Untangling The Real Meaning Of “First-To-File” Patents

This is the first of a series of articles on the America Invents Act (AIA), the sweeping patent reform legislation signed into law in September 2011.

The most widely discussed feature of the AIA is the impending replacement of the longstanding “first-to-invent” system with what is commonly—and somewhat inaccurately—called a “first-to-file” system. The first-to-file provision will apply to patent applications with an effective filing date of March 16, 2013, or later. In the fast-moving world of technology companies, that might seem like a lifetime in the future. 

But there are at least three very good reasons to start planning for this change now. 

First, the new first-to-file system will fundamentally alter the role of public “disclosures” in preserving the patentability of an invention. Disclosures can include presentations and demonstrations at trade shows, official postings on company websites, and even unauthorized postings by company employees on social networking sites. For all but the smallest companies, it will take significant time to ensure that everyone who communicates with the outside world about company technology—including executives, managers, marketers, developers, and salespeople–is fully aware of the new landscape regarding disclosures.

Second, a company can use the time between now and March 16, 2013, to file patent applications that will be pending during the transition from first-to-invent to first-to-file. As I’ll discuss in a later post, that presents the opportunity to create some very interesting and potentially valuable options with respect to downstream patent applications.

Third, the first-to-file system will create some new exposures with respect to intellectual property (IP) security. In a future post, I’ll discuss the nature of these exposures and some steps that companies can take to help reduce the risk of becoming victims of IP theft.

But first, an explanation of “first-to-file”:

The term “first-to-file” can evoke images of a race to the patent office, and there are indeed scenarios in which the patent will go to the winner of just such a race. However, that is far from the whole story. 

Consider, for example, the case of an employee at Company A, who conceives an invention in May, works diligently to reduce it to practice, and files the corresponding patent application in August. Suppose, further, that an employee at Company B independently conceives the same invention in June and files for a patent in July. 

Who gets the patent? Under the pre-AIA first-to-invent rules, Company A can get the patent because its employee invented first. However, under the new first-to-file system, things will be more complicated.

If Company A does not make any public disclosures regarding the invention before the August filing, Company B can get the patent by virtue of its earlier filing date. This is exactly what would be expected given the term “first-to-file.”

On the other hand, suppose that Company A describes the invention in detail (or in more formal terms, provides a disclosure) at a trade show, before a disclosure or a filing by the second company. In this case, Company A can get the patent even though it filed after Company B. This isn’t at all what you’d expect in a system termed “first-to-file.” 

Why does this happen? The pre-filing disclosure by the first company starts the clock ticking on a one-year “grace period” that, under the AIA’s first-to-file rules, is not only protective with respect to Company A’s U.S. rights to the invention, but also removes the ability of anyone else, including Company B, to obtain such rights. Thus, an early disclosure can be beneficial with respect to U.S. patent rights.

However, there is a hitch: The same disclosure that can help capture U.S. rights to an invention under the grace period in the AIA’s first-to-file provision can eliminate those rights in the many international jurisdictions that do not recognize a grace period. 

So what should companies do? Here are some recommendations:

One strategy that can preserve both U.S. and international rights, under both the current first-to-invent rules and the new first-to-file rules, is to ensure that every public disclosure of a potentially patentable invention is preceded by a patent application or a sufficiently detailed provisional application filed with the U.S. Patent and Trademark Office (PTO). But it isn’t always practical or financially feasible to do this for every single company invention.

American companies should perform an early analysis of company inventions to determine if they should be patented in the U.S and internationally, in the U.S. alone, or held as trade secrets. The first-to-file provision of the AIA increases the incentives to perform this analysis in a timely manner, and then to take action accordingly. (Non-American companies should also perform an early analysis of their inventions, but in many instances they may elect to initially pursue patent protection in their home countries, and then to expand that protection “internationally” to include the U.S. and other countries.)

For those inventions that a company wishes to patent only in the U.S., inaction can be costly under the AIA’s first-to-file provision. To the extent that a company remains quiet about an invention while contemplating whether or not to file for patent protection, it stands exposed to the possibility of losing the right to obtain a patent if a competitor files–or discloses–first. 

Some companies may find themselves targeted by competitors’ disclosures designed specifically to foreclose patent opportunities. To reduce their vulnerability to such attacks, companies can engage in preemptive “defensive” disclosures, but must be mindful of the impacts of these disclosures on their own patent filing deadlines and international rights.

If a company intends to use a disclosure at an event such as a trade show to establish U.S. patent rights under the grace period in the AIA, the information presented should be sufficiently complete and detailed. And, once a company has started the clock ticking on the grace period, to avoid losing patent rights it must make a suitable filing with the PTO within one year of the first disclosure of the invention.

An additional challenge is that the AIA does not specifically define what constitutes “disclosure” sufficient to preserve patentability under the new first-to-file rules. While it is clear that a detailed presentation at a trade show would typically be a disclosure, suppose that the same information is instead posted in a difficult-to-find section of a company web site and then taken down after two weeks? Or two hours? Suppose that a disclosure is only partial? Is the commercial release of a product containing an invention a disclosure? The definitive answers to these questions will need to wait for the inevitable court tests.

So where does all of this leave things? The short answer is: it’s complicated. However, despite this complexity, there are plenty of concrete steps that companies can take to successfully navigate the AIA’s first-to-file rules. As noted above, those rules will apply to patent applications with an effective filing date of March 16, 2013 or later. In addition, between now and March 2013 there are some unique opportunities for companies to boost the value of their IP portfolios by taking advantage of the impending transition from first-to-invent to first-to-file. In the next post, I’ll discuss how.

This piece was originally published on Fast Company.