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Updated patent laws will change how device makers innovate

Steven Auvil

Newsflash — both houses of the U.S. Congress and the President agreed on something! Yes, our government agreed, by a wide margin, that it was necessary to modernize our patent laws and did so when it passed the Leahy-Smith America Invents Act or AIA on September 16, 2011. A variety of rationales existed, including harmonizing U.S. patent laws with those of the rest of the world, improving patent quality, accelerating the patent process, reducing dispute resolution costs, encouraging innovation and even creating jobs. An elixir of sorts. But what do the changes mean for med tech companies? What do they need to know? Here is my top 5 list of things med tech companies need to know about the changes to patent law wrought by the AIA.

  1. The AIA changes the system of awarding patents from a first to invent system to a first inventor to file system. This measure fundamentally changes the way our government grants patents and harmonizes U.S. law with the rest of the world. A person who invents first loses out to the second-in-time inventor who wins the race to U.S. Patent and Trademark Office or USPTO. So this change in the law, which goes into effect on March 16, 2013, urges med tech companies to move rapidly from product concept to filing, and their patenting systems need to be changed accordingly.
  2. The AIA expands prior art to include foreign public uses and offers for sale. Under current law, third party uses and sales of the same invention abroad are not bars to patent protection in the U.S. This changes under the AIA, effective March 16, 2013, and conforms the law to the laws of other industrialized countries. For example, third party product demonstrations and sales outside the U.S. are “prior art references” as against a later U.S. patent application to the same or similar invention. Although the new law still provides a 1 year grace period that enables an inventor to avoid the prior art effect of his or her own foreign public use or sale, his foreign public use or sale more than 1 year before he files a patent application is prior art. So med tech companies need to carefully consider the prior art effect of their own activities as well as those of third parties.
  3. The AIA creates two new administrative procedures in the USPTO that enable third parties to challenge the validity of a granted patent. One of the main goals of patent reform was to create multiple administrative procedures to resolve the validity of granted patents more cost effectively than through district court litigation. Effective September 16, 2012, the AIA creates two such USPTO procedures: Post-Grant Review (PGR) and Inter Partes Review (IPR). PGR allows one to file a petition seeking the review of a patent within 9 months of its grant, and the petition will be granted if it contains one or more claims likely unpatentable on any grounds. When that 9 month window closes or at the end of a PGR, one may petition for an IPR of a patent on the more limited grounds of prior art patents or printed publication, and the petition will be granted if it is likely the petitioner would prevail with respect to at least one challenged claim, a higher standard. With both IPR and PGR, the challenged patents are not presumed valid as in a district court. Both PGR and IPR proceedings will be conducted by the Patent Trial and Appeal Board, a new tribunal within the USPTO. To further the objective of reducing dispute resolution costs, the AIA includes an automatic stay of any district court litigation commenced after a PGR or IPR is initiated. Med tech companies need to consider how, if at all, they will use these procedures to resolve patent disputes.
  4. The AIA eliminates failure to disclose best mode as an invalidity defense. The law requires that an inventor disclose his or her best mode of carrying out the invention, also known as the most preferred embodiment. The AIA does not eliminate this requirement, but it eliminates the failure to disclose the best mode as a basis to challenge the validity of a patent. In other words, the law imposes a best mode requirement without any real consequences for failure to comply with it. Med tech companies should consider this fact in deciding how their own patents are written.
  5. The AIA substantially changes patent marking law. Over the past several years, a lot of patent-related litigation concerned claims of false patent marking, including claims based on patent holders marking expired patent numbers on their products. In such suits, called qui tam actions, individuals sued for a penalty of up to $500 per offense and shared any sums collected with the government. Under the AIA, effective on the date of enactment, and having retroactive application, only the U.S. government may bring such actions, and it is no longer an offense to mark an expired patent number on a product. Although the AIA provides a claim to one who suffers competitive injury from false patent marking, his or her recovery is limited to economic damages suffered. Finally, the AIA revises the patent marking law to permit patent holders to give constructive notice of their patents by way of virtual marking — i.e., marking a web address on a product that identifies applicable patents. Med tech companies need to consider their marking strategies in light of these changes.

The AIA, referred to as the “Octopus Patent Law with long tentacles,” made many more changes to the U.S. patent laws. The USPTO will be rolling out regulations concerning many of the changes over the next year. In the meantime, med tech companies need to carefully consider the impact the changes will have on their businesses and make appropriate adjustments to their processes for launching new products, seeking patents on those products, and reacting to competitive patents.

Steven M. Auvil is a partner and Chair of Benesch's Intellectual Property Practice Group.

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