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Impact of patent reforms could take years to unfold

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The America Invents Act, the historic patent reform legislation that was signed into law by President Obama last September, is being rolled out in three stages.

The first set of provisions, which focuses on patent litigation, went into effect immediately.

The second set, which mostly involves administrative trials and procedures in the U.S. Patent & Trademark Office, went into effect on Sunday while the remaining provisions, including the change to a "first-to-file" system, will be implemented March 16, 2013.

The consequences of those changes, however, might not be known for years, according to local legal analysts.

"We don't know how the patent office will apply that new law, and we won't know for awhile," said San Diego patent attorney James Mullen, a partner with Morrison & Foerster.

"Some people say that the AIA is the biggest change to the patent statute in 50 years. I think it's the biggest change in 100 years. I think it will take 5-10 years for the dust to settle and to understand the whole impact."

Stan Panikowski, a partner with DLA Piper in San Diego, said it will be interesting to see if companies take advantage of the new administrative procedures that the bill just put in place.

"It's difficult to know how much these procedures are going to be used and if companies will be motivated to invest in them," he said, "or will they continue business as usual, which means not being too concerned about patents until they get sued or threatened with a lawsuit."

One key provision that went into effect Sunday was an expansion of the post-grant review procedure. It allows a third party to bring a patent challenge to the patent office rather than the district court.

"The point of it is to streamline the system for challenging issued patents," said Michael Rosen, a principal with Fish & Richardson whose practice focuses on intellectual property litigation.

San Diego's Carl Kukkonen, a member of the intellectual property section with Mintz Levin Cohn Ferris Glovsky and Popeo, said the new post-grant review rules will help reduce expenses and created stronger patents.

"A lot of these types of disputes are being handled in courts, which are costly," he said. "Now the disputes will be handled in the patent office."

Critics have said that reexamination in the past has been used as a supplement for litigation, and not as a substitute.

"Part of Congress' vision is to have the PTO become more of a principal forum for validity challenges rather than courts," said Panikowski, "so you get certainty about a patent's validity sooner and you have the expertise of the patent office behind it."

Another important feature that just went into effect is the allowance of a pre-issuance submission, Rosen said. It means that while a patent application is being reviewed, the challenger can present to the patent examiner different arguments and evidence as to why the patent should not be issued.

Patent office officials said the submissions should aim to improve the quality of the patent examination by placing the most relevant prior art into the file at the earliest point in the process.

"Rather than wait until the patent is issued and then challenge it, a competitor to the patentee can monitor when the patent application is published and then respond to it right then and there," Rosen said.

The American Invents Act also will change how disputes involving business method patents are resolved. According to the new provisions, if someone is accused of infringing a business method patent, they can initiate a special review proceeding with the patent office. And during that time, they can ask the court to put a hold on the trial.

"Of all the types of lawsuits, the ones with business methods tend to get the most scrutiny," Kukkonen said. "This carve out is only available to business method patents. (Proponents) perceived there were lots of lawsuits in the past that maybe didn't have merit or could have been resolved quicker, rather than go through a full trial."

There are also new rules that will affect the oath of declaration for a new patent application. The procedural provision allows the company that owns the intellectual property to function before the patent office.

Under the previous rules, the company had to get the original inventor to sign off on the patent application. If the inventor is a former employee who left on bad terms, it might take a while to get the necessary approval.

The changes that have gone into effect this month are important "because in some ways they go to the heart of the patent reform debate," according Panikowski of DLA Piper.

They are geared toward patent quality and the elimination of bad patents.

"The theory is that you get better patents if there's more opportunity to submit prior art and challenge when it is issued or shortly after it is issued," he said.

Some critics of patent reform feel the changes will be useless unless improvements are made to the patent office, including more funding, training and staffing.

"Patent office funding remains the root issue of patent quality and not enough is being done on that front," Panikowski said. "The quality of the outcome depends not only on the process being employed but the people. There is concern that without much greater investment in staffing at the patent office and in salaries and training, you're going to suffer from some of the same problems.

"Some are concerned the new review procedures will increase the workload of examiners."

Inventors and patent practitioners will be watching closely.

"It's a little too early to tell whether the impact of the law is significant or not," Fish's Rosen said, "but I can say already that different provisions have been implemented in the courts, and the courts have even begun the process of interpreting what they mean and applying them in different circumstances."

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