Signed into law in 2011, the America Invents Act provides a one-year grace period for inventors or applicants to file patent applications for their invention. This means they can publically disclose, offer for sale or sell their invention up to one year before needing to file for a U.S. patent.
But waiting for any period of time after a disclosure — public or not — of your invention to a third party can have some significant cost implications and possibly wreak havoc on your patent rights.
After the passage of the AIA, we saw a noticeable uptick in third parties usurping other people’s inventions. Whether this is a reflection of the emasculation of inventors’ rights under the AIA or simply a reaction to a patent system that now incentivizes the race to the patent office at all costs, it appears to be the death knell of the one-year grace period.
To illustrate one potential danger: Company A discloses a new invention to Company B. Although Company A has a confidential agreement in place with Company B, Company B proceeds to prepare and file a patent application on Company A’s invention, adding only a minor modification or improvement.
Even if Company A becomes aware of Company B’s application and then files its own application, Company B’s application may be used to reject Company A’s application on several grounds:
First, if Company B’s application only lists its employee(s) as the inventor(s), then Company B’s application can be used as prior art to reject Company A’s application.
Second, if Company B names Company A’s employee in addition to its employee(s) as the inventors, Company B’s application also can be used to reject Company A’s application based on double patenting, which cannot be easily overcome. More on this below.
What are Company A’s options?
First, Company A can seek to remove Company B’s application as prior art against Company A’s application by establishing the relevant subject matter in Company B’s application was obtained from Company A. This would mean both applications would proceed, each then being owned by its respective applicant.
The result may be two patents are granted on very similar inventions. So, Company A’s right to exclude others from making its invention may cost more to enforce, and the self-enforcing nature of its U.S. patent is somewhat eroded.
A second and much more costly option is for Company A to file a derivation proceeding against Company B’s patent with the goal of invalidating the patent. This is a relatively untested proceeding and would be hard to predict the outcome if Company B only claimed its improvement.
Third, if Company B did not name Company A’s inventor and its omission was unintentional, Company A can petition the U.S. Patent and Trademark Office to add its employee-inventor as an inventor in Company B’s application. If that is successful, then Company A would co-own Company B’s application.
But co-owning is not the perfect remedy. Absent an agreement to the contrary, each owner can do what it wants with its “half” of the patent without accounting to the other.
Fourth, Company A can try to buy Company B’s application. If successful, any potential doubling patenting rejection of Company A’s application can then be overcome with the filing of a terminal disclaimer.
Lastly, Company A can sue Company B for breach of the confidentiality agreement because Company B’s filing of an application likely will result in Company A’s confidential information becoming public. Besides the burden of paying for a lawsuit, there is the added difficulty of proving the actual damages.
So what should a company do to avoid such a mess?
File early and before you disclose to any third party, whether the disclosure is confidential or not. Make sure your employees are aware of this restriction; consider including it in your employee non-disclosure agreement.
Forgo filing a provisional application if you have disclosed to a third party before filing, and instead file a nonprovisional application so you can get your application examined as soon as possible.
Revamp your confidentiality agreements to include an affirmative statement the person receiving the disclosure will not file any patent applications that include your confidential information. Also, request the disclosee agrees to assign rights to any patent applications he or she files that includes your confidential information to you.
Catherine Collins is a partner with the law firm Warner Norcross & Judd. A registered patent attorney with the U.S. Patent and Trademark Office, she has two decades of experience procuring and protecting intellectual property rights. She can be reached at firstname.lastname@example.org.