Programs: Science and Policy
AAAS Policy Brief: Patent Reform
Issue Summary | Resources
- Issues in Structuring the Patent System
- First-to-invent vs. First-to-File
- Willful Infringement
- Post-Issuance Review
- Prior User Rights
- Pre-Issuance Submission
- Recent Legislation
The United States patent system, founded on Article I of the U.S. Constitution, is largely hailed as a mainstay of American innovation. Section 8 of that Article provides that "Congress shall have power...to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."1
Patents provide inventors with property rights on their inventions, allowing them to exclude others from making, using or selling their innovations without their permission. These rights are provided in exchange for disclosure of the invention, which means that inventors must describe how to reproduce their invention and this information is released to the public.2 Patents do not provide the holder the right to make, use, or sell the invention themselves, as there are often other legal provisions such as marketing approval by the competent authority. However, once the product is approved, the patent holder has sole rights, usually for a period of twenty years, which enhances her ability to recuperate research investment. Patents thus theoretically provide both an incentive for private research investment as well as a mechanism for passing on the details of inventions in order for them to be expanded upon by future inventors. Disclosure is seen as an important step to bringing inventions into the common pool of knowledge from which future innovations can be made.
Most patent systems require that an invention be novel ,3 non-obvious ,4 and useful 5 in order to receive a patent. The U.S. does provide Plant Patents , which are granted "to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant," and Design Patents , "to anyone who invents a new, original, and ornamental design for an article of manufacture."6 These two types of patent lack the requirement for usefulness, thus differentiating them from Utility Patents, which are granted for "useful processes, machines, articles of manufacture, and compositions of matter" and are frequently referred to by the simple designation "patent." Patents should also not be confused with copyrights , which cover works of authorship that have been tangibly expressed (such as writings, music, and works of art) and provide protection for the life of the author plus seventy years, or trademarks , which protect words, names, symbols, sounds, or colors that distinguish goods and services and can be renewed forever as long as they are being used in business.7
The U.S. provides patents in "all fields of technology," as is required of all member countries of the World Trade Organization by a foundational treaty of that body.8 However, these requirements do allow nations to exempt certain fields from patent coverage based on concerns for public interest or morality. The governments of some nations, for example, exclude patents on animal or plant varieties based on morality concerns as to the ethics of providing patents on life, as well as the economic and environmental impacts associated with doing so. Additionally, patents are generally not available throughout the world for mathematical formulae and products of nature. Both of these areas have controversial aspects, however, computer programs and patents on biotechnology being some of the most highly contentious matters.
The U.S. patenting system has undergone few changes in its long history. This fact combined with the recent rise in prominence of patents in the landscape of innovation has led to much discussion of how the American patenting system would best be structured. Several of the most contentious issues are: first-to-file vs. first-to-invent priority, calculation of damages, the doctrine of willful infringement, post-grant review proceedings, prior user rights, and pre-issuance publication of pending applications. These issues reflect concerns about the quality of issued patents, the expense and complexity of patent litigation, harmonization of U.S. patent law with the laws of U.S. trading partners, potential abuses committed by patent speculators, and the special needs of individual inventors, universities, and small firms with respect to the patent system.
The U.S. patent system currently awards patents based on the date of conception of the invention rather than on the date of filing for a patent, so long as the inventor worked to reduce the concept to practice and did not abandon the idea.9 This means that if two parties conceived of the same invention separately, the one who conceived of it first will be granted the patent, even if someone else filed a patent on the same invention before the first party was able to do so. In a first-to-file system, if two parties file for patents on the same invention, the first application received will be granted the application, provided that all other patent requirements are met. This does not mean, however, that an individual can copy another's invention and receive a patent because she filed first. First-to-file systems, used in the vast majority of countries, require that an inventor conceived of the invention herself in order to receive a patent.
Supporters of a change to a first-to-file system argue that it would lead to a more efficient patent system by removing the complicated, expensive and time-consuming process of determining who conceived of an invention first. They also say that it would bring the U.S. system into line with the systems of its major trading partners and that it would lead to greater legal certainty within innovative industries by providing a definite and readily determined date of priority of invention. Supporters of the current first-to-invent principle argue that the first-inventor-to-file system would encourage a "race to the Patent Office," which could result in lower quality patent applications and advantage large companies familiar with filing patent applications.10 Others disagree, however, stating that smaller outfits may be more flexible than larger ones and thus more capable of getting patent applications completed quickly.
Concerns as to the priority system also lead to concerns over the so-called "grace period." The U.S. system gives inventors one year from the date of publication of an idea to determine whether patent protection is desirable and then to file an application. Academic scientists have stressed the importance of this provision in encouraging the publication of research results, a keystone for science and technology research. Some argue that if no grace period were provided, parties would be encouraged to guard their results until they have determined if they would like to seek patent protection. Opponents of the grace period typically argue that it prevents the U.S. system from being brought fully into line with the patent systems of other nations.
Much of the debate over patents has come with regards to the way damages are awarded in cases of infringement. Currently, damages can be awarded based on the cost of the entire product produced by a patent infringer, not only the infringed portion, if "the patent-related feature is the basis for consumer demand."11 In all other cases, damages are meant to be assessed based on the contribution of the infringed invention to the market value of the complete product. Many parties argue, however, that the courts have been overly generous in assessing damages.12
The manner in which damages are calculated has distinct repercussions for different industries because various industries deal with highly divergent patent landscapes. In the pharmaceutical industry, for example, individual patents are perceived as critical because often only a handful and sometimes as few as one or two patents may cover a particular drug product. However, in software development innovations are typically cumulative and new products often embody numerous patentable inventions. Thousands of different patented inventions can be used in one single computer, for example. Thus, software representatives typically argue that if damages are awarded based on the cost of the entire product, rather than on the individual patent being infringed, it encourages opportunists with questionable patents to recover huge infringement damage awards based on the price of a product of which their patent may play a negligible role.13 There is also unrest with regards to patent "trolls," or parties that buy large numbers of patents and benefit from them while contributing nothing to innovation. Patents are indeed transferable, which allows parties to benefit from protecting inventions which they did not in fact invent, if the original holder voluntarily relinquishes ownership of the patent. There is a great deal of criticism of "non-practicing entities," which are parties which do not manufacture products using their patents, but make money by collecting money through licensing or through infringement suits. Supporters of damage reform often argue that these parties purposely buy low-value patents which form components of expensive products in order to win large sums in damages.
Pharmaceutical and biotechnology representatives, on the other hand, argue that in their industries the cost of one invention over prior knowledge does not necessarily reflect the research investment (which may span decades) nor the advantage provided by that new invention. Such proponents of the current system also argue that making it easier to provide smaller damage awards encourages patent infringement.14 Many small businesses, venture-capitalists, and independent inventors have joined forces with pharmaceutical and biotech organizations to fight infringement reform because they believe that decreased damage awards provide a way for large technology companies to capitalize on the innovations of small outfits by integrating such inventions into their products. Proponents of reform , on the other hand, argue that it is important for consumers to be able to purchase products that incorporate all of the most up-to-date technologies, and large patent infringement cases prevent them from selling such products at a low price.15
• Willful Infringement
If the court finds that infringement was " willful ," infringing parties can be charged triple the amount of compensatory damages.16 That is, the penalities are significantly greater if the plaintiff can demonstrate that the defendant knew of the patent prior to infringement. Proponents of revising this doctrine argue that the current system encourages inventors to purposely ignore learning about new patents in order to avoid allegation of willful infringement. Many proposals for patent reform would limit such "treble damages" to cases in which the plaintiff notified the defendant of the patent, claims and violation.
• Post-Issuance Review
Many critics of the current patent system argue that high costs of litigation discourage patent proprietors from bringing meritorious claims against infringers and encourage firms to license patents of dubious merit rather than contest them in court. Bringing an infringement case can lead to long court battles because accused infringers will often bring counter-claims against the validity of patents. Many parties have thus suggested the need for a new post-grant review process that would open up the patent system by allowing interested parties to weigh in on what they consider invalid patents without the need for litigation. USPTO does currently permit reexaminations, which allow any individual to cite a previous patent or printed publication in order to dispute the validity of a patent based on concerns as to its novelty. However, critics argue that the current re-examination system prevents parties from bringing many forms of evidence, such as nondocumentary information including evidence of sales or public use of the invention. Many parties also claim that the proceedings are complex and time-consuming. Proposals for a post-grant review system aim to provide a mechanism for a timelier, lower cost, and more efficient review of issued patents.
• Prior User Rights
If an inventor chooses to keep his invention secret instead of choosing to patent it, this prior invention does not prevent another inventor from later patenting the same invention. Parties may choose not to patent an invention if they believe that they can keep its details secret for longer than the twenty years of protection provided by a patent, and thus attain benefits for a longer period of time through protection of the invention as a trade secret. However, the current system does provide that a previous inventor of a "method of doing or conducting business" that is later patented by another party can claim defense from patent infringement.17 Many parties argue that "prior user rights" should be expanded to apply in situations regarding any patented subject matter. Prior user rights are a common component of patent systems around the world and are usually seen as assisting small entities, which may lack the sophistication or resources to pursue patent protection. Proponents of a first-inventor-to-file system often argue for the inclusion of prior user rights, as such rights would protect inventors who were not first to file, but may have in fact been the first to invent and in any case had conceived of the invention prior to patent application filing by another party.
Although current law allows for protests against patent applications, most applications are not published while pending and thus information to the public is limited. Provisions of the American Inventors Protection Act of 1999 ensuring that "no protest or other form of pre-issuance opposition...may be initiated after publication of the application without the express written consent of the applicant"18 have forced the USPTO to lay out very strict rules on the submission of information regarding pending patents by members of the public.19 These regulations prohibit many types of documentation, as well as explanations of submitted documents. Many parties argue for the need to open the patent system by publishing pending patent applications prior to issuance and expanding the ability of interested parties to submit relevant information for patenting, including concise explanations of the submitted information. Concerns have been raised that pre-issuance publication and submissions may merely create more documentation for examiners to consult, without providing any new information and thus slow the already backlogged patenting process. To take these concerns into account, the supporters of these changes have proposed limits on the timing and nature of permitted submissions.
Injunctions are a powerful but controversial tool for protecting intellectual property. Issued by the courts when a business or other entity is found to have violated another’s patented property rights, injunctions order the infringer to cease the infringing activity.20 For some businesses, this might mean closing a factory or laying off a portion of their workforce, while it might drive other businesses out of existence entirely.
Generally speaking, the pharmaceutical and biotechnology sectors favor injunctions that forcefully protect intellectual property rights, deter infringement, and provide leverage during licensing negotiations, since their products often consist of few individual patents. They also argue that injunctions help to increase incentives for research. However, technology firms have long favored limits on injunctions, arguing that the threat of injunctions shifts the balance of power during licensing negotiations too far towards patent-holders. Technological products can rely on dozens or hundreds of patents, and an injunction due to infringement of a single one could end production of the entire product.
Proponents for limiting injunctions argue that courts should have greater discretion in ordering injunctions, by considering such criteria as fairness and equity, whether irreparable harm has happened, or whether the infringer is a direct competitor.
Although the U.S. patent system has undergone few changes during its long history, its important role in the landscape of innovation has brought it to the forefront of reform discussions in recent years. Much international debate has occurred on intellectual property, especially relating to trade, with international treaties such as the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and the Convention on Biological Diversity covering the issue. Within the United States, the recent Patent Reform Acts of 2007 and 2008 take into account issues raised in these international debates. The 2007 act, which many saw as a significant revision of patent law, evolved from the U.S. Patent Reform Act of 2005, which in turn was largely based on the recommendations of a 2003 report by the Federal Trade Commission and a 2004 report by the National Academy of Science. Although the 2005 bill failed to move out of committee, the closely related 2007 bill was passed by the House on September 7, 2007, by a vote of 220-175 (H.R. 1908).
Senate Judiciary Chairman Patrick Leahy (D-VT) introduced a companion Senate bill (S. 1145). The bill was reported favorably out of the Judiciary Committee on January 24, 2008 and subsequently placed on the Senate Legislative calendar, but moved no further. Some of the major features it included were: a shift to a first-inventor-to-file priority system, maintenance of the "grace period," modifications to the doctrine of willful infringement, adoption of post-grant review proceedings, expansion of prior user rights to apply in situations regarding all patented subject matter, and pre-issuance publication of all pending applications. These proposed changes reflect concerns about the quality of issued patents, the expense and complexity of patent litigation, harmonization of U.S. patent law with the laws of U.S. trading partners, potential abuses committed by patent speculators, and the special needs of individual inventors, universities, and small firms with respect to the patent system.
Later in the year, Sen. John Kyl (R-AZ) introduced the Patent Reform Act of 2008 (S. 3600). The bill incorporated some elements of the Leahy bill, most notably the establishment of a first-to-file system, but also departed from the previous bill in some significant ways. For example, the Kyl bill leaves it to litigants to use economic analyses to calculate damages. It also would adopt a two-phase post-grant review process, with more narrowly defined standards for review, and gives the responsibility to decide whether to invalidate patents over “inequitable” or intentionally misleading conduct to the US Patent and Trademark Office (USPTO) rather than the courts. The bill was sent to the Senate Judiciary Committee in September, too late in the congressional session for further consideration.
In early March, Senators Leahy and Orrin Hatch (R-UT) introduced an updated version of their bill (S.515) with a companion bill introduced in the House by Representatives John Conyers (D-MI) and Lamar Smith (R-TX). The bills keep most provisions from the prior Leahy version, but eliminate mentions of inequitable conduct and 18-month publication requirements for new applications. As with the previous bills, the high technology sector applauded the new legislation while the biotech and pharmaceutical sectors maintained their previous criticisms.
On the injunction issue, there have been multiple legislative attempts to give the courts discretion in issuing injunctions this decade, most recently in the Patent Reform Act of 2005 (H.R. 2795). In 2006, the matter was addressed in a landmark Supreme Court case. In the EBay vs. MercExchange decision, the court unanimously ruled that there is nothing in federal law to prevent lower court judges from using discretion to determine whether injunctions are merited, based on the above criteria. This altered the Federal Circuit Court's common practice of routinely issuing injunctions in most cases of infringement, effectively limiting the injunction threat though not eliminating it entirely. Since the lawsuit, injunctions have become somewhat harder to obtain.21
During the 2008 presidential campaign, Barack Obama cited a desire for patent reform, generally seeking greater transparency and predictability in the patent system and additional resources for the USPTO, but the new administration has yet to issue a statement on the matter since taking office. An appointee to the USPTO director's post has not yet been named.
For updates on congressional action on Patent Reform, see the CSTC
1. U.S. Constitution
2. 35 U.S.C. 112.
3. 35 U.S.C. 101.
4. 35 U.S.C. 102.
5. 35 U.S.C. 103.
6. USPTO "General Information Concerning Patents"
7. USPTO "General Information Concerning Patents"
8. TRIPs agreement
9. 35 U.S.C. 102(g)(2).
10. Coe A. Bloomberg, "In Defense of the First-to-Invent Rule," 21 American Intellectual Property Law Quarterly Journal (1993), 255.
11.State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1580 (Fed. Cir. 1989).
12. Amy L. Landers, "Let the Games Begin: Incentives to Innovation in the New Economy
of Intellectual Property Law," 46 Santa Clara Law Review (2006), 364-65.
13. "Coalition for Patent Fairness Supports Introduction of Bipartisan, Bicameral Patent Reform Bills"
14. Robert Shapiro and Aparna Mathur, "The Economic Implications of Patent Reform: The Deficiencies and Costs of Proposals Regarding the Apportionment of Damages, Post-Grant Opposition, and Inequitable Conduct," Biotechnology Industry Organization.
15. "Two Views of Innovation, Colliding in Washington," The New York Times, 13 January, 2008, Business sec.
16. 35 U.S.C. 284.
17. 35 U.S.C. 273.
18. 35 U.S.C. 122(c).
19. 37 C.F.R. 1.99.
20. 35 U.S.C. 283.
21. Eric Bangeman, “Permanent injunctions getting scarce; patent holders turn to ITC,” Ars Technica, June 3, 2007.
Updated March 13, 2009