At the moment, the USPTO is still considering commentary from the community regarding these potential changes. Final fee changes will be posted in December 2012, and will take effect in February 2013.

Below is a list of the ten most dramatic increases proposed by the USPTO (by percentage). All values are taken from the USPTO’s official release of proposed changes.

Some of the proposed changes are deceptive, as brand new fees have been introduced due to changes in the patent-seeking process itself—a result of the America Invents Act. Many fees considered to be ‘brand new’ are therefore not given a percentage change, while now-removed, outdated fees which reference old processes have been listed at -100%. We have therefore listed some of the brand new fees below.

Check the USPTO’s official proposed fee changes for more information.

Please note that the United States Trademark Registration Office is not an office of the United States Government. The circled section of the solicitation above clarifies the fact that it is not a government document. The content of this note is transcribed below:

39 USC 3001(d)(2)(A): “THIS IS NOT A BILL. THIS IS A SOLICITATION. YOU ARE UNDER NO OBLIGATION TO PAY THE AMOUNT STATED ABOVE UNLESS YOU ACCEPT THIS OFFER.” THIS PRODUCT OR SERVICE HAS NOT BEEN APPROVED OR ENDORSED BY ANY GOVERNMENTAL AGENCY, AND THIS OFFER IS NOT BEING MADE BY AN AGENCY OF THE GOVERNMENT.

Should you receive a bill in the mail regarding your intellectual property, please read its contents thoroughly and be on the lookout for notifications of this nature. Many times, these solicitations will be sent out close to the renewal date of your trademark, which increases the likelihood that they will be mistaken for government documents.

When in doubt, ask your IP attorney whether you are obligated to pay a given fee. It is our job to clarify the IP process and to protect you against potential IP-related fraud.

Below, we go over some of the ways in which the America Invents Act will change the American patent system.

First-to-File System.

One of the most dramatic changes proposed by the America Invents Act is the change to a first-to-file patent system.

Currently, US patent law operates under a first-to-invent system, which means that one inventor’s patent proceedings can be interrupted by another inventor’s filing for the same patent. Should the second inventor prove that he conceived of the invention first, he will be granted the patent instead (these are called Interference Proceedings).

Every other country currently uses a first-to-file system, which awards a patent to the first inventor to file, regardless of who conceived of the idea first. This change eliminates costly interference proceedings and replaces them with derivation proceedings. A derivation proceeding simply attempts to assure that the first person to file a patent application is actually the original inventor. This system allows a year’s grace period for inventors who publish on their inventions before filing for the patent.

Elimination of Qui Tam False-Marking Suits.

The new patent system restricts the parties which can bring a false-marking suit to either the US government or a directly injured competitor.

Currently, US patent law allows non-injured parties to bring a qui tam false-marking suit at their own expense (see our blog on False-Marking). This means that any concerned citizen can technically bring a false-marking suit against a party which they believe has engaged in false-marking, even if the citizen has not been directly damaged by said false-marking. Should the suit succeed, the citizen splits the fine with the US government.

Easier Filing by Assignees.

A year after the America Invents Act has been approved, assignees will be able to file on behalf of an inventor without the necessity of consulting the inventor or of getting the inventor’s approval. Assignees will also be able to sign a substitute inventor’s oath, should the original inventor be incommunicable or else unwilling to do so themselves.

Priority Examination Available.

Under the Act, patent applicants will be able to pay an additional fee to expedite the review of a nonprovisional application for certain types of patents. This fee is normally $4800, or $2400 for a small entity.

Preissuance Challenges.

According to the Act’s revisions to 35 U.S.C. 122, a third party will be able to make a preissuance submission based on prior art before the patent is granted. Should this preissuance submission fail, however, it may complicate later attempts to make the same claims after a patent has been granted.

Post-Grant Review.

Should the Act be passed, it will allow other petitioners to file for a post-grant review in order to cancel a granted patent, as long as the reexamination is requested within nine months of the patent’s grant. Post-grant review may be based on any ground except the best-mode requirement. After post-grant review period, third parties have one year to request an inter partes review, which may now be done only on the grounds of prior art patents or publications. The ex parte reexamination process remains unchanged.

Proponents of the bill believe that it will speed the patent-approval process and reduce a growing backlog of patents. Opponents suggest that some of the most significant changes (First-to-File, in particular) will harm start-up companies and small businesses in the long run and create a “rush-to-the-patent-office” situation. Since the bill looks very likely to pass the Senate, we will all find out shortly.

“The court in exceptional cases may award reasonable attorney fees to the prevailing party.”

In general terms, an exceptional case is one in which either the patentee or the infringer acted in bad faith or with gross negligence at any time during the course of the case. The infringer may be found to have acted in bad faith if the court finds that they made no reasonable attempt to uncover related patents before implementing their infringement (i.e. they purposely avoided the possibility of learning about potential infringement) or if they have acted to excerpt or otherwise hide pertinent information. A patentee may be found to have acted in bad faith if the court determines that the case was frivolous in nature or if the patentee is found to have excerpted or to have otherwise hidden pertinent information to the case as a whole. A case may be considered frivolous if the court determines that it was brought on a clearly false comparison, or if it is otherwise strongly suggested that the case was brought for the sole purpose of extorting money from a defendant, rather than for the purpose of aggressively defending a patent and recovering reasonable damages.

When the court finds that a case is exceptional, the offending party is ordered to pay the offended party’s legal fees. Often (but not always), an exceptional case finding will coincide with a finding of inequitable conduct, which we have covered before in the case of Therasense, Inc. v. Becton, Dickinson and Company (Fed. Cir. 2011) (en banc). In the matter of Eon-Net, however, the case was found to be exceptional without inequitable conduct.

It is comparatively rare that a patent case is found to be exceptional, for very good reason. The American legal system is set up to encourage the enforcement of patents, in the spirit of a free-market economy. Patent owners are encouraged to enforce their patents aggressively. Should a patent owner be in constant fear of paying their infringer’s legal fees as well as their own, enforcement becomes an unreasonable burden upon patent-owners.

In the case of Eon-Net, however, the court did find that Eon-Net had a history of bringing frivolous patent-infringement cases, and then settling said cases in mediation for sums much less than what a patent case might cost in legal fees. It seems that Eon-Net miscalculated in attempting to bring suit against Flagstar Bancorp, as Flagstar decided to pay the legal fees necessary to mount a full defense. In the end, it seems that Flagstar will be recovering its legal fees, and Eon-Net will be labeled as having engaged in ‘litigation misconduct.’

The ‘inequitable conduct’ defense requires a defendant to prove that the patentee did not fulfill their “duty of candor and good faith” during prosecution. A patent applicant can violate this duty by submitting false facts, misstating inventorship, withholding prior art, or failing to explain and/or translate references in a foreign language. This defense makes use of 37 C.F.R. § 1.56(a) as below:

That “[e]ach individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section.”

Before Therasense, a successful inequitable conduct defense would result in the permanent unenforceability of the patent in question, excepting the reversal of this decision by a higher court. The court therefore considered the inequitable conduct defense to be a very serious matter. Further, since the defense has been raised in almost every patent case, it has been considered to be a kind of ‘plague’ on the system in general.

The Therasense decision, reached by an en banc Federal Circuit court, revised the standards used to determine inequitable conduct in the following ways:

1. The defendant must prove that the patent applicant had “specific intent to deceive” the USPTO.
2. Evidence shall only be considered material under a “but-for materiality,” wherein the court decides that the patent office would not have granted the patent, but for the deception. Cases which prove egregious misconduct may be exceptions to this rule.

The court also found that inequitable conduct need not always result in the permanent unenforceability of a patent. Even after inequitable conduct is proven, the court suggests that unenforceability should be applied only when the applicant’s deception clearly resulted in the “unfair benefit of receiving an unwarranted claim.”

Post-Therasense cases will find the ‘inequitable conduct’ defense much tougher to prove—and even in the event that inequitable conduct is proven, the court now has a certain amount of leeway in determining the consequences. This may make the ‘inequitable conduct’ defense slightly less appealing in the near-future, if the District Court’s decision has the effect that it is clearly hoping for.

For example: does the law include advertisements as “articles” under the statute?

35 U.S.C. § 292(a) provides that

“[w]hoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word ‘patent’ or any word or number importing that the same is patented for the purpose of deceiving the public …[s]hall be fined not more than $500 for every such offense.”

Under the express language of the statute, a defendant who uses patent numbers on advertising associated with an unpatented article is subject to fine under 35 U.S.C. § 292(a).  However, the statute is unclear as to how one might calculate the number of “offenses” in a case which involves advertising violations.  Unfortunately, there do not seem to be any clear precedents on the issue either, as each potentially relevant case has used a separate method to calculate the number of “offenses” involved.

In Icon Health & Fitness, Inc. v. The Nautilus Group, Inc., 2006 U.S. Dist. LEXIS 24153, No. 1:02 CV 109 TC, (D. Ut. Mar. 23, 2006), a company was brought before the court for advertising its “Power Rods” as being patented, or manufactured with patented technology, for a period of 20 years.  These “Power Rods” were not patented or made with patented technology.  The advertising included brochures, catalogues, print, television, internet, and store displays.  It was argued that there were possibly “millions” of advertisements sent out during this span of time.  To avoid issues of calculations based on incomplete evidence, the court used a time-based determination, wherein it found that it was “reasonable to conclude that the defendant committed at least one new offense each week.” Using this heuristic, the court found a total of 650 offenses.  The fine was $325,000.

The logic behind the Icon case was later criticized by the Federal Circuit in The Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009).   The court commented that “[a]lthough these time-based penalties were creative attempts to reconcile the statute’s language with opinions such as London, this time-based approach does not find support in the plain language of § 292.”   Id. at 1302.

In Forest Group, the Court found that the fine must be determined on a “per article” basis.  Id.  It also reiterated that the current version of the statute provides for a fine of “not more than $500,” which allows the district courts the discretion to strike a balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties for small, inexpensive items produced in large quantities, wherein they may decide upon a per item fine of a fraction of a penny.  Id. at 1304.  Though this case did not address advertising, it is clear that the “continuous marking” strategy for advertising will not be supported by the Federal Circuit if presented.

There are two cases that discuss advertising in relation to a false marking claim.  Both are from district courts in California.  Each will be discussed separately.

In Presidio Components, Inc. v. American Technical Ceramics Corp., 723 F. Supp.2d 1284 (S.D. Cal. 2010), the product at issue was BB capacitors.  In determining the number of offenses, the Court determined the number of capacitors sold during the relevant time period, based on documents and proportional calculations.  Though not all of the capacitors were marked with the patent numbers, Presidio still advertised the capacitors in its catalog and on its website as practicing the patent.  Id.  at 1334.  The Court said that “just because Presidio did not mark all of the shipped BB capacitors with the ‘356 patent does not change the fact that it violated the statute by using the ‘356 patent in advertising all of those BB capacitors.”  Id.  The fine was given at $0.35 per capacitor, for a total of $228,086.25.  The fine was about 32% of Presidio’s overall average sales.  The Court did not discuss or comment on the number of advertising catalogues sent out in making its determination.

In King Tuna, Inc. v. Anova Food, Inc., 2011 U.S. Dist. LEXIS 18774, No. CV07-07451 (C.D. Cal. Feb. 24, 2011), the defendant advertised that its tuna was made in accordance to the ‘619 patent and marked its products accordingly.  All of the tuna from the defendant, and their related entities, were advertised, marked, and sold under the ‘619 patent.  The court did not discuss the number of pieces of advertising or even the type of advertising; nor did it attempt to determine the number of packages sold, since the tuna was sold in differently sized packages.  Instead, the court designated each pound to be one “article” in its calculation of penalty on a “per article” basis.  The fine was $1 per pound, for a total of $1,845,522.

In Juniper Networks, Inc. v. Shipley, 2010 U.S. Dist. LEXIS 24889, No. C 09-0696 SBA (N.D. Cal. 2010), the advertisement at issue was Defendant Shipley’s website, which was alleged to advertise Defendant’s “Dynamic Firewall,” the subject of two U.S. patents.  The website was dedicated to the hacker community, and listed various projects within the community along with each project’s status.  Plaintiff alleged that the post: “Dynamic Firewall***Patent # 6,119,236 and 6,304,975***”…“Status: functioning” meant that the firewall was operating on the website and that the post constituted an advertisement under section 292.  Juniper, 2010 U.S. Dist. LEXIS 24889 at 6.  The actual firewall itself was destroyed in 1999, however, which led Plaintiff to allege that the “unpatented article” under section 292 was the website.  The court rejected Plaintiff’s claim by finding that “the reference to ‘functioning’ relates to the progress of the project,” not that the firewall was operating on the website itself.  Id. at 23.  The court did not address the calculation of damages, but did address The Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009), in which the Federal Circuit held that the fine under section 292 must be determined on a “per article” basis.  Forest Group, 590 F.3d at 1302.  The court in Juniper adopted the Federal Circuit’s reasoning and concluded:

[S]ection 292 may be violated by marking an unpatented article or affixing upon an unpatented article “the word ‘patent’ or any word or number importing that the same is patented for the purpose of deceiving the public,” even if such marking or affixing does not relate to advertising the article. Id. at 20-21.

The court denied Public Patent Foundation, Inc.’s (“PPFI’s”) Administrative Motion for Leave to File Amicus Brief, whose brief was noted by the court.  PPFI’s brief, which was filed before Forest Group was decided, argued that section 292’s plain language clearly supports a finding of “at least one offense per falsely-marked article and per instance of false advertising.”  (Moore Br. 8.)  The brief further argues that a mismarked article should be viewed as “each visit to an offending website” because each visit “creates a new, mismarked ‘article’ on the visitor’s computer, thus constituting a separate ‘offense.’  (Moore Br. 8.)  In its reasoning, PPFI cites to In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994), wherein the Federal Circuit cited the B.P.A.I’s finding that “memory containing stored information,” was an “article of manufacture,” as its justification that the court in Juniper should find that temporary Internet files downloaded by each visitor’s computer when visiting the alleged violating website constitutes an “article” under section 292.  (Moore Br. 9.)  Therefore, PPFI concludes:

“operating a web site that contains a patent mismarking in violation of §292 cannot be fairly viewed as a continued production of a single, mismarked ‘article,’ since each time the web site is visited, the ‘article’ that is created on the visitor’s computer is different than any ‘article’ that previously existed.” Id.

Finally, PPFI asserted that “[e]ven if operating a mismarked website could be properly viewed merely as a continued production of one mismarked article, [PPFI] believes that each creation of a mismarked article-whether the same or different from previously mismarked articles-represents a separate ‘offense’ under §292.”  Id.

Based on the cases in the other districts, and on the Forest Group case by the Federal Circuit, it is likely that the Courts will be receptive to arguments which avoid a separate fine for the advertising and the package marking.  However, the amount of advertising and use of the patent numbers in that advertising may potentially be used in determining the “balance between encouraging enforcement of an important public policy and imposing disproportionately large penalties.”  It could be argued that extensive advertising with the patent numbers should shift the balance to a higher total fine, because it is more egregious than just marking the product itself.

It may also be helpful for presentation to the jury to deal with the amount of product produced, instead of the number of individual packages, which may include different weights for a single product—for example, on commodity products, such as fertilizer or rice.  In this case, each differently sized bag may have a different penalty, which makes a proposed per article fine more complex.  By addressing the fine on a per-pound basis, the numbers will be easier for computation purposes.