Rethinking patents Featured

8:00pm EDT April 25, 2008

Sweeping U.S. patent reforms will significantly impact businesses seeking or owning patents, or avoiding competitor patents. Bills before the House (H.R. 1908) and Senate (S. 1145) could result in new laws by the end of this year. Also, recent judicial decisions have already significantly impacted both patents and patent applications.

“The proposed reforms will make it more expensive to obtain patents and make it easier for issued patents to be challenged,” says David B. Cupar, member, Litigation Department, Intellectual Property Practice Group, McDonald Hopkins LLC. “Patent suits are probably the most expensive of any type of litigation, whether you’re the defendant or plaintiff. It’s very important to become informed now about the changes.”

Smart Business spoke to Cupar about the impending patent changes.

What is happening in the here and now?

There are two major reforms occurring, the first judicial and the second congressional. The major judicial reform is the Supreme Court’s KSR decision (May 2007), which has prompted the U.S. Patent and Trademark Office (USPTO) to change its internal guidelines for examining patent applications, making it harder to obtain new patents. In particular, the USPTO’s new guidelines broaden the scope of determining ‘obviousness’ to make it more difficult to obtain patent issuance. The second Congressional reform covers other changes to existing patent law.

What patent reforms are being considered?

The patent reforms presently found in House and Senate bills include:

 

  • Switching from a ‘first to invent’ to a ‘first to file system.’ In the U.S., the first person to invent obtains patent rights. Everywhere else, it’s the first to file. The idea in the U.S. was to protect inventors. Now, Congress seeks to harmonize the U.S. system with the rest of the world. This could negatively affect entities that don’t have capital readily available to quickly apply for patents.

     

     

  • Mandated search reports. Mandated search reports will require applicants to report that they did a patentability search to determine if the invention is ‘novel’ and ‘nonobvious.’ In the past, this was the USPTO’s responsibility. This change will require businesses to incur significant, additional expenses before applying for patents.

     

     

  • New post-grant opposition system. The USPTO will have more power to render a patent unpatentable after granting it. This will provide challengers with more opportunity to oppose a newly issued patent in a formalized manner to reevaluate that patent.

     

     

  • Appointment of damages in a lawsuit. Currently, a patent owner can seek damages for an entire product even if only a portion of it is patented. Now, damages will be limited to the patented ‘articles’ in the entire device.

     

     

  • Codification of willful infringement standard. A recent court decision requires a patent owner to prove willful infringment by establishing an infringer’s ‘objective recklessness.’ New language will codify this as the standard for proving willfulness.

     

     

  • Venue reform. Under the new law, infringement suits will have to be brought in the district court of the infringer, or where a substantial amount of infringement is occurring. This will stop patent owners from shopping for ‘plaintiff-friendly’ courts and create a level playing field for accused infringers.

     

     

  • Marking. Products are marked with U.S. patent numbers to provide notice that the products are covered under one or more patents. To obtain damages, a patent owner must show that products are marked. If they’re not, damages are limited beginning on the day the patent owner provided notice to the infringer. New provisions would permit a patent owner to obtain damages for up to two years prior to notifying the infringer.

     

Who is supporting the patent reforms?

Large, high-tech companies are supporters of the reforms, as are companies that have been sued for infringement in the past and have paid significant damages afterward with what they perceive as patents that should not have been issued. They want to create a more stable environment with more certainty as to what they are facing on the patent landscape.

Who is opposing the patent reforms?

The opposition to the reform is just as large as the support. Those opposing reform include large manufacturers, universities, nonprofit research centers, individuals, and inventors, which constitute more than one-third of those seeking patents. Generally, those opposing the reforms are doing so based on specific portions of the bills.

How should businesses start preparing now?

First, follow the reforms closely over the coming months and determine how they can affect your business objectives. Second, reconsider your patent strategy based on those reforms. How do you want to proceed with applications? Perhaps you’ll want to spend less time and money on the number of applications you are filing, and focus more on ones that will provide greater quality. Third, look more closely at the invention itself and look ahead to potential issues such as obviousness. Fourth, think of creative ways that your business can use the patent reforms to your advantage. For example, the post-grant opposition could be a cost-effective way to challenge a competitor’s patent as opposed to full-blown litigation.

DAVID B. CUPAR is a member of the Litigation Department, Intellectual Property Practice Group, at McDonald Hopkins LLC. Reach him at (216) 430-2036 or dcupar@mcdonaldhopkins.com.