Patent Infringement Litigation under the 2011 Patent Law Changes

Patent Infringement Litigation under the 2011 Patent Law Changes

By Francis J. Gorman

Significant changes to patent law were enacted when President Barack Obama signed the America Invents Act on September 16, 2011. While this article notes some of the significant changes in patent prosecution, the emphasis is on the effect the 2011 changes portend for patent infringement litigation.

Prosecution Changes

The most significant change in patent prosecution is the “first inventor to file” amendment made throughout the Patent Act, 35 U.S.C. §100 et seq.  Effective 18 months from the date of enactment, a patent will be granted to the first inventor to file an application with the patent office, rather than to the first inventor to invent.

Other prosecution changes include disclosures that can be made by the inventor within one year prior to the filing date without subsequently barring the grant of a patent, permitting third party submissions to the Patent Office  that may impact the patentability of a pending application, reduced filing fees for “micro entities,” and higher filing fees for paper applications.

Patent Infringement Litigation

Post-Grant Review Proceedings in the Patent Office.  Any person who is not the owner of a patent may file with the patent office a petition to institute an inter partes review of the validity of the patent’s claims.  There are time limits on when the petition for aninter partes review has to be filed.  If the petition is granted, a review is conducted by the Patent Trial and Appeal Board (not by a federal court).  The patent office’s determination on validity or invalidity is conclusive and cannot be re-litigated in federal court.

This right to petition for review is dove-tailed with other provisions that are related to infringement suits in federal court.  The Patent Office will not grant an inter partes review to a person who, before the date on which the petition for review is filed, filed a civil action in court challenging the validity of any claim of a patent.  If, on the other hand, a person files a petition for review of validity and subsequently files a civil action in federal court challenging validity of a patent, then the court action is automatically stayed unless the patent owner moves to lift the stay or files a counterclaim or files a separate suit alleging that the petitioner has infringed the patent.

These provisions encourage a crossover of strategy and involvement in patent office validity reviews and federal court litigation.

Defense to Infringement Based on Prior Commercial Use.   In 1999, patent law was amended to provide a defense to infringement of abusiness method patent but, as intended, it had limited impact on infringement litigation.  Because the first inventor is no longer necessarily entitled to a patent, and as boost to manufacturing, the 2011 changes provide a new defense to alleged infringement of utility or process patent used in manufacturing or other commercial processes.

A person who commercially used the subject matter of the patent prior to the filing date of the successful patent application is not liable for patent infringement if that person commercially used the invention — internal use or an arm’s length sale or transfer — provided such use occurred one year before the effective filing date of the patent or the date on which the invention was disclosed to the public in a way that the disclosure is not “prior art.”

Requiring commercial use as a condition is consistent with the policy behind the patent system, i.e., encouraging inventors to come forward with their inventions in return for a limited-years monopoly on making, using, and selling the invention.

Denying Joinder of Unrelated Alleged Infringers.  This procedural change denies a patent owner the right to join as co-defendants in one infringement suit alleged infringers whose only common act is that each infringed the patent.  To join alleged infringers in the same infringement suit, the mere allegation that both defendants infringed the patent is not sufficient.

“Best Mode” Requirement Not a Basis for Invalidity.  An accused infringer can no longer have the patent declared invalid because the inventor failed to disclose in the patent the best mode of the invention.

Advice of Counsel.  In one of the shortest and clearest changes, the failure of an alleged infringer to obtain the advice of counsel with respect to the infringement, or to present such advice as evidence, cannot be used by the patent owner to prove that the alleged infringer willfully infringed or intended to induce infringement by another.

No State Court Jurisdiction Over Patent Claims.  This change codifies a generally accepted principle, i.e. the state courts do not have jurisdiction over patent infringement suits.  The term “State” is expanded to include the District of Columbia, Puerto Rico, and various U.S. territories.

While this change appears to be limited to Federal Circuit jurisdiction over appeals involving compulsory counterclaims raising patent issues, it may also affect the issue of a state’s immunity under the Eleventh Amendment from patent infringement suits in federal court.

The issue of state court jurisdiction to provide relief for patent infringement has come up in infringement litigation against the states.  In Florida Prepaid Postsecondary Education Expense Bd. v. College Savings Bank, 527 U.S. 666 (1999), the Supreme Court held that the states could not be sued in federal court for patent infringement because of the Eleventh Amendment.  The Court rejected a due process argument from the patent owners on the basis that only when a state did not provide an adequate remedy for patent infringement could a patent owner be said to be deprived of property without due process.

This has induced arguments in the district courts by patent owners that a state has not provided, and indeed is unable to provide, adequate relief to a patent owner whose patent is infringed and arguments by states that their courts could provide adequate relief.

Study of Patent Litigation by Non-Practicing Entities.  Congress expressed concern with the increase in patent infringement suits instituted by non-practicing entities, sometimes called “patent assertion entities.” Congress authorized a study by the Comptroller General of the United States of the costs of such litigation and the economic impact on inventors, job creation, employers, employees, and consumers.  The report is due in 2012.

Other Litigation Changes

In the category of litigation changes but not infringement:

Venue for Suing the Patent Office.  Appeals from decisions of the Patent Office, such as denial of a patent application or an inter partesreexamination, are to be taken to the United States District Court for the Eastern District of Virginia, and no longer to the United States District Court for the District of Columbia.   The Eastern District of Virginia has four court locations—Alexandria, New Port News, Norfolk and Richmond — but most appeals will likely be filed in Alexandria.

Restriction on False Marking Suits.  In recent years there have been hundreds of qui tam suits under 35 U.S.C. 292 seeking a statutory $500 penalty per offense against a defendant who marked a product or method with the word “patent,” a patent number, or the words “patent pending” with the intent to deceive.  After the 2011 changes, the cause of action remains, but only the United States can recover the penalty, and a private litigant must show competitive injury and can only recover compensatory damages.  Marking a product with an expired patent number that once covered the product is no longer a violation.

Caveat

One final word of caution:  The effective date of any specific change has to be determined from the provisions of the Act. Some changes are effective 18 months after enactment, some one year after enactment, and others on the date of enactment.