What Patent-Law Reform Means for U.S. Manufacturers

What Patent-Law Reform Means for U.S. Manufacturers

'No longer can you invent first, be diligent, go to commercialization and then rely on that first date of invention' to win a patent battle with someone who files earlier, attorney John Kastelic says.

Beginning on March 16, 2013, the patent-filing process in the United States is going to become more like the patent-filing process in other countries.

Whether that's a good thing or a bad thing is a matter of conjecture. But the bottom line, patent attorney John Kastelic said Wednesday, is manufacturers need to be aware of an impending change to the U.S. patent process, because it could impact your business.

Under current U.S. patent law, patents are issued to applicants who can prove that they were the first to invent a particular product or process. To make the U.S. patent system more consistent with other industrialized nations, that's going to change beginning in March 2013.

"As of March of next year, you need to file a patent application before someone else in the U.S. if you are to win out in the inventorship battle," explained Kastelic, who is vice president and chief intellectual property counsel for Cleveland-based Eaton Corp. and president of the Cleveland Intellectual Property Law Association.

Patent attorney John Kastelic at the 2012 North American Manufacturing and Invention Expo in Cleveland

"No longer can you invent first, be diligent, go to commercialization and then rely on that first date of invention [to win a patent battle with someone who files earlier]."

So, what does the shift from first-to-invent to first-to-file mean for manufacturers? That depends on "who you are," Kastelic said during a presentation at the 2012 North American Manufacturing and Invention Expo in Cleveland.

"If you're a multinational corporation with a global patent portfolio, it's probably not all that significant, because you've been working and selling in a lot of different regions of the world where there is this first-to-file rule in place already," Kastelic explained.

"So, if you're selling in Europe and Asia, you've had to comply with these requirements in those regions."

If you're a sole inventor, or a company that exclusively conducts business within the United States, however, "this is going to be a pretty significant change for you," he added.

"If either you as an inventor or someone in your company, as an engineer and/or scientist-inventor, comes up with an idea, you're going to need to move a little faster on filing your patent applications," Kastelic said.

Most large companies have mechanisms in place -- such as patent-review committees -- to manage the patent-filing process.

However, if your company doesn't have any such system in place, Kastelic advised taking a hard look at your inventions and making "decisions early on as to whether or not you should file a patent application, even if you don't think it's particularly ready."

America Invents Act

The shift from first-to-invent to first-to-file is just one provision of the America Invents Act, which President Obama signed into law on Sept. 16, 2011. The aims of the legislation, Kastelic summarized, are to:

  • Make the U.S. patent laws more consistent with those of other industrialized nations.
  • Reduce the number of lawsuits challenging patent validity.
  • Expedite the approval of patents. (The U.S. Patent and Trademark Office has a backlog of some 700,000 patent applications.)
  • Improve the quality of patents issued by the U.S. Patent and Trademark Office.

The patent-reform legislation finally saw the light of day after decades of failed efforts in Washington, Kastelic noted.

"There were numerous efforts back in the 80s and 90s to get patent reform rushed through Congress," Kastelic said. "It just never happened. There was always some sort of obstacle -- some lobbying group, some political party that didn't want to push it through. It always got stuck in committee. It never really came up for votes.

"Until now."

Protecting Your Manufacturing Processes

When President Obama signed the America Invents Act into law on Sept. 16, some of the changes to the U.S. patent system took effect immediately, while a few others -- such as the first-to-file process -- will kick in on March 16, 2013.

One that took effect right away was the addition of a "prior-commercial-use" defense to fight patent-infringement claims.

A bit of background: "In the past, if you had a manufacturing process that you considered trade secret and you kept behind curtains and you had employees sign agreements to prevent them from disclosing it when they left the company, and that process gave you a competitive advantage -- so it satisfied the definition of 'trade secret' -- you could actually be precluded or enjoined from practicing that if someone else independently patented that process," Kastelic explained.

The perverse reality of the previous patent law was that a company could've been using what it thought was a proprietary manufacturing process for decades, only to be forced to stop engaging in that process by a competitor that patented it years later.

Not anymore.

The America Invents Act includes language that allows "prior commercial use" as a defense to such patent-infringement claims, as long as the defendant -- a manufacturer, in this example -- can prove that it has been engaging in that process for at least one year before the plaintiff filed for the patent.

"Under this new law, you are now able to defend against a lawsuit from somebody who comes along and later patents your proprietary process," Kastelic explained.

While the America Invents Act gives manufacturers some leverage to defend their unpatented but proprietary processes, Kastelic added that the onus is on those manufacturers to vigilantly document their processes.

There are a few caveats to keep in mind.

If a prior-commercial-use defense is successful, you can continue to engage in your proprietary manufacturing process, but you can't expand the process to additional factories or product lines.

"You basically need to maintain the scope of your process involvement moving forward," Kastelic said.

He also noted that the defense is personal, meaning that the right to assert the prior-commercial-use argument cannot be licensed to anyone else.

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