A Closer Look at the Patent Office’s New Conversation about Adoption of a “First to File” Rule and a Proposal for a Win-Win for the Patent Office and Inventors

By | November 14, 2009

(Editorial Note:  Regular readers of the IP Asset Maximizer Blog might find this post an departure from the usual topics discussed on this blog.  In the almost 2 years I have been blogging, I have consciously avoided talking about specific aspects of patent law, both in the form of case law, patent reform efforts and the US Patent Office itself because I believe there are many great blogs that do a great job that frequently discuss these topics and that I can likely add little to the already substantive discussions occurring elsewhere.  However, given the great significance of the so-called “first to invent” system to the interests of individual and corporate inventors alike, I felt it appropriate to weigh in on the conversation.  Put simply, any changes in the first to invent rule must clearly flesh out and respond to the resulting effects to businesses of all sizes, as well as unintended consequences that might occur to the operations of the US Patent Office.  I think my business-focused approach to this topic may provide a perspective not seen on the other blogs discussing this topic.  I welcome your comments.)

The first to invent rule is arguably the "third rail" of the US patent system.

The first to invent rule is arguably the "third rail" of the US patent system.

The new Patent Office Administration has hit the ground running.  In just a few months at the helm, David Kappos and his crew have rescinded the controversial continuation rules that had the patent community in an uproar for 2 years, advised the examiner ranks that patent quality does not equate to rejection of applications and has started realigning patent examiners’ workplace incentives so that they are less inclined to reject otherwise allowable applications.  These are all good signs that Mr. Kappos, as well as his boss Commerce Secretary Gary Locke, are serious about fixing the often-Kafkaesque bureaucratic mess that the US Patent Office has been over the past several years.  But, like many things we have seen from the folks in the Obama Administration, these efforts–which only 2 years ago would have seemed almost revolutionary–appear modest now that the Patent Office seems to be reaching for the “third rail” of the US patent system:  the first to invent rule.

By way of explanation, the US is the only industrialized nation that adheres a first to invent system.  This means that someone who files a patent application at a date later than another party can still end up with exclusive rights to their invention if they can make certain evidentiary showings to the Patent Office.  This system is in contrast to other countries, which follow a first to file system, whereby the first party to file a patent application wins against a second party–no ifs, ands or buts.  Other countries are understandably adverse to the US having a system that is not in conformance with the world patent community, and for many years there has been periodic discussion of bringing the US into conformance with our world peers.

I referred to first to file as the “third rail” of the US patent system because many people have strong opinions about the perceived criticality of this system to the viability of to independent inventors, US business and the US’ standing in the world.  Their views are held so strongly, they will not easily be moved off of their positions–even when presented with evidence that the ostensibly most sacred aspect of the first to invent system–the ability for a small inventor to prevail against a large corporation who steals her invention–are, in fact, highly insignificant to the patent process.

In this regard, in his new Director’s Forum blog, Mr. Kappos recently presented some real numbers regarding how frequently the first to invent system is actually used in the interference context. (For the non-patent geek, an interference is a proceeding where two parties effectively “duke it out” using very precise and strenuous standards.  The effort and expense involved in an interference proceeding is akin to a patent litigation, and the rules involved are so arcane that only a small number of patent practitioners can honestly hold themselves out as experts in the area.)  Mr. Kappos presented some very telling numbers to demonstrate that interference proceedings are actually very insignificant to the US patent system as a whole.

Specifically, Mr. Kappos related statistics that indicated that in 2007 (the latest year for which statistics are available), only 7 patents were granted on the basis of a priority claim, and, of these, only 1 case involved a small or medium sized entity. This makes it seem a bit like a non-issue, right?  Wrong!  For those who believe the first to invent system is sacrosanct, changing our system to bring it in better conformance with the rest of the world would be akin to eviscerating the fundamental premise of the US Patent system–as that system is defined in their own minds.

Certainly, there is much wrong with a true “first to file” system.  Adoption in the US would result in a race to the Patent Office, whereby the first party to file a patent application would win–no questions asked.  Independent inventors and small to medium sized entities are rightfully concerned about adoption of a true first to file system in the US for at least the following reasons:

  • Large companies almost always have more knowledge and better resources than smaller organizations, and so can be expected to prevail in a first to file system.
  • A first to file system would be bad for business as a whole–both large AND small, because it would motivate people to file patent applications before the invention was fully “baked” in order to stake one’s claim to the invention.  This will result in businesses wasting money on premature filings and, perhaps as important, will take business people’s attentions and resources away from determining whether an invention will result in generating business value.  This system would also require applicants to file continuation-in-part applications to attempt to capture invention improvements that resulted from additional research and development efforts conducted on the road to commercialization of an invention.  Costs and the complexity of the US patenting process would be significantly increased for all sized organizations.  Moreover, for those entities that cannot afford serial filings, or that do not have the sophistication to do so, it is likely that the early stage invention filing will not adequately cover the commercial product, thus leading to a lower overall value for those companies where patent protection is a critical aspect of the business.
  • The filing of “just in case” or “placeholder” inventions would cause unintended negative consequences for the Patent Office because the inventions claimed will likely not be fully fleshed out, making them difficult to examine, which will result in more complicated and contentious examinations.  The already-strained examiner corps will experienced increased frustration and applicants will continue to feel that the Patent Office is not a partner, but an adversary in the examination process.  These problems will more than outweigh any increased fees resulting from serial continuation filings (as far as the rules will allow) that will result from the filing of improvement applications by applicants.

Put simply, I believe that adoption of a true first to file system will be a “train wreck” for the business of all sizes, as well as the US Patent Office.

But Mr. Kappos’ remarks seek to clarify that the changes being proposed would not award patent rights to the first to file but, rather, the first inventor to file.  In Mr. Kappos’ words:

[T]here is no risk of someone who learns about your invention being able to beat you to the patent office; because they’re not an inventor.  As you know, any filer has to sign an oath and declaration under penalty of criminal sanctions.

This statement comports with the overriding policy of the US Patent System:  to reward those who disclose their inventions over those who choose to keep their innovations from the public.  Moreover, a first to file system would arguably be an expansion of this disclosure policy:  it would affirmatively recognize in the Patent Act that patent rights are a significant purpose of the patent application proceeding.  That is, the vast majority of the pre-issuance provisions in the US Patent Act are directed toward ensuring that someone is not granted a patent to the detriment of the public’s right to have access to the claimed invention (in other words, they are not obtaining exclusive rights to an invention that should be freely available to the public).  By rewarding the first inventor to file with a patent, the US would expressly acknowledge that it intends to reward first person who wants to own the invention, as opposed rewarding the person who seeks to disclose in exchange for ownership of that invention.  Put another way, the US patent laws would finally expressly acknowledge the motivation of ownership in the patent application stage, instead of only in the post-grant (i.e., enforcement) phase.

A significant push-back I have to Mr. Kappos’ assertion is that I do not agree that the requirement of a inventor to declare on penalty of perjury that she is the first inventor provides adequate protections against misappropriation of inventions.  Someone who misappropriates an invention and races to the Patent Office to file an application presumably will have no compunction against also falsifying an oath or declaration.  Moreover, without objective evidentiary requirements, one seeking to provide evidence that they were in fact the first inventor would effectively have to get into a credibility contest with the other party.  At its core, this credibility contest would be very similar, if not identical, to an inter parties interference proceeding.

If Mr. Kappos really wants to show that the US seeks to presumptively reward the first inventor to file, I believe he needs to acknowledge that the evidentiary aspects currently in existence are critical to making this happen.  In my opinion, inventors should be able to do at least the following to show that they are the first (and true) inventor:

  • Inventors should still be able to present evidence in prosecution to “swear behind” references (that is, to show their claimed invention predates a publication or the like).  Being able to swear behind a reference is a critical feature of our system because new innovations rarely are sui generis.  Rather, most innovations occur because there is a recognized need in the marketplace, and, typically, more than one entity is working on solving that same problem.  A person who solved that problem first and who sought to disclose the invention to the public (and, of course, own it exclusively) should not be penalized due to cost issues, administrative inefficiencies or a lack of sophistication about the rather arcane nature of the various patent laws.
  • The one year grace period should not be changed.  This one year grace year period, which also exists in Canada and Mexico, allows inventors more fully “bake” the business aspects of their invention, or to generate income or gain investment that will them to better commit resources to the filing.  Maintaining the grace period also should not be an issue with regard to bringing the US into conformance with other countries because several major industrialized countries outside of North America also have grace periods.

In short, I believe that for the US patent system to truly reward the first inventor to file, it must do more than rely on the good faith of patent applicants of the truth of their oath or declaration that they are the first and true inventor of the invention claimed in their application.  To do so would make it appear to provide those who were victims of invention theft a cause of action for misappropriation of their invention in a litigation proceeding, instead of providing them an opportunity to gain exclusive rights to their invention by awarding them a patent.  As indicated by Mr. Kappos’ comments, it appears that those who were working on innovations in parallel with others, but who for whatever reason could not make it to the Patent Office first, would not have any ability to prove that they were actually the first to invent under the changes currently being proposed.  As I currently understand it, such a system would in fact be a true first to file system, unless one could prove the invention was stolen (or “derived” from someone else in parlance)  from them.

Given Mr. Kappos’ numbers about the actual value (or lack thereof) of interference procedings, my current view is that the US stands to lose little by eliminating these inter parties priority contests. Indeed, the people with the most to lose from this are the relatively small group of experts, most of whom are employed at patent specialty firms, who generate significant income from their knowledge and experience in navigating the arcane rules of patent interferences.  (See for example, this estimate from Oblon, Spivak of $250K to $1MM for the cost of an interference proceeding.) However, I believe it will always be critical for the US to maintain the ability of an applicant to demonstrate that her invention occurred before the date of a publication by submitting the appropriate evidence of an earlier date of invention, as long as she filed her patent application first.

Perhaps the answer is to go to a system that says one can swear behind publications, but not previously filed patent applications that claim the same or similar invention.  This would reward the first patent applicant who sought to claim an invention, but would still allow an applicant who was the first party to seek patent protection for the invention.  In other words, this would effect the policy stated by Mr. Kappos to “reward the first inventor to file.”

Admittedly, I have not studied the Patent Reform provisions currently before Congress, and may be missing a significant portion of the proposals that might assuage some of my concerns.  However, others, such as Dennis Crouch of the great Patently-O blog, also clearly have concerns about elimination of the swear-behind and related priority rules(Patently-O is currently conducting a survey for those interested in weighing in on the subject.) At a minimum, then, Mr. Kappos and those aspects of his organization charged with communicating Patent Office policy and changes thereto to the public need to do a better job of explaining to both patent practitioners and the business public that the proposed changes will serve to effect the interests of US business, as well as the fundamental policy of the US Patent System, as opposed to being merely a way for the US to capitulate to the desires of other industrialized  countries that our system be more in conformance with their patent laws.

photo credit:  Flickr/Infinite Jeff

3 thoughts on “A Closer Look at the Patent Office’s New Conversation about Adoption of a “First to File” Rule and a Proposal for a Win-Win for the Patent Office and Inventors

  1. Pekka Valkonen (Mr.)

    Do not forget former head of USPTO, Gerald J. Mossinghoff and his article “The U.S. First-To-Invent System Has Provided No Advantage To Small Entities.*
    But of course for patent agents and patent lawyers clear, unambiguous First-To-File system will be “train wreck”, which will not provide extra income in interference proceedings.
    First-To-File system adds certainty and as rule of thumb more certainty means better for business.

    *
    http://www.ipfrontline.com/depts/article.asp?id=586&deptid=4

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  3. Pingback: Guest Poster David Boundy of Cantor Fitzgerald: A Detailed Examination of What the Proposed First to File Legislation Means to Business – IP Asset Maximizer Blog

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