The America Invents Act and its Effect on Universities: It Goes Beyond Just Patents. Carl P. B. Mahler II, JD UNC Charlotte

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1 The America Invents Act and its Effect on Universities: It Goes Beyond Just Patents Carl P. B. Mahler II, JD UNC Charlotte

2 Why Universities Patent and Why Companies Patent - I To promote societal use of the inventions no one will invest in making a product if others can take the market out from under them To reward inventors and promote formation of new companies For these purposes it is important to have strong, valid patents that can withstand challenges In addition, we often patent our research results so as to assist the sponsors of our research in benefitting from our research

3 Why Universities Patent and Why Companies Patent - II Companies frequently are happy to have even low-quality patents that won t withstand scrutiny so long as those patents make it harder for others to compete with them Note the difference: universities have no incentive to obtain low quality patents, but industry has a significant incentive to obtain patents even if they are of low quality.

4 AIA: What We Know v. What We Think We Know - I Passed by Congress in 2011 Signed by President Obama 9/16/2011 Phased in between 2011 and March 16, /16/2013 is known as the Trigger Date

5 AIA: What We Know v. What We Think We Know - II Congress passes laws Government agencies (like the Patent and Trademark Office PTO ) create regulations to implement those laws PTO frequently updates its regulations, especially while figuring out what new laws mean

6 Hierarchy: Congress, Courts, PTO PTO must follow the laws passed by Congress AND the rulings of the Court of Appeals for the Federal Circuit ( CAFC ) and the US Supreme Court ( SCOTUS ) CAFC and SCOTUS give little or no deference to the PTO Once courts rulings contradict PTO regulations, the PTO regulations must change

7 How Long Until we Know What the AIA Really Means? Experience with Bayh-Dole Act Passed in 1980 No significant court cases until Stanford v. Roche in 2011 (30+ years later)! Significantly reinterpreted Bayh-Dole from what universities expected AIA will certainly be litigated more quickly as many deep-pocketed companies will be affected

8 Upshot This presentation is my understanding from 20+ years as a patent attorney working for universities. My crystal ball is no better than anyone else s, so don t take this presentation as unchanging truth Be ready for surprises in the future

9 First to Invent v. First Inventor to File US was the only country in modern times to retain first to invent regime Drawbacks: Because we were different from all other countries, prosecution was different and therefore more expensive Value of patents was decreased because of uncertainty of ownership earlier inventors of the same technology could gain ownership of the patent rights

10 Universities and First to Invent Universities benefitted from first to invent Most companies no longer perform truly fundamental research, so we frequently could get broad coverage to new technologies (e.g., Cohen- Boyer patent on DNA manipulation) Under first to file we didn t have to rush to protect our discoveries, so we could take our time and further develop the technology before filing Could even publish without fearing others would scoop us and claim the patent rights

11 Universities and First Inventor to File We now have to worry about others inventing after we do but filing patent applications before us. If we disclose our inventions and someone makes minor improvements, they can legitimately file patent applications on those improvements If we haven t already filed applications on our earlier work, those applications on improvements can make our work obvious and preclude us from obtaining patents!

12 Rating on First Inventor to File Bad for universities. Our ability to obtain patents on groundbreaking research is greatly diminished Other parties can prevent us form obtaining patents by filing applications on minor improvements before we file our first patents Greatly increases our need to file applications soon after discoveries are made Have your patent budgets and staffing been increased in order to handle this change?

13 Effect of Public Disclosures (Ours or Someone Else s) - I If we make a public disclosure we retain a oneyear grace period in which to file for a patent on the disclosed idea. But this is extremely limited if another party discloses or files a patent application on our idea, that disclosure or application affects our rights if it contains ANYTHING beyond what was included in our earlier disclosure!

14 Effect of Public Disclosures (Ours or Someone Else s) - II Per PTO, if the other party s changes were merely insubstantial changes or only trivial or obvious variations our earlier disclosure would STILL be ineffective at overcoming the other party s subsequent disclosure or patent. This interpretation clearly violates the spirit of the AIA, but the PTO claims that it is required by the language (and only Congress or the courts can change it)

15 Rating on Effect of Public Disclosure/One Year Grace Period Meh to Bad. We always needed to work closely with researchers to manage (or, usually, respond to) public disclosures. Now that others can legitimately prevent us from patenting by filing first on trivial changes we risk losing patents (one more reason to file early) What does this mean with respect to our progress reports to sponsors? So what if we think someone stole our idea? See next section on Derivation Proceedings Spoiler alert: don t get your hopes up

16 Derivation Proceedings - I If a party (the Petitioner ) thinks that another party (the Respondent ) stole ( Derived ) their idea, that party (the Petitioner) has to file a petition with the PTO and attempt to prove this allegation. Derivation proceedings are unlikely to be of much value to universities unless they have LOTS of resources for this work

17 Derivation Proceedings - II Timing: the petition must be filed within 1 year from the first publication of the claims of the derived application Publication can be from either of two sources Published US PTO application International application designating US and published by WIPO (in any language!) So to protect your rights, you need to review all relevant patent application publications in all languages to see if they cover your idea

18 Derivation Proceedings - III To initiate a Derivation Proceeding, you must file a patent application on the invention including a claim that is the same or substantially the same as a claim of the allegedly derived application To be successful, the application must be in condition for allowance by the PTO in other words, you must ensure that the PTO will allow the patent to issue. (How do you do this?)

19 Derivation Proceedings - IV You must also file a petition that includes: An explanation of why the Respondent s claim(s) is substantially the same as your claim; A request for specific relief, e.g., rejecting the Respondent s patent application and allowing yours; A demonstration that the Respondent derive its application from your work; and A statement that the Respondent was not authorized to file its application

20 Derivation Proceedings - V In order to win the Derivation Proceeding, the Petitioner must Submit at least one affidavit demonstrating that the invention was communicated by the Petitioner to the Respondent; Present evidence corroborating this affidavit; and Demonstrate that the Respondent was not authorized to file the application Question: how do you prove a negative?

21 Summary of What you Need to Win: Knowledge of the existence of the other party s patent claims (even if not in English) Demonstration that the other party learned the invention from you (corroborated) Demonstration that the other party was not authorized to file the application Ability to file a patent application on the invention that you know the PTO will allow to issue as a patent

22 Rating for Derivation Proceedings Bad for universities The resources required are beyond the means of most universities The university s culture of openness can make it very difficult to track and document communications in the ways required to show derivation If we DO start tracking communications like this, what message are we sending to our sponsors? That we don t trust them?

23 Microentity Filing Status - I PTO has had a two-tier fee structure for years. Small businesses (universities are defined to be small entities) pay half of what other businesses pay. AIA introduces a third tier, the Micro Entity which pays 25% of the normal fees. Legislative history clearly shows that universities were supposed to receive this benefit.

24 Micro Entity Filing Status - II The language of the statute contradicts the stated legislative intent. Micro Entity status is limited to the Applicant and the statute makes it clear that the Applicant is the inventor who is obligated to assign the patent to the university; the Applicant is not the university itself. PTO FAQ states the same thing and explicitly states that universities that are applicants cannot claim Micro Entity status.

25 USPTO FAQ Question: If all inventors on a patent application qualify for micro entity status, and if those inventors assign the application to their university-employer as a condition of their employment, can the university file as the "applicant" and secure the micro entity discount or should the inventors be named as the applicant in order to obtain the micro entity discount? (Question: FEE4450) Answer: The inventors should be named as the applicant for the micro entity discount to be available. If the university filed as the applicant, the university would not be eligible for the micro entity discount. Under the "gross income" definition, the university likely would not meet the "four previously filed applications" limit. Likewise, under the "institution of higher education" definition, the university itself would not either (i) be an employee of the "institution of higher education" or obtain the majority of its income from such institution; or (ii) be a transferor of ownership rights to such institution. See Question FEE4415.

26 Rating of Micro Entity Status Bad (or at least useless) The PTO refuses to recognize universities as entitled to the lower fees provided to Micro Entities. Filing patents with the inventors as the Applicants requires the prosecuting patent attorneys to consider the inventors, rather than the university, their clients. At best the Micro Entity Status saves a few thousand dollars. At worst it might result in patent invalidity, attorney discipline, and/or inventors intentionally or unintentionally undermining the university s patent position.