Blog Archives

Patent trolls and the AIA – a Potential non-Litigation Business Strategy

On March 16, 2013, the United States changes from a “first to invent” country to a “first inventor to file” country for patent applications.

Patent “trolls” or “non-practicing entities” (NPEs) own patents but do not make, use or sell the patented product.  Instead, patent trolls have in the past generally followed a business model in which, under the threat of patent litigation, they demand and receive relatively small amounts of revenue from a large number of targets.  Each of the targets believes that it is in its best interest to pay the troll a relatively small licensing fee for use of the patent rather than face the possibility of huge, uncertain damages in a patent infringement lawsuit. By owning a large number of patents, a patent troll can have a large potential market. However, section 299 of the AIA, effective as of September 15, 2011, limits the ability of patent trolls to join large numbers of accused infringers in a single patent infringement suit. Thus, the AIA section 299 may drastically change the traditional litigation business strategy used by patent trolls.

However, the AIA also opens up a potential new, non-litigation business strategy for patent trolls.

As of March 16, 2013, 35 U.S.C. 102(a)(2) becomes effective. This section of the patent law states “A person shall be entitled to a patent unless…the claimed invention was described in a patent issued…or in an application published…in which the patent or application…names another inventor and was effectively filed before the effective filing date of the claimed invention.” 35 U.S.C. 102(b)(2), however, contains an exception to the above.  It states: “A disclosure shall not be prior art to a claimed invention under subsection (a)(2) if…the subject matter disclosed and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person.”

A picture is worth a thousand words. Take a look at the following example in which B is a patent troll that owns invention B and A is a target company which owns invention A.

Under the AIA, as cited above, if B’s effective filing date is earlier than A’s effective filing date, B will be prior art to A and the disclosure in B may prevent patent A from issuing. However, this result can be avoided if A owns invention B “not later than the effective filing date” of invention A.  On or after March 16, 2013 an issued patent or pending patent application that would be prior art to a new application has potential value to the applicant for a new patent. Thus,  the date of March 16 can be a “bridge” between the troll’s patent or application having no value to target A and a value that may be large, depending on the significance of the target’s new patent application and the presence/absence of other prior art. If company A believes that invention A is key to its business, company A may be willing to buy application B at a significant price. However, if there is other prior art, company A may only be willing to pay the troll less money for application B.

This strategy has the disadvantage that (probably) the patent troll can only use it against one target at a time,  because the troll is selling the leveraging patent, not licensing it to many targets. However, if section 299 of the AIA has the predicted deterrent effect on the joinder of multiple defendants, the strategy may be the only one left to the patent troll.

Note that this strategy will not work before March 16, 2013. Before that date, company A may be able to “swear behind” the filing date of invention B under 37 CFR 1.131 by establishing by oath or declaration that the subject matter of invention A was invented prior to the effective date of invention B.  Therefore, it is prudent for company A to file a patent application for invention A prior to March 16, 2013, particularly if it is aware of invention B. By doing this, company A cuts off the troll’s potential market for invention B.

Advertisements

USPTO Implements Third-party Pre-issuance Submissions

On July 17, 2012, the United States Patent and Trademark Office (USPTO) announced the final rules regarding third-party pre-issuance submissions under the Leahy-Smith America Invents Act (AIA), which amends 35 U.S.C. 122 by adding 35 U.S.C. 122(e). The new rules will be effective on September 16, 2012 for any patent application filed before, on, or after that date.  The new rules are implemented in 37 CFR 1.290.

The new rules provide a “mechanism for third parties to contribute to the quality of issued patents by submiiting to the Office, for consideration and inclusion in the record of a patent application, any patents, published patent applications, or other printed publications of potential relevance to the examination of the application.” This provides a way for a third party to potentially block the issuance of a patent that the party feels does not meet the requirements of the Patent Act, instead of or in addition to attempting to challenge an issued patent by a re-examination procedure.

In order to be considered by the office, a third-party submission must pay a fee and provide a copy of each printed item and a statement of relevance. The submission must be filed prior to the earlier of (1) a notice of allowance or (2) the later of (i) six months after the date on which the application is first published under 35 USC 122(b), or (ii) the date of the first rejection of any claim. Extensions of time will not be allowed. The submission may be filed electronically through the Office’s EFS-Web system or by mail.

For further information, the text of the new rule can be found at the following link: http://www.gpo.gov/fdsys/pkg/FR-2012-07-17/pdf/2012-16710.pdf.

%d bloggers like this: