Last night, by an 89-9 vote the Senate passed H.R. 1249, the Smith-Leahy America Invents Act, setting the stage for President Obama to sign the bill into law and implement the first comprehensive reform to the Patent Act in more than 50 years. SIIA and its member companies have worked diligently toward this goal for more than 6 years, and passage of the bill represents a significant victory for our industries. We believe that this legislation will improve patent quality and reduce (though certainly not eliminate) wasteful litigation over bad patents.

The bill can be found here. SIIA issued a press release last night applauding passage of the bill.

In passing the House version of the bill as is, the Senate rejected amendments by (1) Sen. Sessions, which would have removed a special interest provision restoring Medco’s patent on the Angiomax drug, which had lapsed due to alleged malpractice by its law firm; (2) Sen. Cantwell, which would have eliminated the business method patent “transitional program,” and (3) Sen. Coburn, which would have restored the Senate’s language prohibiting fee diversion, in lieu of the House’s version which creates a special fund for the U.S. Patent & Trademark Office (USPTO) which is still subject to the Congressional budget approval process.

While a detailed summary is beyond the scope of this communication, some of the key provisions of the Act include:

* Harmonization of the U.S. system with most of the rest of the world, by granting priority to the “first inventor to file” rather than “first to invent,” which often triggered complicated and expensive interference proceedings, and sometimes permitted patent owners to overcome would-be prior art in litigation. The new provision will, for example, make it more difficult in some cases for inventors to overcome the novelty and nonobviousness requirements, because there will be no more “swearing back” to establish an earlier date of invention (i.e., to get around prior art dated before the patent application filing date).

* Along with “first inventor to file,” establishing a prior user defense (with some exceptions for universities).

* As mentioned above, ending of the diversion of USPTO fees by Congress for other purposes. The USPTO still must submit an annual budget to be approved by Congress, but this provision seemingly grants the USPTO latitude to establish a larger budget based on the fees it collects. The eventual outcome hopefully will be shorter patent pendency times, and higher quality patents (e.g., due to better trained and perhaps better paid examiners, better resources, and more attention to questionable applications).

* Permitting third party submission of prior art during patent examination.

* Deeming “tax strategies” within the prior art and thus unpatentable. This provision has a key exception, however, covering a wide range of computer programs on tax and financial management inventions.

* Establishing a post-grant review process of any patent by the USPTO that can be triggered by third parties.

* Establishing a supplemental examination process for the benefit of patent owners, to “correct” possible inequitable conduct.

* Heightening the requirements for joinder of patent infringement defendants.

* Amending the false marking provision to require a showing of “competitive injury,” which is intended curtail the flood of false marking claims being filed by private parties that are not competitors of the patent owner (and often not in any related business) simply seeking a profit from the false marking statute.

* Eliminating the best mode defense in litigation.

* Establishing an eight-year “transitional program” for post-grant review of certain business method patents (including a provision that increases likelihood of a stay of litigation involving such patents).

The effective dates of these provisions vary. Some will be effective on the date of enactment. Others will be effective one year later, and still others (namely, some of the USPTO procedures) will be phased in.