America Invents Act – A Look at its Substantive Effect Five Years Later

October 2016

By: Thomas McNulty 

The America Invents Act (AIA) was signed into law September 2011. The law provided for a number of changes to the U.S. patent system, with the goal of improving the process. A few notable changes included the change from first-to-invent to first-to-file system, substantive changes to the patent marking law, and post-grant procedures to challenge issued patents at the PTO. This month, we are focusing our TIPPs on the ways in which the AIA has changed patent practice in the United States.

Patent Backlog

One of the purposes of the AIA was to reduce the backlog of pending patent applications and streamline prosecution. According to the U.S. Patent and Trademark Office (USPTO), these goals are trending positively. The current backlog is about 550,000, down from over 700,000 in 2011and nearly 30 percent lower than its 2009 high. Pendency from filing to first office action has also been reduced from 28 months to 16 months, and overall pendency from 33 months to 26 months.

First-To-File

The change to a “first-to-file” system, while retaining the one-year grace period as to an inventor’s own disclosures, was designed to harmonize U.S. law with international law with the hope that other countries would move to implement a similar one year grace period. However, thus far, that hope is unrealized, although discussions among the IP5 – U.S., Europe, Japan, China, and South Korea – are on-going.

On-Sale Bar

 Prior to 2011, any sale of a patented product prevented inventors from obtaining patents due to the on-sale bar. So-called “secret” sales, as when a pharmaceutical company contracts with a manufacturer to produce a product it subsequently seeks to patent, would trigger the on-sale bar. The AIA changed this, stating that subject matter is patentable unless it was “in public use, on sale or otherwise available to the public before the effective filing date.” The meaning of this clause is the subject of an appeal that was argued this month at the Federal Circuit, in which the district court declined to apply the on-sale bar because it determined that, under the language of the AIA, this sale still was not sufficiently public. Resolution of this appeal should shed light on how this change will be interpreted.

Supplemental Examination

The AIA’s supplemental examination procedures allow patent owners to rectify potential issues relating to inequitable conduct by having the PTO make a determination as to whether such errors were material to the allowability of the issued claims. In the five years since implementation, however, supplemental examination has been little-used for a variety of reasons, including the difficulty in meeting the USPTO’s requirements and the tightening of the standards for proving inequitable conduct by the courts.

Inter Partes Review – Institutions

In the first year of its existence, Inter Partes Reviews (IPR’s) were instituted on 87% of all IPR requests, leading many to assume that institution was all but nearly automatic. Since then, however, the institution rate has declined to 74% in the second year and has settled at about 66%. This decline in institution rate suggests that greater care should be taken in preparing IPR requests because they are no longer being granted as a matter of course.

Inter Partes Review – Results

Moreover, while success rates in IPR’s has generally been high, with about 70% of all instituted proceedings resulting in all claims of the subject patents being cancelled, the success rate seems to be trending downward. In three of the last four reported months only 50% of IPR decisions cancelled all of the claims. It is not all good news for patentees, however. Less than 25 percent of all instituted proceedings resulted in an affirmance of all challenged claims.

Substitute Claims in Inter Partes Reviews

One of the protections afforded patentees subject to IPR is the ability to propose substitute claims, to overcome prior art that was never put before the patentee during prosecution. This protection has proven to be largely hollow, however, as the PTO established rules that render amendment nearly impossible. In fact, it was not until May 2014 that the first proposed substitute claim was actually entered. As of April 30, 2016, the PTO had rendered a decision on 118 motions to add substitute claims, of which only two had been allowed in full and only four in part. 95% of all motions to amend the claims were denied entirely.

Joinder Changes

The AIA sought to limit the practice of naming multiple defendants in a single infringement lawsuit, restricting such suits to circumstances where there are questions of fact common to all defendants. However, many courts consolidate separate cases involving the same patent(s) for pretrial purposes, including discovery and claim construction, splitting them into individual suits only for trial. This has likely muted some of the benefits the AIA sought to provide to patent infringement defendants, as it forces defendants to work together on claim construction, despite having potentially divergent views on the correct interpretation of the claims.

Virtual Marking

In general, patentees must mark their products with any applicable patent numbers as a prerequisite to collecting infringement damages. The AIA made this requirement easier to achieve, allowing companies to indicate a website at which patent marking information is available. This greatly simplifies the addition or removal of new and expired patents, making compliance easier to achieve. In the five years since the AIA was enacted, many companies have shifted to a virtual marking system.

False Marking

Prior to the enactment of the AIA, claims could be brought by anyone alleging that a product was falsely marked with a patent number and obtain significant statutory damages. In light of a flood of such cases, the AIA limited potential plaintiffs in false marking cases to direct competitors or the government. The AIA also clarified that marking with an expired patent is no longer a violation, and placed limits on damages that could be obtained. As a result, suits claiming false marking have been dramatically reduced.