Patent Reform Act of 2007 - Argle-Bargle, or Foofaraw?

Early reports are in on Patent Reform Act of 2007, and it's clear that there is something for everyone to dislike about the currently-proposed legislation. Here are some of the highlights:

Prior Art

35 USC § 102: The U.S. patent system would go to a "first-to-file" regime, where the critical date for prior art would become the "effective filing date" of a patent application. Disclosures made by an inventor or joint inventors would be given a one year "grace" period before an application must be filed.

• The on-sale bar is still in force under the legislation, and no grace period applies here. Instead of abolishing the rule, the on-sale bar has been extended to cover secret offers for sale outside the U.S. Public use of the invention would also be exempt from the grace period.

35 USC § 103: Pretty much the same: "claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art."

No More BPAI

The "Board of Patent Appeals and Interferences" would now become the "Patent Trial and Appeal Board." Interference practice would be abolished and replaced with "derivation proceedings." Under a derivation proceeding, one applicant is accusing another of "stealing" the invention and filing a patent application without authorization.

Oaths and Declarations

Companies can get around non-cooperating inventors easier by filing a "substitute statement" in lieu of an oath or declaration when the inventor is under a contractual duty to assign the invention.

Damages

Reasonable royalties under § 284 will be applied

[o]nly to that economic value properly attributable to the patent's specific contributions over the prior art . . . The court shall exclude from the analysis the economic value properly attributable to the prior art, and other features or improvements, whether or not themselves patented, that contribute economic value to the infringing product or process . . . damages may not be based on the entire market value of the infringing product or process.

It appears this provision is one of the least-understood, and most-likely to be litigated ad infinitum in the CAFC. "Properly attributable" does not give much guidance on what specific factors are considered and the weight that each factor carries. It is also unclear what effect settlement agreements with other defendants will have on this calculation.

Willful Infringement

Willfulness will be much more difficult to get, and will be limited in scope. Willfulness will not apply to provisional rights under § 154(d), and must be established in a separate proceeding under clear and convincing evidence. A patentee will no longer be able to plead willfulness until a court has determined that a patent is infringed, not invalid and enforceable.

Willfulness may be found when

1. The defendant received written notice from the patentee that demonstrates infringement in a manner that gives reasonable apprehension of suit (see Sandisk for this one). The notice must also identify "with particularity each claim of the patent, each product or process that the patent owner alleges infringes the patent, and the relationship of such product or process to such claim."
2. The infringer intentionally copied the patented invention with knowledge it was patented, or
3. The infringer continues to engage in conduct that is not "colorably different" from previously infringing conduct.

Under the proposed rules, an "informed good faith belief" will protect an infringer against charges of willfulness. Opinions of counsel, evidence of modifying conduct to avoid infringement, and "other evidence" may be used to prove that a defendant was not willful.

Post Grant Review

A cencellation proceeding has two "windows." The first window for filing a petition is "not later than 12 months after the grant of the patent or issuance of a reissue patent." The second (and more controversial) window is any time that a petitioner "establishes a substantial reason to believe that the continued existence of the challenged claim in the petition causes or is likely to cause the petitioner significant economic harm."

There is no further information on what "substantial reason" would trigger this provision, or how "significant" the harm must be. The decision to grant the petition will be left entirely up to the USPTO Commissioner, which is a politically appointed position (and cause for some concern).

The proceeding will be a more strict type of reexamination request, where the patentee gets one opportunity to amend the patent. Amendments may not enlarge the scope of the claims. No presumption of validity applies, and the burden of proof is a preponderance of the evidence.

Both sides can have a right to appeal. If a final decision is rendered against one of the requesting parties in a civil action, the cancellation proceeding terminates.

Reexaminations - estoppel provision for inter partes reexamination has been removed ("or could have raised"). Also, a judgment by a district court (NOTE: not a "final decision") finding a patent valid terminates a reexamination proceeding on the same prior art. This provision is retroactive, and would capture existing reexamination proceeding if enacted.

Some early criticism

Currently, Hal Wegner has been all over the proposed legislation and provides some good commentary:

• "Despite the pomp and circumstance . . . this bill is dead on arrival . . . there is essentially zero-point-zero chance of enactment for the overall package in its present form."
• Too much power is vested in the USPTO Commissioner. Cancellation proceedings should be independent of the USPTO.
• A better forum for cancellation proceedings would be the Court of Federal Claims. Special Masters could be appointed to conduct reviews much like the current reviews being done in other subject matters.
• Statutorily overrule Lear/Medimmune to provide "licensee estoppel" to bar potential abuse of the "second window" for cancellation proceedings.
• Get rid of § 271(f) - "[t]his section has gotten way out of hand."
• Why are interlocutory appeals for Markman hearings allowed in infringement cases, but not declaratory judgments?

- Preliminary Reports from the blogosphere (will be updated as more posts follow):

Patently-O (part I)

Patent Prospector