On Sept. 16, President Obama signed the America Invents Act into law. This patent reform bill is the first major legislative overhaul of the U.S. patent system in 60 years and is the product of six years of Congressional attempts to implement patent reform. The America Invents Act significantly changes 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.
Orthopedic device companies must adopt dynamic patent strategies to thrive in this changing patent landscape. A strategic patent portfolio includes both offensive and defensive patents that maximize value while minimizing competition. To build a strategic patent portfolio amid patent reform, orthopedic companies should file patent applications faster, monitor competitors’ patents, and submit relevant prior art in competitors’ pending patent applications. Orthopedic manufacturers also should be ready for more change and uncertainty over the next 18 months as the USPTO implements rulemaking to meet the patent reform provisions discussed below.
File Early, File Often
A key provision of the patent reform lawreplaces the “first-to-invent” system with a first-inventor-to-file system, a change that will impact orthopedic firms’ patent application filing practices. This change takes effect 18 months after the bill’s enactment. A first-inventor-to-file standard grants patents to inventors who first filed a patent application with the USPTO, whereas the current system grants patents to the first inventor, regardless of which inventor filed a patent application first.
First-inventor-to-file introduces several benefits to the patent system and, in turn, to orthopedic companies as well. First, itharmonizes the U.S. patent system with the patent systems of most other countries that also use 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. Thus, orthopedic inventors no longer will need to depend on clearly kept records and lab notebooks to demonstrate and defend originality of an invention. Third, the new system encourages inventors and companies to file their patent applications quickly rather than rely on the U.S. 12-month grace period for public disclosures. This emphasis on a faster filing timeline benefits orthopedic companies because of the rapidly evolving and short life spans of much of the medtech industry’s innovative technology and products.
Despite these benefits, the first-inventor-to-file system carries several drawbacks, particularly to small and early stage orthopedic manufacturers. The most visible result of the new system will be an increase in the number of applications filed. Inventors will need to race to the patent office to stake priority claims before their competitors, a result that favors large, well-established companies with resources to file applications quickly and often. Another impact of a first-inventor-to-file system is that it places pressure on inventors to rush to file applications, potentially resulting in weaker, less-detailed applications that may be filed before the technology is fullyunderstood. To counter this, orthopediccompanies should file applications that not only cover their core technology but also future improvements and alternativeembodiments. This will prevent competitors from obtaining design-around patents. A further disadvantage under the new system is the need for limited disclosure of an invention before the application is filed. Particularly relevant to startup firms, companies seeking venture capital funding will need to be guarded about what and how much they disclose. Similarly, inventors in university and research settings will need to be warier about funding options and collaboration among colleagues. The first-inventor-to-file system thus presents several new opportunities and challenges to orthopedic firms.
Post-Grant Patent Uncertainty
Another core change of the America Invents Act is the creation of a nine-month, post-grant opposition review period. This provision is effective one year from enactment of the bill, but applies only to first-inventor-to-file applications filed 18 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. If the goal of post-grant opposition is achieved, the orthopedic industry will benefit from a reduction in costly and time-consuming patent litigation.
Moreover, an ongoing post-grant review will help ensure that high-quality patent applications deserving of patent rights are issued. Much like the first-inventor-to-file change, however, this provision is more valuable to large orthopediccompanies with the budget to consistently monitor and challenge competitors’ patents. A decrease in litigation also may not occur to the extent expected because final post-grant review decisions are appealable to the U.S. Court of Appeals for the Federal Circuit.
Though more relevant to companies with larger budgets and resources, engaging in post-grant opposition review will allow orthopedic companies to directly affect the quality of industry patents and potentially invalidate competitors’ newly issued patents.
Third-Party Participation
Another key patent reform is the opportunity for third parties to submit prior art for consideration during patent prosecution. Effective one year from the bill’s enactment, it also retroactively will apply to still-pending patent applications. This option allows third parties to disclose references to the patent examiner along with statements of relevance, which currently are not permitted. Submissions may be kept confidential, and must be made prior to the issuance 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 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 all orthopediccompanies will enjoy these benefits, larger companies with more resources to engage in this process and monitor their competitors’ pending patent applications will find greater use of this provision.
Better Funding for the USPTO
A number of modifications to the USPTO’s funding and operations under the America Invents Act will allow the agency 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 and effective almost immediately, the USPTO will institute a 15 percent surcharge on all fees. The USPTO also will establish a Prioritized Examination Fee, an indicator that its Track One initiative for accelerated examination—put on hold in April due to budgetary constraints—will be reinstated.
Though budgetary constraints also forced the USPTO to shelve its proposed satellite office in Detroit, Mich., the act calls for the creation of the Detroit office as well as an additional two satellite locations. 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 this fund only will 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 nearly 700,000 patent applications. Orthopediccompanies eager to bring cutting-edge products to commercialization will appreciate a faster prosecution timeline made possible by the America Invents Act’s reforms.
Supreme Court Chimes In
Over the past five years, the Supreme Court has been active in issuing major opinions that affect patent prosecution strategy. For instance, its 2007 decision in KSR International Co. v. Teleflex invoked a narrow interpretation of the obviousness test, and, as a result, orthopediccompanies should elaborate on unexpected results and technical difficulties to avoid obviousness rejections. Since 2010, several Supreme Court decisions have addressed what is patentable subject matter, including the patentability of method claims for personalized medicine and diagnostics. While some cases have reached final decisions, others are expected to be heard by the Supreme Court soon and will affect patentable subject matter, patent prosecution, and patent licensing. Recent and upcoming Supreme Court rulings indicate a willingness of the Court to address perceived problems in the patent system. To build and maintain a strong patent portfolio, orthopedic manufacturers will need to pursue patent strategies that account for these major Supreme Court decisions.
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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. The reform introduces new challenges and opportunities to orthopedic companies and, as a result, medtech companies must carefully navigate the new patent system to maximize their competitive edge inthe industry.
Larger, well-established companies emerge as clear winners of patent reform, 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. Smaller companies, on the other hand, may encounter more difficulties adjusting to these new provisions and, as a result, may be forced to assume a more defensive, rather than offensive, patent strategy.
Regardless, all orthopedic companies stand to benefit from a more streamlined patenting process aspiring to produce higher-quality patents under faster timeframes. The America Invents Act is a landmark bill that, after a period of almost 60 years, introduces much-needed patent reform. Yet medtech companies must remain vigilant as USPTO initiatives and sweeping U.S. Supreme Court decisions continue to reshape the U.S. patent system.
David J. Dykeman is co-chair of the Intellectual Property Department in the Boston, Mass., office of the international law firm Greenberg Traurig LLP. A registered patent attorney with more than 15 years of experience in patents, intellectual property (IP) and licensing, David’s practice focuses on securing strategic worldwide IP protection and related business strategy for high-tech clients, with particular expertise in life sciences, medical devices, biotechnology and healthcare. He can be reached at (617) 310-6009 or dykemand@gtlaw.com.