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CHANGE TO U.S. PATENT LAW: COMPANY MAY OBTAIN ROYALTY FOR USE OF ITS INVENTION PRIOR TO ISSUANCE OF PATENT

The American Inventors Protection Act includes "provisional rights," allowing a company to obtain monetary compensation for use of its invention that occurs prior to issuance of a patent.

Under the old law, filing a patent application could not prevent another company from using one's invention cost-free, until the patent application issued into a patent. In other words, during the period in which the U.S. Patent & Trademark Office (PTO) was examining the application, another company could use the invention without accruing expense. This pre-issuance use of the invention may represent substantial value, as the PTO examination period may span several years.

In other words, under the old law, one could not infringe a patent application.

Under the new law, after the patent issues, damages for patent infringement may relate back to the patent application. The new law states, a "patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent . . . makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application . . . and had actual notice of the published patent application."(footnote 1)

This right, based on a patent application, is called a "provisional right." This provisional right is tentative and depends on four conditions. The first condition is publication of the patent application. Under the new law, the PTO normally publishes patent applications eighteen months after the application filing date, but may publish sooner upon request of the owner of the application. Alternately, the PTO will not publish the application at all if the owner makes an appropriate request.(footnote 2)

The second condition is notice. In order for the notice condition to be satisfied, the company from which royalties are to be obtained must have notice of the published patent application. To satisfy this notice condition, the owner of the patent application may wish to engage legal counsel to send a copy of the published patent application to the other company.

The third condition is issuance of the patent application into a patent.

The fourth condition is substantial identity between the inventions in the issued patent and the published patent application; "The right . . . to obtain a reasonable royalty shall not be available . . . unless the invention as claimed in the [issued] patent is substantially identical to the invention as claimed in the published patent application." (footnote 3)This fourth condition will often be a critical issue, because the application owner typically changes the claims during examination of the application. Complicating the issue is uncertainty as to the meaning of certain language in the new law, because no court has yet had an opportunity the interprete the new law. For example, it is currently unclear what kind of claim continuity is required between the claims of the patent and the claims of the application. Must the entire set of claims of the patent be "substantially identical" to the entire set of claims of the application for any provisional right to exist? Alternately, does the law allow claim by claim continuity, merely requiring a single claim to be "substantially identical" for a provisional right to exist in that claim, even when there are differences between other claims? Further, what does " substantially" mean in this context?

As we await judicial interpretation of the new provisional rights provision, a company with a new invention may wish to instruct legal counsel to prepare a patent application with at least some claims for which, the company believes, change will not be required.

The provisional rights provision of U.S. Patent Law represents an important new business tool. A company with a commercially valuable, patentable, invention now has additional leverage over a competitor seeking to copy the invention. Under the new law, such a competitor runs the risk of accruing royalty expense before any patent issues.





FOOTNOTES

1.35 U.S.C. § 154(d).

2.Provisional rights should not be confused with provisional patent applications. In fact, provisional patent applications cannot be the basis for provisional rights, because provisional patent applications are not published.

3.35 U.S.C. § 154(d)(2).