The America Invents Act gives the Patent Act a Facelift: Establishing Chain of Title under a First-to-File System

Since the adoption of the federal patent Act of 1790, patent law in the United States has remained a dynamic area of legal practice as it continues to wrestle with the unique challenges that could only arise in a field where attorneys arm themselves with engineering and science degrees in order to keep up with their clients and zealously protect their inventions. After undergoing significant changes in the 1952, the Act saw its most comprehensive changes with the Leahy-Smith America Invents Act (the “AIA”). Although some changes took effect upon the acts enactment in September 2011, the most significant amendments to the Act went into effect on March 16, 2013 –yup, that’s just three months ago. While patent attorneys and major tech companies like Google, Microsoft, and IBM have scrambled to assess the amendments made by the AIA, it is important for the modest inventor or small tech firm to get a grasp on some of the more significant changes made to the Act by the AIA, especially the change from a first-to-invent to a first-to-file patent system.

Why should you care about this change?

Perhaps the most significant change to the American patent law system by the AIA was its move from a first-to-invent to a first-to-file system (a change which brought the United States into conformity with international patent community). This move to a first-to-file system is particularly important as it touches upon one of the most fundamental concepts of patent law –chain of title.  In all areas of law, when an individual or entity is said to have “title” to some form of property (such as house, a car, a movie script, or a patent), that individual or entity is considered by law to be the owner of such property and may enjoy such property exclusively. The right to exclude others from enjoying your property is a right inherent to all property that can be owned and it permits the owner to selectively share his property with others (for a low or exorbitantly high price depending on the value of the property and the demand for it). While many inventors would happily disclaim any and all rights to their patented inventions for the right dollar amount (see US 5771354 by Christopher Crawford), a handful of inventors own start-ups or work for companies which seek to retain their patents in order to build a strong patent portfolio. A strong portfolio can then be used to license out specific and limited rights to customers and competitors who seek to utilize the invention in some way.

As with all forms of property, even novel inventions will lose all or most of their value eventually. In this day and age, this is likely to happen much sooner than later, with patents in particular, as science and technology continue to progress rapidly and as global engineering firms and labs compete vigorously (often waging war in court) so they may be the first to reach a breakthrough innovation or discovery which can be subsequently patented and exploited. Given the amount of competition and the resulting decrease in a potential invention’s value as competitors get closer to claiming the same discoveries, it is necessary for all inventors (or inventors-to-be) to understand how the AIA impacts their legal rights during the invention process so that hard work and years of research do not go to waste.

So what are these changes?

Prior to the enactment of the AIA, the U.S. Patent and Trademark Office determined priority between two competitors for the purpose of awarding a patent on a first-to-invent basis. At that point in time, the U.S. was the only country which still subscribed to this system (Canada and the Philippines having switched to a first-to-file system in 1989 and 1998 respectively). Essentially, if you were the first to conceive a novel idea and subsequently reduced it to practice, it would not matter if someone else had disclosed the same invention in a publication after your date of invention, so long as you could prove that your date of invention was indeed prior to the competitor’s disclosure.  In the United States, the date of invention is established after two critical steps are completed: (1) Conception and (2) Reduction to practice. Conception is merely a mental act or process which takes place in the inventor’s head through which the inventor arrives at a definite and permanent idea of their invention. However, much to the dismay of many self-proclaimed idea-originators, priority would not be granted until the inventor could reduce their conception of their invention to practice. In order to satisfy this second element, an inventor had to prove that he or she constructed an embodiment or performed the processes which met all the specifications of the invention, or the invention would be considered constructively reduced to practice upon the inventors filing of their patent application. Thus, prior to the AIA, once these two elements were met, a date of invention was established, and so long as the inventor’s date of invention occurred prior to that of his competitors, that inventor could take his or her sweet time filing at the PTO.

Under the first-to-file system, effective March 16, 2013 (when the AIA went into effect), if that inventor I just mentioned still hasn’t filed their application, they will be out of luck if a competitor with a later date of invention wins the race to file an application for the same invention at the PTO. This new system brings the U.S. into line with the rest of the world, while also bringing with it many advantages to our patent system. One clear advantage of the first-to-file system is the avoidance of expensive and drawn-out interference proceedings necessary under the first-to-invent system in order to determine who the first inventor was to conceive the invention and diligently pursue its reduction to practice.  This change gives greater security for prospective patentees who conduct the best patentability search possible and determine there is no prior art that anticipates their invention or renders it obvious. In such a situation, an applicant may file without fear that an unknown party will suddenly interfere with the process by claiming that they were in fact the first inventors and therefore entitled to priority. Furthermore, this new system prevents inventors from sitting idly by with many unfinished or incomplete projects since putting something off to later time might mean losing out to a more committed inventor.

So should we be happy or sad about the change?

Under the contract theory of patents, inventors are granted exclusive rights to their inventions for a limited time so that no one else may exploit the same patent for the duration of its term without a license or assignment by the owner. In consideration for this limited term of exclusive rights, the inventor is expected to disclose the workings of the invention in their patent application (and eventually the issued patent) so that society may benefit from the innovation and build upon it moving forward. So according to the contract theory of patents, it makes sense that the moment an inventor files an application, he or she can be seen as offering to the public a disclosure of their invention, and after the painstaking process of prosecution comes to an end and no prior art is found to anticipate or render the invention obvious, the inventor is awarded with the patent for their contribution to society. I tend to agree with this take on the first-to-file system and hope that it will indeed have the effect of spurring inventors to finish projects the world might be benefiting from right now if it weren’t for complacency or a lack of competition. It seems to me that under this new system, scientists, engineers and inventors alike will not endeavor to take on new projects unless they intend to finish them, and fast, so they could be the first in time to file. This will result in higher levels of competition and innovation as inventors race to file than in a system where an inventor could potentially drag out the process of filing, and therefore, society will certainly reap the benefits of these inventions sooner than later.

On the other hand, some see this change as constitutionally invalid since Article I, Section 8 of the U.S. Constitution mentions “inventors” when discussing the grant of IP rights, and technically speaking, an inventor is the first person to invent something. Thus, the argument here is that the change to a first-to-file system ignores the Constitution’s mandate that inventors (defined as those who are first to invent something) be granted exclusive rights for a limited time to their writings and discoveries.

Whether the move to a first-to-file system is a good or bad thing remains to be seen as the AIA’s significant changes have only been in effect for three months and many of the potential issues have not yet found their way to the court room. One thing that is clear, however, is that the rest of the world has adopted this first-to-file system and the U.S. is the last on the bandwagon, so maybe the rest of the world is onto something! There are countless other changes that have been made to the AIA, some more significant than others, and while IP attorneys should definitely get intimately acquainted with these changes, so should anyone who is considering filing a patent on their own! In the meantime, check out this incredible useful reference chart created by the Intellectual Property Owners Association to see select changes made by the AIA in comparison the pre-AIA act.

Ali Bushra
Law Clerk