Authored by Ian Y. Liu, Ph.D. and Leslie A. McDonell
Imagine the following scenario:
You invent a gadget.
You discuss this invention with Mr. Collaborator.
Sometime later, you discover that Mr. Collaborator filed a patent application on a gadget similar or even identical to your invention.
This scenario is not uncommon and generally results in an inventorship dispute. Some disputes can be amicably resolved,1 others are contested.
Depending on whether the dispute relates to an issued patent or a pending patent application, an omitted inventor can raise the issue in two different forums. If the patent application is pending in the U.S. Patent and Trademark Office (PTO), an omitted inventor can seek inventorship correction in the PTO. If the patent has already issued, an omitted inventor must seek inventorship correction in a court. An omitted inventor typically cannot resolve an inventorship dispute in a pending application in a court,2 but she can wait until the application is issued and then challenge the inventorship.3
For patent applications filed before March 16, 2013, an omitted inventor can resolve an inventorship dispute in the PTO through an interference proceeding. Specifically, an omitted inventor can file a parallel application and provoke an interference: "If A files an application as sole inventor and B claims that the invention is in fact a joint one of A and B, B may file an application on behalf of A and B for the purpose of provoking an interference."4 If the PTO finds that B's application claims the same or substantially the same invention as A's, it may declare an interference to determine which of the two applications has priority.5 In other words, the PTO awards a patent to the entity, either A solely, or A and B jointly, that made the claimed invention first, and cancels the other application/patent.
Interferences have not been widely used to resolve inventorship disputes.6 As summarized by the U.S. Court of Appeals for the Federal Circuit in Hor v. Chu, one reason is that:
[I]t would be inefficient to require an omitted inventor to initiate an inventorship dispute while the application is still pending. Throughout the back-and-forth negotiation between the patentee and the PTO examiner, the original claims are routinely narrowed or even cancelled. Thus, in many cases, an omitted inventor may not know whether he or she has a cognizable inventorship claim until the examination concludes and the patent finally issues.7
Another reason is that an inventorship determination is fundamentally different from an interference. Specifically, inventorship is an originality test, while an interference proceeding is a priority contest. They ask different questions: an inventorship determination asks who made the invention while an interference asks who made the invention first:
[A] claim to priority of invention does not question whether the patentee "invented" the subject matter of the count, but instead focuses on which party first invented the subject matter of the count.8
And they focus on different facts: an inventorship determination examines who made an inventive contribution to the claimed invention, while an interference examines who first reduces the invention to practice:
Priority goes to the first party to reduce an invention to practice unless the other party can show that it was the first to conceive the invention and that it exercised reasonable diligence in later reducing that invention to practice.9
While it may take years, thousands of dollars and extensive discovery10 in an interference to prove or disprove that a party used due diligence in reducing the invention to practice, such inquiry is completely irrelevant to an inventorship determination.
Thus, using interference to correct inventorship is like trying to fit a round peg into a square hole. As a result, the PTO has not been a popular venue for correcting inventorship in the past.
The America Invents Act (AIA) streamlines inventorship correction in the PTO. While switching the U.S. patent system away from the first-to-invent system, the AIA continues to emphasize the importance of originality in patents by creating a derivation proceeding to ensure correct inventorship:
Drawing on the best aspects of the two existing systems, the AIA creates a new "first-inventor-to-file" system. . . . A new administrative proceeding—called a"derivation" proceeding—is created to ensure that the first person to file the application is actually a true inventor. This new proceeding will ensure that a person will not be able to obtain a patent for the invention that he did not actually invent.11
Accordingly, the newly established Patent Trial and Appeal Board (PTAB) is tasked with examining inventorship in patents and applications. More importantly, the AIA authorizes the PTAB, "[i]n appropriate circumstances," to "correct the naming of the inventor in any application or patent at issue."12
Although Congress did not specify what constitutes an appropriate circumstance, the PTO through its rulemaking capacity addressed several questions left unanswered by Congress. For example, "can there be a middle ground, to wit, partial derivation, leading to a finding of joint inventorship?"13 In the derivation final rules, the PTO clarified that the PTAB will make determination on both derivation and inventorship:
Under 35 U.S.C. 135(b), as amended, the Board will determine in an instituted derivation proceeding whether an inventor named in the earlier application derived the claimed invention from an inventor named in the petitioner's application. When making this determination, if the Board finds the inventorship to be incorrect in an involved application or patent, the Board may correct the inventorship in such an application or patent depending on the facts of the particular case.14
In addition, the AIA makes it much easier to correct inventorship. Under the pre-AIA law, an inventorship correction required that the error had been made without deceptive intent. The AIA removes this obstacle by striking the language of "and such error arose without any deceptive intention on his part" from both 35 U.S.C. §§ 116 and 256.
Prior to the AIA, inventorship disputes were largely resolved in the courts. However, litigating inventorship has many drawbacks, which may be avoided by using derivation proceedings in the PTO.
In a litigation, an omitted inventor must prove his or her case by clear and convincing evidence: "Because the issuance of a patent creates a presumption that the named inventors are the true and only inventors, the burden of showing misjoinder or nonjoinder of inventors. . . must be proved by clear and convincing evidence."15 As the Federal Circuit points out, this burden is a heavy one.16 In contrast, the default evidentiary standard in a derivation proceeding is a preponderance of evidence, 37 C.F.R. §§ 42.400(a) and 42.1(d), a standard much lower than the clear and convincing evidence required in a litigation.
The difference between these two evidentiary standards is perhaps best illustrated in the Federal Circuit's recent Fresenius USA, Inc. v. Baxter International, Inc. decision.17 A district court had found that Fresenius had not established by clear and convincing evidence that the patent in suit was invalid and a judgment of more than $23 million was levied against Fresenius. That district court decision was upheld by the Federal Circuit.
However, the same patent was found invalid in a reexamination in the PTO. When the case was appealed, the Federal Circuit affirmed invalidity, finding that the PTO decision controls. One explanation for the Federal Circuit upholding validity of the patent in the earlier case and invalidating the same patent in the later case is the difference in the evidentiary standards required in the court and the PTO.18
Another major drawback in a district court litigation is time and cost. In a survey conducted by PricewaterhouseCoopers last year, the average time from the complaint to the first day of trial for a patent case is about 2.5 years.19 In addition, according to the American Intellectual Property Law Association, the cost of an average patent lawsuit is $1.6 million through the end of discovery and $2.8 million through final disposition.20
In comparison, derivation proceedings will be speedier and thus, likely far less costly. "In the case of derivation proceedings, although not required by statute, the Board expects to provide a final decision not more than one year from the institution of the proceeding."21 Fees for filing a petition for derivation are only $400,22 and the PTO estimates that a derivation proceeding takes about 700 hours.23 Using the PTO's average professional rate of $371 per hour,24 the estimated cost of a derivation is about $260,000. This advantage can partially be attributed to limited discovery in the PTAB.25
The AIA makes derivation proceedings a viable venue to correct inventorship. Compared to interferences, a derivation provides a clearer pathway for making corrections. Compared to litigations, it carries a lower evidentiary standard and is less costly and much speedier.
Although an omitted inventor is required to initiate a derivation within the one-year period following the date on which the patent-at-issue was granted or the application-at-issue was published, 35 USC § 135(a)(2), with patent information becoming increasingly readily available, an inventor in a collaboration should be encouraged to monitor patent filings of his/her collaborator and use the derivation proceeding as a tool to protect his/her rights.
1 Adding an inventor in the PTO requires consent of all the parties, including the existing inventors. 37 C.F.R. § 1.48. This also includes inventorship correction initiated by a party in an interference. See, e.g., Van Otteren v. Hafner, 278 F.2d 738, 126 U.S.P.Q. 151 (C.C.P.A. 1960). In an inventorship dispute, however, the existing inventor contests the inventorship, and, without the existing inventor's cooperation, inventorship correction is "not an available avenue for [omitted inventors] to correct their omitted inventorship." Hor v. Chu, 699 F.3d 1331, 1336, 2012 BL 297855, 104 U.S.P.Q.2d 1685 (Fed. Cir. 2012) (85 PTCJ 96, 11/23/12).
2 See HIF Bio, Inc. v. Yung Shin Pharms. Indus. Co., 600 F.3d 1347, 1354, 2010 BL 70731, 94 U.S.P.Q.2d 1286 (Fed. Cir. 2010) (79 PTCJ 701, 4/9/10).
3 See 699 F.3d at 1336-37.
4 1 Chisum on Patents § 2.04[a] (West 2000); Hor v. Chu, 669 F.3d at 1336.
5 35 USC § 135 (2011, West).
6 Charles L. Gholz, "A critique of Recent Opinions in Patent Interferences," 94 J. Pat. Off. Soc'y 32, 51 (2012) (". . . a straight inventorship interference (that is, as distinguished from a derivation interference) is unusual . . . .").
7 Hor, 669 F.3d at 1336.
8 Price v. Symsek, 988 F.2d 1187, 1190, 26 U.S.P.Q.2d 1031 (Fed. Cir. 1993).
10 Rept. 112-98, America Invents Act, Report together with Dissenting Views and Additional Views (House Committee Report), p. 41 (Jun. 1, 2011).
11 House Committee Report, p. 42 (emphasis added).
12 35 USC § 135(b) (2013).
13 3A Chisum On Patents § 10.10[d][iii][A].
14 77 Fed. Reg. 56,068, 56,078 (Sep. 11, 2012) (emphasis added).
15 Bd. of Educ. v. Am. BioScience, Inc., 333 F.3d 1330, 1337, 67 U.S.P.Q.2d 1252 (Fed. Cir. 2003) (66 PTCJ 258, 6/27/03).
17 Fresenius USA, Inc. v. Baxter Int'l, Inc., No. 2012-1334, 1335, 721 F.3d 1330, 2013 BL 175930, 107 U.S.P.Q.2d 1365 (Fed. Cir. 2013) (86 PTCJ 520, 7/12/13).
18 In re Baxter Int'l, Inc., 678 F.3d 1357, 1364-1365, 2012 BL 121025, 102 U.S.P.Q.2d 1925 (Fed. Cir. 2012) (84 PTCJ 143, 5/25/12), reh'g en banc denied, 698 F.3d 1349, 2012 BL 283461, 104 U.S.P.Q.2d 1530 (Fed. Cir. 2012) (85 PTCJ 9, 11/2/12).
19 2012 Patent Litigation Study: Litigation continues to rise amid growing awareness of patent value (PricewaterhouseCoopers, 2012).
20 Chris Neumeyer, Managing Costs of Patent Litigation, IPWatchdog, http://ipwatchdog.com/2013/02/05/managingcosts-of-patent-litigation/id=34808/, accessed on July 15, 2013.
21 77 Fed. Reg. 48,756, 48,768 (Aug. 14, 2010).
22 37 C.F.R. § 42.15(c).
23 77 Fed. Reg. 48,612, 48,666-667.
25 37 C.F.R. § 42.51(b); also 77 Fed. Reg. at 48,622 ("Section 42.51(b) provides for limited discovery in the trial consistent with the goal of providing trials that are timely, inexpensive, and fair.").
Reproduced with permission from BNA's Patent, Trademark & Copyright Journal, Vol. 87, No. 2136, 11-1-13. Copyright © 2013 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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