THE NEW U.S. PATENT LAW: WHAT IMPACT ON CHEMICAL INVENTIONS?

Adda C. Gogoris, S. Peter Ludwig, and Jason M. Schwent

Darby & Darby, 805 Third Avenue, New York NY 10022.

1 ABSTRACT

On November 29, 1999, President Clinton signed the most important revision of the U.S. patent statute since 1994, and arguably since the original enactment of the statute in 1952. Although the new law is named the American Inventors' Protection Act, it is no protectionist's tool. Its major provisions affect US. patents in more or less the same manner, regardless of the nationality of the patent holder.

In this paper, we briefly outline the major changes in the law and attempt to assess their impact on patents in the chemical field. Of course, an in-depth evaluation of its impact is not possible this early in the life of the new statute since the U.S. Patent & Trademark Office ("USPTO") has not yet passed regulations to implement the law, and the courts have not yet interpreted it in their decisions. Nevertheless, even a preliminary analysis reveals advantages and disadvantages of the new statute, and suggests strategies that can be used to reap some of its benefits and to avoid some of its pitfalls.

2 INTRODUCTION

The following six changes in the U.S. patent law are most important for chemical inventions:

1. Publication of Applications: The vast majority of U.S. patent applications will be published - they will no longer be kept secret until grant of the patent.

2. Liability for Infringement Before Patent Grant: An infringer's liability can begin upon publication of a patent application, i.e. long before a patent is issued.

3. New Defense: A Prior User of a Business Method Avoids Infringement of a Later Patent: Under prior law, the first inventor of a method or product patented by another may nevertheless be liable for infringement. The new law allows the first inventor of a business method only to avoid liability for infringement under certain circumstances.

3. Extension of the Patent Term to Compensate for USPTO Delay: The USPTO will postpone patent expiration to make up for time lost as a result of the USPTO's delay in processing the patent application.

5. Co-Workers' Patents/Patent Applications Are Not Prior Art: Unless patented or published more than one year prior to the filing of a patent application, patent/applications of an inventor's co-workers cannot be used to deny him/her a patent.

6. Contested Patent Reexamination: The challenger of a patent now has the option of participating actively in reexamination of the patent by the USPTO.

The foregoing changes advance two main policies: harmonization of U.S. patent laws with the laws of other countries (changes #1, 2, 3 and 6 above) and greater accountability by both the private and the public sector (#4 and 6). Implementation of these policies ultimately increases certainty in business and decreases the cost of obtaining patents.

The degree to which these policies have been served by different aspects of the new law varies greatly, however, often as a result of political compromise.

But let us examine each of these important changes separately.

3 PUBLICATION OF APPLICATIONS

Until now, U.S. patent applications were maintained as secret until a patent was granted.2 This treatment contrasted with that of most other countries which publish all patent applications 18 months after their filing. In the ever shrinking global community, the vast majority of those who apply for a patent in the United States also seek patent protection internationally. Therefore, secrecy of only the U.S. patent applications arguably afforded these applicants no advantage since the same subject matter became publicly available through publication of the corresponding non-U.S. applications.

A number of U.S. patent applications, however, lack non-U.S. counterparts. Most of these applications are owned by individuals, small companies and universities, although, occasionally, large companies decide to pursue patent protection only in the United States. Such US.-only patent applicants opposed publication of U.S. applications because they perceived that secrecy shielded them for a limited period of time from competitors with greater resources. They argued that, without secrecy, their competitors could gain early access to the basic ideas in their patent application, adapt them quickly beyond the scope of the patent, and dominate the marketplace.

However, the very secrecy thought to be beneficial by these patent holders, also makes it difficult for businesses to evaluate the risk of patent infringement. Businesses (large and small) commonly ask for legal advice on whether their activities will infringe patents owned by their competitors. In response, lawyers identify and study relevant patents, render opinions as to whether an infringement problem exists, and sometimes suggest modification of commercial practices to avoid infringement.

Prior to the present reform, it was often difficult to determine whether any pending U.S. patent applications posed an infringement risk. The only available means for U.S. attorneys to assess the potential risk of infringement presented by pending U.S. applications was to look to published corresponding non-U.S. applications. While lawyers analyzing these non-US. publications were routinely able to make some judgment as to whether a commercial activity might someday infringe a U.S. patent, the analysis had serious limitations.

Analysis of counterpart patents in other countries (when available) often did not provide sufficient information upon which to assess whether a pending U.S. patent application poses an infringement risk. Occasionally, U.S. patent applications have protracted pre-issuance proceedings in the USPTO, which may cause them to remain pending for many years. Since these proceedings are also shrouded in secrecy, it was impossible for a competitor to determine whether a particular U.S. patent application was still pending and whether it was likely to mature into a patent that might be infringed. In addition, patent applications pending outside of the United States often do not correspond to the patent that ultimately issues in the United States as the scope of a U.S. patent need not be identical to that of its non-U.S. counterparts. A company might first obtain a narrow patent, e.g., in Japan, and several years later a broad patent in the US. In addition, patent applicants compounded the uncertainty by employing different patent strategies in different countries.

All of this made it more difficult to evaluate the risk of patent infringement. In extreme cases this uncertainty manifested itself in so-called "submarine patents." Applications for such patents lie in secrecy prior to their grant, eluding the industry's attention. When they "surface'' upon issuance, years after filing and often after competitors have made a substantial investment, they take the industry by surprise. Competitors are forced to pay large sums for licenses...