Untangling The Real Meaning Of "First-To-File" Patents

Note: This is the first of a series of articles on the America Invents Act (AIA), the sweeping patent reform legislation signed into law in September 2011.

The most widely discussed feature of the AIA is the impending replacement of the longstanding “first-to-invent” system with what is commonly--and somewhat inaccurately--called a “first-to-file” system. The first-to-file provision will apply to patent applications with an effective filing date of March 16, 2013, or later. In the fast-moving world of technology companies, that might seem like a lifetime in the future. 

But there are at least three very good reasons to start planning for this change now. 

First, the new first-to-file system will fundamentally alter the role of public “disclosures” in preserving the patentability of an invention. Disclosures can include presentations and demonstrations at trade shows, official postings on company websites, and even unauthorized postings by company employees on social networking sites. For all but the smallest companies, it will take significant time to ensure that everyone who communicates with the outside world about company technology--including executives, managers, marketers, developers, and salespeople--is fully aware of the new landscape regarding disclosures.

Second, a company can use the time between now and March 16, 2013, to file patent applications that will be pending during the transition from first-to-invent to first-to-file. As I’ll discuss in a later post, that presents the opportunity to create some very interesting and potentially valuable options with respect to downstream patent applications.

Third, the first-to-file system will create some new exposures with respect to intellectual property (IP) security. In a future post, I’ll discuss the nature of these exposures and some steps that companies can take to help reduce the risk of becoming victims of IP theft.

But first, an explanation of “first-to-file”:

The term “first-to-file” can evoke images of a race to the patent office, and there are indeed scenarios in which the patent will go to the winner of just such a race. However, that is far from the whole story. 

Consider, for example, the case of an employee at Company A, who conceives an invention in May, works diligently to reduce it to practice, and files the corresponding patent application in August. Suppose, further, that an employee at Company B independently conceives the same invention in June and files for a patent in July. 

Who gets the patent? Under the pre-AIA first-to-invent rules, Company A can get the patent because its employee invented first. However, under the new first-to-file system, things will be more complicated.

If Company A does not make any public disclosures regarding the invention before the August filing, Company B can get the patent by virtue of its earlier filing date. This is exactly what would be expected given the term “first-to-file.”

On the other hand, suppose that Company A describes the invention in detail (or in more formal terms, provides a disclosure) at a trade show, before a disclosure or a filing by the second company. In this case, Company A can get the patent even though it filed after Company B. This isn’t at all what you’d expect in a system termed “first-to-file.” 

Why does this happen? The pre-filing disclosure by the first company starts the clock ticking on a one-year “grace period” that, under the AIA’s first-to-file rules, is not only protective with respect to Company A's U.S. rights to the invention, but also removes the ability of anyone else, including Company B, to obtain such rights. Thus, an early disclosure can be beneficial with respect to U.S. patent rights.

However, there is a hitch: The same disclosure that can help capture U.S. rights to an invention under the grace period in the AIA’s first-to-file provision can eliminate those rights in the many international jurisdictions that do not recognize a grace period. 

So what should companies do? Here are some recommendations:

  • One strategy that can preserve both U.S. and international rights, under both the current first-to-invent rules and the new first-to-file rules, is to ensure that every public disclosure of a potentially patentable invention is preceded by a patent application or a sufficiently detailed provisional application filed with the U.S. Patent and Trademark Office (PTO). But it isn’t always practical or financially feasible to do this for every single company invention.
  • American companies should perform an early analysis of company inventions to determine if they should be patented in the U.S and internationally, in the U.S. alone, or held as trade secrets. The first-to-file provision of the AIA increases the incentives to perform this analysis in a timely manner, and then to take action accordingly. (Non-American companies should also perform an early analysis of their inventions, but in many instances they may elect to initially pursue patent protection in their home countries, and then to expand that protection “internationally” to include the U.S. and other countries.)
  • For those inventions that a company wishes to patent only in the U.S., inaction can be costly under the AIA’s first-to-file provision. To the extent that a company remains quiet about an invention while contemplating whether or not to file for patent protection, it stands exposed to the possibility of losing the right to obtain a patent if a competitor files--or discloses--first. 
  • Some companies may find themselves targeted by competitors’ disclosures designed specifically to foreclose patent opportunities. To reduce their vulnerability to such attacks, companies can engage in preemptive “defensive” disclosures, but must be mindful of the impacts of these disclosures on their own patent filing deadlines and international rights.
  • If a company intends to use a disclosure at an event such as a trade show to establish U.S. patent rights under the grace period in the AIA, the information presented should be sufficiently complete and detailed. And, once a company has started the clock ticking on the grace period, to avoid losing patent rights it must make a suitable filing with the PTO within one year of the first disclosure of the invention.

An additional challenge is that the AIA does not specifically define what constitutes “disclosure” sufficient to preserve patentability under the new first-to-file rules. While it is clear that a detailed presentation at a trade show would typically be a disclosure, suppose that the same information is instead posted in a difficult-to-find section of a company web site and then taken down after two weeks? Or two hours? Suppose that a disclosure is only partial? Is the commercial release of a product containing an invention a disclosure? The definitive answers to these questions will need to wait for the inevitable court tests.

So where does all of this leave things? The short answer is: it’s complicated. However, despite this complexity, there are plenty of concrete steps that companies can take to successfully navigate the AIA’s first-to-file rules. As noted above, those rules will apply to patent applications with an effective filing date of March 16, 2013 or later. In addition, between now and March 2013 there are some unique opportunities for companies to boost the value of their IP portfolios by taking advantage of the impending transition from first-to-invent to first-to-file. In the next post, I’ll discuss how.

--Author John Villasenor is a nonresident senior fellow at the Brookings Institution and a professor of electrical engineering at the University of California, Los Angeles. Email him at villa@ee.ucla.edu or follow him on Twitter @johndvillasenor.

[Image: Flickr user Rachel Gardner]

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2 Comments

  • Daniel Taylor

    It's good to see a business-focused discussion about a topic that often gets mired in the intricacies of administrative law. Much of the AIA analysis is focused on the statutes, but the real meat of things will be in forthcoming changes to 37 CFR.

    You mention some specific examples of "disclosures" and some excellent questions for business managers to ask. Fortunately, we don't have to wait for "court tests" to get answers to your questions about prior art, as much of the case law is already well documented in MPEP 2128.01. The implicit disclosure of an invention in the commercial release of a product is covered in MPEP 2133.03(b).

  • staff staffer

    “America Invents Act”

    “This is not a patent reform bill” Senator Maria Cantwell (D-WA) complained, despite other democrats praising the overhaul. “This is a big corporation patent giveaway that tramples on the right of small inventors.”

    Senator Cantwell is right. Just because they call it “reform” doesn’t mean it is. The agents of banks, huge multinationals, and China are at it again trying to brain wash and bankrupt America.   

    They should have called the bill the America STOPS Inventing Act or ASIA, because that’s where it is sending all our jobs.

    The patent bill is nothing less than another monumental federal giveaway for banks, huge multinationals, and China and an off shoring job killing nightmare for America. Even the leading patent expert in China has stated the bill will help them steal our inventions. Who are the supporters of this bill working for??

    Patent reform is a fraud on America. This bill will not do what they claim it will. What it will do is help large multinational corporations and maintain their monopolies by robbing and destroying their small entity and startup competitors (so it will do exactly what the large multinationals paid for) and with them the jobs they would have created. The bill will make it harder and more expensive for small firms to get and enforce their patents. Without patents we cant get funded. In this way large firms are able to play king of the hill and keep their small competitors from reaching the top as they have. Yet small entities create the lion's share of new jobs. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” This bill is a wholesale destroyer of US jobs. Those wishing to help fight this bill should contact us as below.

    Small entities and inventors have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. The smaller the firm, the more they rely on patents -especially startups and individual inventors. Congress tinkering with patent law while gagging inventors is like a surgeon operating before examining the patient.

    Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

    Please see http://truereform.piausa.org/d... for a different/opposing view on patent reform.
    http://docs.piausa.org/