A reform bill now working its way through the United States Congress is poised to make the most comprehensive changes in the nation's patent law in nearly 60 years.

The Senate overwhelmingly passed the bill in early March and the House of Representatives' Judiciary Committee has since approved a version that largely tracks the Senate bill.

The proposed changes to the patent system, including procedures before the US Patent & Trademark Office (USPTO), will inevitably impact how Chinese companies operating in the US protect their interests.

Review proceedings

The proposed legislation sets forth two opposition procedures that a third party may use to challenge an issued patent.

One of them, known as a post-grant review, contests an issued patent and must be filed within nine months - or 12 months in the House version - after the granting or re-issuance of a patent, and can be based on any grounds of invalidity, including lack of enablement and indefiniteness.

The other, known as an inter partes review, can be filed after the nine- or 12-month deadline or after termination of a post-grant review. It is only used on asserted prior art patents or printed publications.

Neither review can be sought if a petitioner has already filed a federal court action challenging the validity of an issued patent.

There are also provisions prohibiting a petitioner in a district court or US International Trade Commission action from raising an argument already used in an earlier post-grant review.

A supplemental examination process will also be available permitting patent owners to purge potential inequitable conduct allegations by making post-grant disclosures of prior art and timely submission of the patent for review by the USPTO.

Chinese companies may want to consider post-issuance proceedings to preempt infringement claims down the road and build a stronger overall patent portfolio.

They may also want to consider using one of the opposition procedures to invalidate a patent that could be asserted against them or apply for supplemental examination of their own patents that may be at risk of future allegations.

USPTO funding

The proposed amendments will also give the USPTO the authority to set fees and the discretion to offer fee reductions.

Collected patent fees will be deposited in a USPTO revolving fund rather than the US treasury, which over the past two decades has received an estimated $800 million in revenue from the USPTO.

Applicants that qualify as small entities will continue to receive a 50 percent reduction in fees, while a new category of so-called micro entities will be entitled to a 75 percent reduction.

Even though the fee reductions make it more likely that smaller Chinese companies and entrepreneurs can receive US patent protection, the decision to give the USPTO fee-setting authority will likely lead to overall higher patent application fees.

The newly created fund will enable the USPTO to hire more patent examiners, which is good news for Chinese applicants, as the current average waiting time for a US patent is about three years.

Next steps

Although it is impossible to predict when the floor debate will end, a House vote on the proposed legislation may be held as early as this summer.

If and when final legislation is approved, both chambers of Congress will have to reconcile any differences between their respective bills before presenting the final version to the president.

Many expect the president, who has already announced his support for omnibus patent reform, to sign the combined bill into law.

(Editor's note: This is the second in a two-part series.)

John D. Murnane is a partner of Fitzpatrick, Cella, Harper & Scinto and Anna Y. Huang is an associate at the firm.

China Daily

(China Daily 06/08/2011 page17)