The Patent Reform Act of 2007: What's changed in the final House version?
September 11, 2007

With the Patent Reform Act of 2007 (H.R. 1908) passing the House on Friday, it's about time to take another look at the Act and see what's different between the current version and the version as introduced back in April.

Click below for the analysis.

First to file (Section 3)

This section is essentially unchanged, apart from a definition of "joint invention" and an addition that previously-filed applications are not prior art to other applications filed within a year and either commonly owned or subject to a common obligation of assignment. This change will help larger companies, as it will extend the one-year "grace period" to other applications filed by the same company. More detail was also added to the proposed "derivation proceeding" that would replace interferences.

Proceeding without an inventor's consent (Section 4)

This section is also essentially unchanged, apart from making the effective date of these changes one year from the date of passage and applicable only to applications filed on or after that date.

Damages and willful infringement (Section 5)

There was one change to the damages portion of this section that softens the change a bit for patent holders. The following subsection was added:

(5) COMBINATION INVENTIONS.—For purposes of paragraphs (2) and (3), in the case of a combination invention the elements of which are present individually in the prior art, the patentee may show that the contribution over the prior art may include the value of the additional function resulting from the combination, as well as the enhanced value, if any, of some or all of the prior art elements resulting from the combination.

This would at least gives courts a bit more flexibility when determining damages when a patented component of a larger product also enhances the function of other, non-patented components. In addition, the USPTO would be required every 7 years to prepare a report detailing the "effectiveness" of these amendments.

The portions regarding willful infringement are essentially unchanged from the original version.

Venue and jurisdiction (Section 11)

The venue provisions were softened somewhat, but also now includes a provision specifically directed toward so-called "patent trolls," meaning companies who purchase patents for enforcement but do not actually do research or produce products. The revised provision includes this caution at the outset:

In any civil action arising under any Act of Congress relating to patents, a party shall not manufacture venue by assignment, incorporation, joinder, or otherwise primarily to invoke the venue of a specific district court.

The, in the specific venue section, the Act permits an infringement lawsuit to be filed in one of:

  1. The defendant's state of incorporation or principal place of business
  2. Where the defendant has committed a "substantial portion" of the acts of infringement and has a "regular and established physical facility that the defendant controls and that constitutes a substantial portion of the defendant's operations" (not sure how this is functionally different from principal place of business)
  3. When there are only foreign defendants, the rules of 28 U.S.C. § 1391(d)
  4. Where the plaintiff resides, but only if the plaintiff is either a higher education institution or a nonprofit organization
  5. Where the plaintiff (or a subsidiary) has a place of business that is engaged in "substantial (A) research and development, (B) manufacturing activities, or (C) management of research and development or manufacturing activities"
  6. Where the plaintiff resides, if the plaintiff is an inventor or coinventor that has not assigned or licensed any rights and is under no obligation to do so
  7. "Where any of the defendants has substantial evidence and witnesses if there is no other district in which the action may be brought under this section."

Of all the revisions in the Act, this is the one most directly targeted at patent licensing companies. These provisions would take effect on the date of enactment and would apply to all actions filed on or after that date. So, if this gets sent to the White House for signature, expect a flurry of lawsuits filed before it can be signed.

Post-grant cancellation procedures (Section 6)

There is a new subsection in this portion which expands 35 U.S.C. § 301 to also allow third parties to submit "written statements of the patent owner filed in a proceeding before a Federal court or the Patent and Trademark Office in which the patent owner takes a position on the scope of one or more patent claims." This section also now changes how inter partes reexaminations are handled, making them heard by an administrative patent judge as opposed to going through the ordinary examination process. This may include an oral hearing.

The much-maligned "second window" opposition period has been removed, making the new post-grant review procedure only available in the first 12 months after a patent is granted or if the patentee consents. Of course, the changes to reexamination to potentially include an oral hearing makes that procedure more powerful, and it will likely serve as the replacement for the "second window" review procedure. Post-grant review proceedings will also be able to be stayed if there is also a pending civil case that addresses substantially the same issues related to patentability. The Act also now makes explicit that an infringement suit may still be filed while a patent is in post-grant review, and the existence of such a proceeding cannot be used as evidence relating to the validity of the claims either before a district court or the International Trade Commission.

Third party prior art submissions during examination (Section 9)

This section, like section 4, is essentially unchanged, other than the effective date is one year from the date of passage.

Patentability of tax planning methods (Section 10) [NEW]

This is a new section, and removes methods of avoiding taxes from the definition of patentable subject matter. This in response to the trend in the past year or so toward patenting such methods.

Inequitable conduct and rulemaking authority (Section 12) [NEW]

This section expressly permits the USPTO to require, by rule, the dreaded "Applicant Quality Submissions" introduced in the accelerated examination program and the new claim limitation rules. This addition appears to be in response to the testimony of Director Dudas before the Senate, specifically asking for this express authority. It also codifies the conditions under which inequitable conduct may be found, including a definition of materiality, specifically adopting the "reasonable examiner" standard, and also including anything that refutes or is inconsistent with a position previously taken by the applicant. These provisions would only apply to patent applied for one year after enactment.

Best Mode (Section 13) [NEW]

This section makes it so that failure to comply with the best mode requirement is not grounds for finding a patent invalid during litigation.

Regulatory authority (Section 14) [NEW]

This section statutorily authorizes the new rules limiting claims and continuations, and also provides the USPTO a bit of cover in the pending lawsuit to enjoin implementation of the rules. The section specifically authorizes the rules, and then goes on to note that this specific grant is merely to "clarify," as the USPTO already had the authority, although not specifically spelled out, in 35 U.S.C. § 2(b)(2). This appears to be a calculated effort to give the USPTO a legislative history argument that it has the statutory authority to promulgate those rules in defending the lawsuit against their implementation.

Study of USPTO workplace conditions (Section 17) [NEW]

The Act also provides that the USPTO must study the conditions under which examiners work, including such factors are recruitment and retention, workload, quality assurance, grievances, and submit a report regarding these issues. This is a small bone thrown to those who think that the USPTO's management is largely responsible for the decrease in perceived patent quality by not allowing examiners sufficient time to do a thorough examination of applications.

All in all, the Act is still bad news for almost everyone but big technology companies.

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