in the alternative.

The Act statutorily provides that failure to obtain or disclose advice of counsel with respect to an allegedly infringed patent cannot be used as evidence that the alleged infringer willfully infringed a patent.  This is consistent with the current state of the judge-made law on the issue, but should provide certainty on the issue going forward.

Commercial use of a process more than one year prior to the effective filing date of a patent has been added as a defense to infringement of a patent directed to the process or to a machine that implements the process.  Previously, this defense was only available for patents directed to business methods.  This is a personal defense and cannot be asserted by a party that did not themselves use the process.

New “Micro Entity” with Reduced Fees

In addition to the already existing “small entity” that is entitled to a 50% reduction in most Patent-related fees, the Act creates a “micro entity” that is entitled to a 75% reduction.  A micro entity is defined as an applicant that is assigning the invention to an institution of higher education or an applicant that did not in the preceding calendar year have a gross income exceeding three times the median household income for the preceding calendar year ($49,445 in 2010), as most recently reported by the Bureau of the Census.  Applicants qualifying based on income cannot have filed more than four previous patent applications.

Expedited Examination

The Act authorizes the Patent Office to charge a fee of $4800 ($2400 for small entities) for an “expedited examination.”  The Patent Office has not formally announced the details of the program yet, but it is expected to be implemented in the near future.  The most recent proposal by the Patent Office basically allows an applicant pay the increased filing fee in exchange for quicker handling of the application by the Patent Office.

Business Method Patents

The Act includes several provisions that make it easier to administratively challenge so-called business method patents.  The Act defines a “business method patent” as “a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”  Therefore, its limitations relate primarily to financial services inventions.

The Act creates a post grant review procedure for business method patents that is similar to the post grant review procedure described above that can be based on any grounds and not merely printed publication prior art, except that for business method patents, there is no one-year time limit on bringing such an action.  Furthermore, this provision applies to existing applications and patents; whereas the standard post grant procedure will only apply to applications filed more than one year after the effective date of the Act.  Even more importantly, a party initiating a post grant review of a business method patent will only be precluded from later asserting the defenses actually included in the post grant review, not all defenses that could have been raised.

The Act also tightens jurisdiction a little in litigation cases asserting a business method patent, requiring that venue for any litigation must be at a principal place of business of the infringer, or where the infringer committed acts of infringement and has a regular place of business.  It further clarifies that an ATM machine is not a regular place of business for establishing venue. 

The Act precludes issuing patents on tax strategies, which it defines as “strategies for reducing, avoiding, or deferring tax liability.”  The special provisions related to tax strategy patents apply to pending tax strategy applications, but not to patents issued prior to September 16, 2011. 

Prohibition on Patenting Human Organisms

The Act provides that no patent may issue on a claim directed to a human organism.  This is consistent with current Patent Office policy. 

Increased Fees

Starting September 26, 2011, there will be a 15% surcharge on most Patent Office fees.

Reduced Fee Diversion

Many of the fees collected by the Patent Office have been diverted to outside purposes.  The Act permits the Patent Office to retain more of the fees it collects.  It is hoped that this will improve the quality of patent examination and reduce costs.

Claim and continuation rules dead: thousands of practitioners breathe easier

In a Federal Register notice today, the USPTO has officially withdrawn the claim and continuation rule changes from the Code of Federal Regulations.  This is consistent with a press release from Thursday announcing the rules were no longer going to be pursued.  The summary of the notice:

The United States Patent and Trademark Office (Office) published a final rule in the Federal Register in August of 2007 to revise the rules of practice for patent cases pertaining to continuing applications and requests for continued examination practices, and for the examination of claims in patent applications (Claims and Continuations Final Rule). The Office is revising the rules of practice in this final rule to remove the changes in the Claims and Continuations Final Rule from the Code of Federal Regulations.

The USPTO and GlaxoSmithKline (one of the plaintiffs who sought injunctive relief against implementation of the rules) have joined in a motion to dismiss the appeal and vacate the district court decision.  Tafas, the other plaintiff, has not joined the motion regarding the vacatur of the district court decision, wanting it to stay on the books as a limit on future rulemaking attempts by the USPTO.

To read the press release, click here.

To read the full Federal Register notice with background history on the rules and the underlying litigation, click here.

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