The America Invents Act became the first major legislative overhaul of the U.S. patent system in 60 years when President Obama signed the Act into law on September 16, 2011. To deal with the change, medtech companies should adopt dynamic patent strategies. 

The America Invents Act introduces a number of significant changes to the current patent system, including switching to a “first-inventor-to-file” system, introducing post-grant patent review, allowing third-party prior art submissions, and addressing deficiencies in U.S. Patent and Trademark Office (USPTO) funding and operations. In January and February 2012, the USPTO issued 10 notices of proposed rulemaking with details on how the USPTO plans to implement the sweeping changes of the America Invents Act. The USPTO is currently accepting public comments from stakeholders, and in July 2012, the USPTO plans to issue final rules, which will be effective soon after issuance.

In addition to the changes introduced by the America Invents Act, a number of important patent cases are pending before the United States Supreme Court and the Court of Appeals for the Federal Circuit which will further impact the patent landscape.

To thrive in this changing patent landscape, medtech companies must adopt dynamic patent strategies to develop strategic patent portfolios that include both offensive and defensive patents that maximize value while minimizing competition. To achieve a strategic patent portfolio, medtech companies should file patent applications early and often, and to monitor competitors’ patenting activities in the USPTO to prevent issuance of blocking patents. This article discusses key changes introduced by the America Invents Act, and provides recommendations for building a strategic patent portfolio amid patent reform.

Change to “First-Inventor-To-File”

In a major departure from the current system, the America Invents Act replaces the “first-to-invent” system with a “first-inventor-to-file” system, a change that will impact medtech companies’ invention disclosure and patent application filing practices. The switch to the “first-inventor-to-file” system takes effect on March 16, 2013, eighteen months after the enactment of the bill. Under the new standard, a patent will be granted to inventors who first filed a patent application with the USPTO, whereas the current patent system grants patents to the first inventor, regardless of which inventor filed a patent application first.

In accordance with the change to the “first-inventor-to-file” standard, the patent reform law also broadened the scope of prior art to include information available to the public as of the effective filing date of the claimed invention, without regard to the actual date of the invention. Due to this change, Applicants will no longer be able to disqualify prior art available at the time of filing of the application by showing that the actual date of invention is different than the application filing date and is earlier than the date of the prior art.

“First-inventor-to-file” introduces several benefits to the patent system and, in turn, to medtech companies as well. First, it harmonizes the U.S. patent system with the patent systems of most other countries that also utilize a “first-inventor-to-file” rule. This synchronization simplifies the patent process and reduces confusion over foreign filing practices. Second, a “first-inventor-to-file” system provides clear standards for dispute resolution regarding questions of inventorship. Third, the new system encourages inventors and companies to file their patent applications quickly rather than rely on the ability to antedate prior art available less than twelve months before the effective filing date of the application based on the actual date of the invention. This emphasis on a faster filing timeline benefits medtech companies because of the rapidly evolving and short life spans of much of the medtech industry’s technology and products.

Despite these benefits, the “first-inventor-to-file” system carries several drawbacks, particularly to small and early-stage medtech companies. The most visible result of the new system is the need to race to the patent office to stake priority claims before competitors, a result that favors large, well-established companies with resources to file patent applications quickly and often. The pressure that the “first-inventor-to-file” system places on inventors to quickly file applications may potentially result in weaker, less-detailed applications that may be filed before the technology is fully understood. To counter this, medtech companies should file applications that not only cover their core technology but also future improvements and alternative embodiments. This will prevent competitors from obtaining design around patents. Another prudent practice for medtech companies is to file multiple provisional applications as their technology evolves and combine them into a single non-provisional application at the one year anniversary from the filing date of the first provisional application, which should secure the earliest possible priority date for all subject matter in the non-provisional application.

Introduction of Post Grant Opposition

Another fundamental change of the America Invents Act is the creation of a nine-month post-grant opposition review period. This post-grant review provision is effective as of September 16, 2012, one year from enactment of the bill, but applies only to “first-inventor-to-file” applications that will be filed beginning eighteen months after enactment.

The post-grant review process allows companies to challenge patents on any grounds of invalidity during a nine-month window from the issue date of a patent, with an aim of shifting the patent challenging arena from the courts to the USPTO. On February 10, 2012, the USPTO published a set of proposed rules to implement the post-grant opposition process. The USPTO suggested a filing fee for a post-grant opposition petition of $35,800 to review up to 20 claims to $89,500 to review 51 to 60 claims, and an additional $35,800 to review additional groups of 10 claims. With attorney fees in addition to the USPTO fees, post-grant review will not be cheap.

The proposed fee structure for initiating post-grant opposition heavily favors large medtech companies with a sufficient patent budget to monitor competitor’s patents and conduct post-grant oppositions. Large companies may also use post-grant opposition as a business tool to prevent smaller competitors from entering the market. On the other hand, smaller medtech companies with patents that survive the nine-month window will become a more attractive target for investors due to the added strength of their patent portfolios.

Though post-grant opposition aims to resolve patent disputes through the USPTO instead of through court litigation, a decrease in litigation may not occur to the extent expected because final post-grant review decisions are appealable to the Court of Appeals for the Federal Circuit, which is the court that hears all appeals arising under patent laws throughout the United States. However, if the goal of post-grant opposition is successful, the medtech industry may benefit from a reduction in costly and time-consuming patent litigation. Ongoing post-grant review can also help ensure that high-quality patents deserving of patent rights are issued.

Changes to Third Party Participation in Patent Process

The America Invents Act also expands the opportunity for third parties to submit prior art for consideration during patent prosecution. Effective September 16, 2012, one year from the enactment of the bill, this provision will retroactively apply to still-pending patent applications. On January 5, 2012, the USPTO proposed a new 37 CFR §1.290 for third parties to submit prior art in the patent applications of others. Current patent rules provide a very limited opportunity for third parties to submit relevant prior art. The proposed rules of January 5, 2012 expand that opportunity by broadening when and what information can be submitted to the USPTO by third parties. The proposed third-party submission provisions require that references be submitted to the patent examiner along with statements of relevance of the references, which is currently not permitted, to potentially make the submissions more effective and easier for the USPTO Patent Examiner to consider third-party submissions.

Submissions may be kept confidential, and must be made prior to the mailing of a Notice of Allowance, a first Office Action rejecting a claim, or six months from the date of publication, whichever comes first.

Third-party prior art submission is useful because it will assist USPTO Patent Examiners in determining which patent applications are worthy of grant. As with post-grant opposition review, the intended result is higher-quality patents that are less likely to be challenged further down the patent pipeline. While larger companies with more resources to engage in this process and monitor competitors’ pending patent applications will find greater use of this provision, smaller medtech companies can also take advantage of this change to directly affect the quality of medtech industry patents.

Implementation of Prioritized Examination

Immediately after the enactment of the America Invents Act, the USPTO reinstated its Track One initiative for prioritized examination. The Track One initiative was previously put on hold due to USPTO budgetary constraints. Under the Track One initiative, the USPTO will strive to provide a “final disposition” within twelve months of prioritized status being granted to a patent application. The fees to request a prioritized examination are $4,800, or $2,400 for a small entity, and $130 for processing the request in addition to a regular filing fee for a utility patent application. In addition to the increase in filing fees, the faster pace of examination means that the costs associated with prosecution of the patent application will be incurred over a much shorter period of time. Nevertheless, medtech companies looking to quickly build or expand their existing patent portfolios should consider taking advantage of the prioritized examination program. By having an issued patent sooner, emerging medtech companies can attract investors at an earlier stage and sue third parties developing competing products for patent infringement.

Decreasing Pending Application Backlog

A number of modifications to the USPTO’s funding and operations under the America Invents Act are designed to allow the USPTO to make the most of patent reform. One major benefit is that the USPTO will have the authorization to set its own fees, a mandate that previously fell to Congress. In line with this new provision, the USPTO instituted a fifteen percent surcharge on all fees on September 26, 2011, ten days after the Act was signed into law. As discussed above, the USPTO also reinstated its Track One prioritized examination where the USPTO charges higher filing fees. Most importantly, the Act creates a USPTO Reserve Fund, which will receive all fees collected over the amount appropriated each year. The amounts contained in the USPTO Reserve Fund will only be available for use by the USPTO and may not be appropriated by Congress.

Though Congressional fee diversion has not been entirely curtailed, these funding provisions nevertheless allocate more control to the USPTO over its own budget. With a more promising financial outlook, the USPTO is poised to take strides in reducing its examination backlog of almost 700,000 patent applications. Moreover, though budgetary constraints previously forced the USPTO to shelve its proposed satellite office in Detroit, the Act calls for the creation of the Detroit office and additional satellite offices within 3 years of the enactment of the bill, which should further aid in reducing the backlog of pending applications.

Medtech companies eager to bring cutting-edge products to commercialization will thus appreciate a faster prosecution timeline made possible by the America Invents Act’s reforms.

Courts Chime In

Over the past five years, the Supreme Court has been active in issuing major opinions that affect patent prosecution strategy. The Supreme Court’s 2007 decision in KSR International Co. v. Teleflex invoked a narrow interpretation of the obviousness test, and, as a result, medtech companies should elaborate on unexpected results and technical difficulties to avoid obviousness rejections.

Since 2010, both the Supreme Court and the Court of Appeals for the Federal Circuit, have addressed what constitutes patentable subject matter, including the patentability of method claims for personalized medicine and diagnostics. On March 20, 2012, the Supreme Court issued its long-awaited decision regarding medical diagnostic patent claims in Mayo CollaborativeServices v. Prometheus Laboratories, Inc. In a unanimous decision, the Supreme Court invalidated two patents covering the optimization of the therapeutic efficacy of a drug regimen as claiming patent-ineligible subject matter. In doing so, the Supreme Court reversed the decision of the Court of Appeals for the Federal Circuit which twice upheld the patentability of the diagnostic method patent claims. The Prometheus Supreme Court decision held that all claims of the two patents are invalid as directed to unpatentable “laws of nature.” The Prometheus Supreme Court decision is causing the greatest uncertainty in the diagnostics, genomics, and personalized medicine fields, where some of the world’s largest medtech companies are developing diagnostic tests and treatments targeting the unique genetic makeup of a patient. 

Less than one week after the March 20 Prometheus decision, the Supreme Court addressed another much-watched patent case regarding the patentability of isolated DNA of human genes in Association for Molecular Pathology v. Myriad Genetics. On March 26, 2012, Supreme Court granted certiorari, vacated a July 2011 Federal Circuit decision upholding the patentability of isolated DNA patent claims, and remanded the Myriad case back to the Federal Circuit for further consideration in light of Mayo v. Prometheus. The Federal Circuit will hear oral arguments in the Myriad case on July 20, 2012, and some experts believe the patent claims will be found invalid, while others believe the patent claims will be upheld.

On August 31, 2011 in Classen Immunotherapies Inc. v. Biogen Idec, the Court of Appeals for the Federal Circuit held that an immunizing method is patentable subject matter because the method involved a physical step of immunization in addition to purely mental steps. Recent and upcoming Supreme Court and Federal Circuit rulings indicate a willingness of the courts to address perceived problems in the patent system, but also introduce new standards and uncertainties. To build and maintain a strong patent portfolio, medtech companies will need to pursue patent strategies that account for these major court decisions.

Conclusion

Patent reform presents widespread changes to current patent laws, from altering basic filing procedures in a new “first-inventor-to-file” system to addressing issues in USPTO funding and operations. These changes introduce new challenges and opportunities for medtech companies. Many provisions of the America Invents Act favor larger, well-established companies with the capability of filing many applications quickly under “first-inventor-to-file” and monitoring and reacting to competitors’ patents and patent applications through post-grant opposition review and third-party prior art submission. On the other hand, as a result of a more streamlined patenting process aspiring to produce higher-quality patents under faster timeframes, smaller medtech companies may be able to develop their patent portfolios faster and end up with stronger, more strategic patent portfolios. 

Regardless of size, medtech companies must remain vigilant as USPTO initiatives and court decisions continue to reshape the U.S. patent system. Medtech companies should work closely with their patent counsel to carefully navigate the new patent system and maximize their competitive edge in the industry.