Canada: Leahy-Smith America Invents Act Passed By Senate

Last Updated: September 16 2011
Article by Marco Clementoni

The Leahy-Smith America Invents Act (the "Act") was passed by the U.S. Senate on September 8, 2011, without amendment, and is expected to be ratified by President Obama within the next week. The Act makes significant changes to the patent regime in the U.S. Some of these changes are discussed below.

Most notably, the Act will shift the U.S. from a "first-to-invent" system to a modified "first-to-file" system for determining prior art and priority of applications, joining the rest of the world in this regard. Under the current regime, publications and patent applications made by unrelated parties prior to the date of invention for an application at issue can be cited against the application in order to determine the patentability of the claimed invention. This system can be onerous for the U.S. Patent and Trademark Office and the courts to support due to the evidentiary requirements. Under the modified "first-to-file" system introduced by the Act, publications made by unrelated parties prior to the effective filing date of an application, and patent applications and patents made by unrelated parties prior to the earlier of the effective filing date of an application and the date on which the invention was publicly disclosed by the inventor or a related party, can be cited against the application in order to determine the patentability of the claimed invention. The effective filing date is the filing date of the application, or the filing date of the earliest filed patent application from which priority is claimed. As a result, we may see applications being filed at earlier stages.

The modified "first-to-file" system to be implemented by the Act is a hybrid system. It is similar to a "first-to-file" system, except that other patent applications can only be citable as prior art if they precede the earlier of the earliest filing date of the application and a publication of the invention by the inventor or a related party. Of interest is that inventors have one year within which to file an application in the U.S. from the first date that the invention was publicly disclosed. Thus, where two separate parties independently file patent applications for the same invention, the applicant that has the earliest filing date or publication date is entitled to a patent. While the publication of an invention can be used to establish a priority date for determining which patents and patent applications are citable against an application, applicants are advised to consider that such a strategy can bar them from obtaining a valid patent in most other countries, with Canada being an exception.

A "prior-use" defense has been created. A party who internally commercially used or sold an invention or a product thereof at least one year prior to the effective filing date of an application (or the date that the applicant made a first public disclosure, if earlier) will be able to assert a "prior-use" defense against an infringement claim. Presently, parties can maintain the secrecy of an invention, but bear the risk that another party may file for and obtain a patent for the same invention and bar them from using it. As a result, many who decide not to file a patent application for the invention elect to publish defensive disclosures to prevent others from obtaining a patent for the same invention. The "prior-use" defense significantly reduces the benefits of such defensive disclosures. We may therefore see a reduction in the number of such disclosures.

The Act diminishes the best mode requirement for patent application specifications by stating that the failure to satisfy the best mode requirement may not serve as a basis for invalidating any claim of a patent. The best mode requirement stipulates that inventors must describe the best mode contemplated for carrying out the invention. This application requirement is a safeguard to ensure that applicants describe the invention so that the public can readily understand its implementation and implications. While the best mode requirement remains present as an application requirement, this requirement will cease once a patent has issued.

While many amendments made by the Act only come into effect for applications that have an effective filing date that is at least 18 months after its enactment, a 15% surcharge on fees will be effective almost immediately. Further, a new level of fees that are discounted 75% is available to "micro entities". "Micro entities" are applicants that have not previously filed four regular U.S. patent applications, and whose gross income in the previous calendar year did not exceed three times the median household income. Further, they cannot have licensed or assigned, or be under obligation to license or assign, the application, to a party that has gross income exceeding this amount. Micro entities also include applicants who work for and license or assign, or are under obligation to license or assign, the application to an educational institution.

In addition, there will be a new $4,800 option (reduced to $2,400 for small entities) for prioritized examination within twelve months of the filing date of an application. Applications for which prioritized examination are requested cannot have more than four independent claims and 30 claims in total.

The Act amends the requirements for requests for re-examination, changing the standard for reexamination from "a substantial new question of patentability" to "a reasonable likelihood that the requestor would prevail" with respect to at least one of the challenged claims. This amendment generally makes the standard for a re-examination request stricter.

Tax strategies will be explicitly patent-ineligible under the Act. Any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art.

The change of the patent regime from first-to-invent to first-to-file rewards those who are swift to file applications and punishes hesitation. Where two parties file applications for the same invention, only the party that published or filed an application for the invention first is entitled to a patent. In view of this, inventors and innovating companies would be well advised to consider filing patent applications sooner rather than later. It may also be beneficial to consider a strategy of filing incremental provisional patent applications at intermediate stages in the development cycle of a product, method of manufacture, pharmaceutical, etc. in order to secure the earliest filing date possible for an invention and minimize the amount of citable prior art.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2011 McMillan LLP

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