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On November 29, 1999, President Clinton signed into law three intellectual property related acts that were incorporated into the spending package passed by the House and Senate on November 18 and 19, 1999, respectively. The three acts, the American Inventors Protection Act, the Anticybersquatting Consumer Protection Act, and the Satellite Home Viewer Improvement Act, were initially introduced as stand-alone bills, but were joined together to form the Intellectual Property and Communications Omnibus Reform Act of 1999. Congress then merged this omnibus bill, with some changes, into the mammoth appropriations legislation.

These important new laws reform a variety of provisions in the patent law; strengthen competition between satellite and cable television broadcasters; and provide additional protection for trademark holders in the digital environment. They offer benefits to the owners and producers of intellectual property, such as the patent term guarantee and the prohibition on "cybersquatting." Some of the new provisions, however, appear to favor intellectual property users and second generation inventors, such as those for publication of applications and optional inter partes reexamination of patents. In this memorandum, we briefly discuss the background of each of the three new laws as well as the actual provisions and their implications. We also touch on some other intellectual property matters included in the appropriations bill and other legislation passed by Congress this session.

American Inventors Protection Act of 1999 (AIPA)

Background of the AIPA

Much of the substance of the American Inventors Protection Act (AIPA) had been previously introduced in the 104th and 105th Congresses. For example, the AIPA's provisions relating to the first inventor defense, early publication of patent applications, patent term guarantee, patent litigation reduction, inventor rights, and Patent and Trademark Office reorganization appear in some form in proposed legislation dating back to 1995. This earlier legislation proved very controversial, and was opposed by the "small inventors" lobby which contended that the amendments benefited foreign and large corporate interests. Congress changed many provisions to accommodate these concerns, but the AIPA still reflects many of the concepts previously proposed.

Discussion of the AIPA's Provisions

The AIPA introduces changes in a number of areas, including prior user rights for business methods, early publication of U.S. patent applications before grant, a patent term guarantee, a new optional inter partes reexamination procedure, invention promotion services, and improvements to Patent and Trademark Office (PTO) efficiency, which includes establishment of the position of Director of the PTO in place of the former Commissioner for Patents and Trademarks. The term "Director" is used in the remainder of this memorandum. These amendments to the patent laws, taken together, will have a major impact on the offensive and defensive patent strategies of companies. Companies should consult with their patent counsel to determine how to respond to the changes brought about by the AIPA.

First Inventor Defense Act of 1999

Perhaps AIPA's most important amendment is the creation of a "prior use" defense with respect to business method inventions. Prior to AIPA, the fact that a person had long been using a method which was protected as a trade secret, for example, did not provide a defense against another person who later obtained a patent on the method. This forced some companies to pursue patent protection as a defensive measure, but patent protection required disclosure of the method to the public. In past years, some companies have argued that they should not be forced to disclose their secrets to protect themselves against subsequent inventors' patents. Accordingly, they sought enactment of a "prior use" defense. Legislation introduced in previous Congresses provided a broad shield from patent infringement based on commercial use of patented subject matter more than one year before the effective filing date of the patent. But the breadth of such a shield contributed to preventing passage of that legislation because the breadth would have discouraged the dissemination of knowledge, which is a major goal of the patent system,

The AIPA, in a new section 273 in title 35, provides a narrower prior use right for those who have invented and commercialized a business method. The passage of this defense may be due in part to the patentability of business methods following the recent State Street decision, State Street Bank and Trust Co. v. Signature Financial Group, 149 F.3d 1368, 47 USPQ2d 1596 (Fed. Cir. 1998), cert. denied, 119 S.Ct. 851 (U.S. 1999). Prior to that decision, business methods and processes were generally considered unpatentable, and thus protectable only as the subject matter of a trade secret.

The "prior use" defense is significant in several respects. First, it represents a shift in the basic structure of the patent laws, at least with respect to business methods. Now, a company will be able to keep a method secret with diminished risk that it will be liable to a subsequent patentee. This may lead to greater reliance on trade secrecy and less public disclosure of business method inventions. Second, although the "prior use" defense currently only applies to business methods, other interests are likely to push for its expansion to additional types of subject matter. Third, the fact that Congress created prior user rights with respect to business methods perhaps signals the discomfort of Congress with this type of patent. Additional legislative action in this area is likely.

This new "prior use" defense is for any subject matter that would otherwise infringe one or more patented claims for a "method of doing or conducting business." The defense is available only against patented claims to a method and requires (1) actual reduction to practice of the subject matter at least one year before the effective filing date of the patent; (2) commercial use of the subject matter at least one day before the effective filing date; and (3) establishment by clear and convincing evidence. There is no requirement for public knowledge of the subject matter or its use. The defense also protects buyers or recipients of a useful end product produced by the prior user practicing the subject matter by exhausting the patent owner's rights under the patent as if the owner had sold the product. Importantly, the AIPA explicitly provides that raising or succeeding in the defense does not invalidate the patent by providing an earlier date of invention or "prior art" under the patent laws.

There are also limitations to the defense. For example, the defense fails if the party asserting "prior use" derived the subject matter from the patentee. Also, the defense is not a general license under all claims of the patent at issue. Rather, one may raise the defense only against the specific claims against which the subject matter of the defense applies. The defense does extend, however, to changes in the quantity or volume of use of the claimed subject matter as well as to improvements therein that do not otherwise infringe additional claims.

Further, one is barred, after abandoning commercial use of the subject matter, from relying on activities performed before the date of abandonment to establish a defense based on actions taken after that date. The defense is personal to one who performed the acts necessary to establish the defense, and may be transferred only to the patent owner with one exception. The exception is when the defense is licensed, assigned, or transferred to another as a part of an assignment or transfer of the enterprise or business to which the defense is related. This business transfer based exception still comes at the cost of further limiting the defense to locations where the subject matter of the defense was in use before the later of the effective filing date of the patent or the date the business was transferred. A final potential risk in the defense is that failure to demonstrate a reasonable basis for its assertion comes at the cost of awarding attorney fees to the patent owner.

The scope of the defense is also clarified by the definition of "commercially used" and "commercial use" as encompassing a use in the U.S. related to an internal commercial use, an arm's length sale, or other arm's length commercial transfer of a useful end result, including uses relating to a premarketing regulatory review period. Activities by a nonprofit entity for which the use is intended to benefit the public will also be considered "commercial," except that the defense available under such use is only for continued use by the nonprofit entity and may not be asserted with respect to any subsequent commercialization or use outside the nonprofit entity.

The Report from the House Judiciary Committee describes the scope of the defense as encompassing a method or process "used in connection with the production of a useful end-product or -service and is or could have been claimed in the form of a business process or method in a patent." The Report provides examples of such methods or processes in the form of software related inventions which previously required claiming as part of a programmed machine. Thus the defense is likely to be of particular significance to the financial services industry, where methods and processes fundamental to the delivery of many financial transactions are now subject to patent protection under the State Street decision. Importantly, the actual scope of a "method of doing or conducting business" remains undefined by the new provisions and may lead to broad inclusion of diverse subject matter only tangentially related to "doing or conducting business."

The provisions establishing the new defense took effect on November 29, 1999, the date of enactment, except for "any action for [patent] infringement that is pending on such date of enactment or with respect to any subject matter for which an adjudication of infringement, including a consent judgement, has been made before such date of enactment."

Domestic Publication of Foreign Filed Patent Applications Act of 1999

Another significant change in the patent law is the enactment of a statutory requirement for the publication of U.S. patent applications that are published abroad. Previously proposed legislation attempted to broadly require the publication of most patent applications after 18 months had passed from the earliest filing date for which the application sought benefit, without regard to publication elsewhere. Aside from potentially expanding the prior art by publishing what would otherwise be confidential application files, the previous legislation would have provided the patent owner with the right to obtain a reasonable royalty from anyone who, with actual notice of the application, made, used, sold, or imported the patented invention between the time of publication and the time of patent issuance.

The new provisions, codified by changes in sections 122, 181 and 374 of the patent laws in title 35, establish that after 18 months from the earliest filing date for which benefit is sought, the PTO will publish a filed U.S. patent application unless it is (1) abandoned; (2) subject to a secrecy order; (3) a provisional application; (4) a design patent application; or (5) subject to a request not to publish, described below in greater detail. An applicant may request that publication occur earlier. The actual decision to publish, as well as the actual information to publish, is to be determined by the Director of the PTO and is final and nonreviewable. The costs of publication are defrayed by charging the applicant upon allowance of the application.

As noted above, an applicant may avoid publication by request. This requires certification upon filing that the invention disclosed in the application has not been and will not be the subject of an application filed in another country or under an international agreement that requires publication of applications 18 months after filing. This request may be rescinded at any time, after which the PTO will proceed to publish the application after 18 months from the earliest filing date or as soon as practical after that date. If the applicant files the disclosed invention under conditions where it would be published in another country or under an international agreement, the applicant must notify the PTO of such a filing within 45 days. Unless unintentional, failure to so notify will result in abandonment of the U.S. application.

In the event that the filing in another country or under an international agreement is less extensive than the invention description in the U.S. application, the applicant may submit a redacted copy of the U.S. application to eliminate any part or description not found in the corresponding foreign applications. Under such conditions, the PTO may publish only the redacted copy as long as it is received within 16 months of the earliest effective filing date for which benefit is sought.

Publication of an application provides a patent owner with a new provisional right to obtain a reasonable royalty during the period beginning on the date of publication of the underlying U.S. application and ending on the issue date of the patent. These royalty rights are "provisional" because they mature only upon the issuance of the patent. This new provisional right to a reasonable royalty, codified at 35 U.S.C. § 154(d), is directed against any person who, with actual notice of the published patent application, "makes, uses, offers for sale, or sells in the United States " or imports " into the United States" the invention as claimed in the published patent application, or in the case of claimed processes, "uses, offers for sale, or sells in the United States or imports into the United States products made by" a process as claimed in the published patent application. The provisional right does not apply to a claim if the description of the invention in a published redacted copy of the application does not enable one skilled in the art to make and use the claimed subject matter. The reasonable royalties are not, however, subject to the increased damages authorized under 35 U.S.C. § 284.

This new provisional right is also extended to publication of a Patent Cooperation Treaty (PCT) international application designating the U.S. However, a published PCT application permits the provisional right to begin when the PTO receives a copy of the publication under the PCT or, in the case of non-English applications, the date when an English translation is received. The Director of the PTO may require that a copy of a published PCT application and a translation thereof be provided. Importantly for a published PCT application, the requirement for actual notice includes a requirement for a translation into English, if necessary.

Furthermore, the provisional right to a reasonable royalty is limited by the requirements that (1) the invention as claimed in the patent be "substantially identical" to the invention as claimed in the published patent application; and (2) an action for reasonable royalty is brought not less than 6 years after issuance of the patent. The requirement for "substantial identity" reflects a concern that without it, the public would be unacceptably burdened after publication of an application by the lack of guidance on specific behavior to avoid because the provisional right would be determined by the invention as later claimed in the patent. But given the apparent ambiguity in the phrase, every person or entity that might be acting near the scope of the claims in a published application will likely still need clarification as to what subject matter to avoided. While this burden might be lifted by greater reliance on the actual published claims to set the range of subject matter to avoid, this may still be inadequate given the unclear scope of "substantially identical."

The impact of the "substantially identical" standard is heightened when combined with the requirement of actual notice. In describing the notice requirement as "critical", the House Judiciary Committee Report on this provision continues with "[t]he mere fact that the published application is included in a commercial database where it might be found is insufficient. The applicant must give actual notice of the published application to the accused infringer and explain what acts are regarded as giving rise to provisional rights." Thus an applicant seeking the benefit of the new provisional right by providing actual notice of the published application should be concerned by ambiguity in what claims in a subsequently granted patent would be deemed "substantially identical" to claims in the published application.

There are also prior art effects created by the new publication provisions. 35 U.S.C. § 102(e) is revised to make a published application prior art as of its earliest effective U.S. filing date against subsequently filed U.S. applications. Thus published applications are treated the same as an issued U.S. patent, which remains prior art as of its earliest effective U.S. filing date. But as with an issued U.S. patents, the prior art effect of a published U.S. application is not based on any foreign filing date from which the published application may claim priority. An exception to this rule is for PCT international applications published in English and designating the U.S., which have a prior art effect as of the international filing date.

Due to the need for an orderly scheduling of pending applications for publication based on the new provisions discussed above, additional changes have been introduced to limit the time period for claiming benefit of earlier filing dates. Previously, a claim to the benefit of an earlier filing date could be made sometime during pendency. Now, for applications that may be entitled to benefit of foreign priority, 35 U.S.C. § 119(b) is amended to permit the Director of the PTO to set a deadline during pendency of a U.S. application for claiming such benefit. Similarly, 35 U.S.C. §§ 120 and 119(e)(1) are amended to permit the Director to set a deadline during pendency for claiming the benefit of priority to an earlier filed U.S. utility and provisional application, respectively. The Director may consider failure to timely claim either foreign or domestic priority as a waiver of the claim unless the failure was unintentional. These changes appear directed to ensure that claims for benefit of priority will not interfere with the orderly and timely publication of applications at the 18 month date. There is a likely side effect, however, in that claims for priority in general will need to be made within a specific time period or be waived.

As explained above, there are obvious implications for patent applicants based on the new provisions. Applicants who prefer secrecy may choose not to file in a foreign jurisdiction or to file in one of the few jurisdictions which do not publish applications, such as India or Taiwan. While one might view the 18 month window as relatively short to make the decision, it should be noted that the filing and publication of a PCT international application presents the same timing pressure (18 months from the filing date of the earliest priority application, if any). On the other hand, the new availability of "provisional rights" may make publication attractive for other applicants, notwithstanding the potential complication of determining whether published and patented claims are "substantially identical." To address this possibility, applicants may attempt to have a more comprehensive schedule of claims to provide more notice and more scope for asserting "substantial identity."

Two other points appear worthy of note. First, applicants should look for the new deadlines for claiming benefit of an earlier filing date to be set by the Director of the PTO. Second, it appears possible under the language of the new provisions for the Director of the PTO to make information about a published application available to the public. This could be interpreted to include public access to the ongoing prosecution history of a published application even before a patent is granted.

These provisions take effect on November 29, 2000 and apply to all patent applications filed after that date.

Patent Term Guarantee Act of 1999

Patent term extension became a significant issue after changes in U.S. patent law implementing the GATT-TRIPs agreement took effect in 1995. The GATT implementation legislation changed the term for patent protection from 17 years from the date of issue to 20 years from the date of application. This somewhat curtailed "submarine" patents by shortening the effective patent term in cases where applicants made extensive use of continuation practice. However, some inventors expressed concern that factors beyond a patent applicant's control, such as administrative delays in the processing of an application, could result in an effective term shorter than the 17 years available under the previous statute.

The new law, codified by changes to 35 U.S.C. § 154, compensates a patent applicant for patent term reductions which are not the applicant's fault. The provisions included in the patent term adjustment provisions of the patent bills passed by the 105th Congress only provided adjustments for secrecy orders, interferences, and successful appeals. These adjustments were too short in some situations and did not provide for administrative delays caused by the PTO which were beyond the control of the patentee.

Thus, the new provisions (a) remove the previous caps of the existing provisions, (b) compensates applicants fully for administrative delays caused by the PTO, and (c) guarantees diligent applicants at least a 17 year term by extending the term of any patent not granted within three years of filing. As a result, no diligent applicant will receive a patent term of less that 17 years as under the pre-GATT standard. However, applicants who purposely manipulate the patent system to delay the issuance of their patents will be penalized under the Act.

Consequently, 35 U.S.C. § 154(b) as amended provides a day-for-day restoration of the patent term lost due to a delay caused by the PTO where the agency fails to give a first action on an application within 14 months, and where the agency fails to respond to an applicant's submission within four months.

Additionally, the new provisions guarantee a total application pendency of no more than three years and provide a day-for-day restoration of patent term if the PTO has not issued a patent within three years after the actual date of filing the application in the United States, which specifically excludes the filing date of a PCT patent application. Periods of time not considered a delay by the PTO and not counted for determining whether the patent issued within three years of the filing date include time

• during the continued examination of the application under new 35 U.S.C. § 132(b), which provides that the Director of the PTO shall prescribe regulations to provide for the continued examination of patent applications at the request of the applicant;
• lost due to an interference under 35 U.S.C. § 135(a), a secrecy order under 35 U.S.C. § 181, or appellate review by the Board of Patent Appeals and Interferences (BPAI) or by a federal court; and
• incurred at the request of an applicant in excess of the three months to respond to a notice from the PTO unless the applicant could not respond within the three months in spite of all due care. Under paragraph (3)(C), "[t]he Director shall reinstate all or part of the cumulative period of time of an adjustment under paragraph (2)(C) if the applicant, prior to the issuance of the patent, makes a showing that, in spite of all due care, the applicant was unable to respond within the 3-month period, but in no case shall more than 3 additional months for each such response beyond the original 3-month period be reinstated." See 35 U.S.C. § 154(b)(2)(C)(ii) and 35 U.S.C. § 154(b)(3)(C).

The new provisions also provide for a day-for-day patent term adjustment for delays due to interference proceedings, secrecy orders and appellate review of by the BPAI or a federal court in a case in which a patent was issued pursuant to a decision reversing the adverse determination of patentability. See 35 U.S.C. § 154 (b)(1)(C).

The new patent term restoration provisions have, however, the following limitations: (1) where there are multiple grounds for extending the patent term, which may exist simultaneously, the term may be extended for only the actual number of days that the issuance of the patent was delayed; (2) the term may not be extended beyond the shortened term of a patent which has been disclaimed; and (3) the term adjustments shall be reduced by a period of time equal to the time in which the applicant failed to exercise reasonable efforts to conclude patent prosecution as determined by regulations developed by the Director. The applicant is deemed to have failed to engage in reasonable efforts for any periods of time in excess of three months that are taken to respond to a notice from the PTO.

35 U.S.C. § 154(b)(3) sets forth the procedures for patent term adjustments. The Director is empowered to prescribe regulations establishing procedures for the application for and determination of patent term adjustments. The Director determines the period of any patent term adjustment and shall provide a notice of determination with the written notice of allowance of the patent application.

The applicant has one opportunity to request reconsideration of the patent term adjustment determination made by the Director. An applicant dissatisfied with the determination of the patent term adjustment made by the Director may bring a civil action against the Director in the United States District Court for the District of Columbia within 180 days after the grant of the patent. The patent term adjustment determination, however, is not subject to an appeal or challenge by a third party prior to the grant of the patent.

As patentees are guaranteed a patent term of at least 17 years if they act with due diligence and good faith, patentees and patent practitioners will want to keep records of the various periods of time an application is pending. Practitioners will want to be diligent in responding to Office actions as extensions of time will diminish the patent term to under 17 years, unless the patent is granted within three years of filing. However, the implications of the patent term guarantee provisions on continuation practice are unclear as the regulations for continuation practice are yet to be developed by the Director.

The patent term guarantee provisions take effect on May 29, 2000 and apply to any patent application, except for a design patent application, filed on or after May 29, 2000.

Optional Inter partes Reexamination Procedure Act of 1999

Since a 1994 agreement with Japan on patent law reforms, several bills have been introduced to provide for greater participation by third parties in U.S. reexamination proceedings. These earlier bills also attempted to expand the ability of a third party to initiate a reexamination proceeding as well as provide a third party with the ability to appeal reexamination proceedings as far as the Board of Patent Appeals and Interferences (BPAI).

The AIPA retains, in Chapter 30, title 35, the present ex parte reexamination procedure, and codifies, in a new Chapter 31 an optional inter partes reexamination procedure that permits third parties to have limited, yet meaningful, participation throughout a reexamination proceeding in the PTO. In addition, the statute helps prevent third parties from using reexamination to harass patent owners by imposing certain estoppel provisions. New Chapter 31 took effect on November 29, 1999, and apply to any patent that issues from an original application filed on or after such date, with the exception of a provision concerning certain petitions in a reexamination proceeding that takes effect November 29, 2000. In the future, the PTO is likely to issue regulations on this new procedure.

In an ex parte reexamination under current practice, a third party may request the PTO to reexamine an issued patent based on prior art submitted by the third party that was not a basis of rejection in the original prosecution. If the patent owner responds to the request, the third party may file a response. If the Director finds that a substantial new question of patentability exists in view of the prior art, an order granting reexamination will be issued. The third party has no further participation.

A reexamined patent is presumed valid. A third party may weaken its best defense by presenting prior art in a reexamination because the party cannot participate fully in the reexamination, and the court in a subsequent infringement action will grant deference to the PTO's evaluation of the prior art. Thus, these procedural restrictions make ex parte reexamination an unattractive option for third parties to challenge patent validity.

The AIPA offers an additional inter partes option for a third party and gives a third party an opportunity to appeal an examiner's decision to the BPAI. A third party begins the inter partes procedure as an ex parte procedure by filing, at any time, a written request for reexamination on the basis of cited prior art. However, the AIPA provides a third party with an opportunity to participate throughout the inter partes reexamination procedure. Specifically, a third party is permitted to provide one response for each of a patent owner's responses to official PTO actions in a reexamination within 30 days of the patent owner's responses. This explicit time limit suggests that a third party cannot request extensions of time, thus preventing a third party from delaying the proceedings.

Although an inter partes reexamination proceeding provides a third party the right of appeal from the examiner's final decision to the BPAI, no appeal to the Court of Appeals for the Federal Circuit (Federal Circuit) is permitted. In contrast to third party's rights, a patent owner may appeal the examiner's final decision to the BPAI and can further appeal an adverse decision to the Federal Circuit. There is no provision for the third party to participate if the patent owner appeals to the Federal Circuit. There is no provision for either party to bring a civil action.

The AIPA provides three important safeguards to ensure that inter partes reexamination does not become a vehicle for harassing patent owners. First, a third party that does not prove invalidity in a civil action may not thereafter request an inter partes reexamination on the same basis as was raised or could have been raised in that action. Second, a third party is precluded from initiating multiple concurrent reexaminations, or from initiating a second reexamination on the same issues resolved in an earlier reexamination proceeding initiated by the same third party. Third, and most importantly, a third party is explicitly estopped from further litigating issues that would or could have been addressed during reexamination in a subsequent federal court proceeding. This measure will prevent a third party from using reexamination as a prelude to litigation on the same patent validity issues. Moreover, regarding estoppel, any party who requests an inter partes reexamination is estopped from challenging any fact in a civil action determined during the reexamination proceedings, except a fact determination later proved to be erroneous based on information unavailable at the time of the inter partes reexamination decision.

A third party is not precluded, however, from raising issues that could not be asserted during reexamination in federal court following an inter partes reexamination proceeding. For example, a third party cannot challenge patentability based on 35 U.S.C. § 112 during a reexamination proceeding. In addition, a third party is not precluded from asserting invalidity in federal court on newly discovered prior art unavailable to the third party and the PTO at the time of the inter partes reexamination proceedings. The legislative history suggests that unavailable prior art refers to prior art at the time of reexamination that is unknown to the individuals who were involved in the reexamination on behalf of the third party and the PTO.

The implications of the new inter partes reexamination procedure are unclear. Third parties are not given the right of judicial review for matters addressed in the inter partes reexamination proceedings, and thus it is unlikely that third parties will risk estoppel instead of litigating patent invalidity in federal courts. Further, because the new reexamination procedures do not allow for assertions of invalidity based on 35 U.S.C. § 112, third parties will likely forego reexamination in favor of litigating these issues, along with invalidity issues based on prior art, in federal court. Moreover, issues of examiner bias already present in ex parte reexamination are not addressed. The responsibility of determining whether a new question of patentability is raised remains with the Director, who will most likely delegate the responsibility, as in cases of ex parte reexaminations, to the examiner who examined the patent application. The examiner's determination may be influenced by his or her own prior decisions. The AIPA does not preclude an examiner from reexamining a patent that he or she has previously examined or allowed, which may also introduce bias into the reexamination proceedings. In contrast, the European patent system addresses the problem of potential examiner bias by limiting the original examiner's participation in opposition proceedings, which are analogous to the U.S. reexamination proceedings. Nonetheless, the AIPA provides enhanced incentives for third parties to resolve disputes using less costly reexamination procedures rather than court litigation. These changes also allow greater harmonization of U.S. procedures with Japanese and European opposition procedures.

Inventors' Rights Act of 1999

The AIPA creates a new section, codified at 35 U.S.C. § 297 and entitled "Integrity in Invention Promotion Services," which is designed to protect inventors in their dealings with invention promoters. Similar legislation had previously been proposed to address the issue of promoters advertising on television and in magazines, encouraging inventors to disclose their inventions and subsequently purchase marketing services as a means of realizing the market potential of their inventions. Congress noted that among these promoters are unscrupulous operations that simply take advantage of untutored inventors by collecting large advance payments and then providing no meaningful service. The section is not directed at legitimate invention assistance and development organizations that can be of great benefit to an inventor.

The new provision defines an invention promoter as an entity that provides services related to "the procurement or attempted procurement for a customer of a firm, corporation, or other entity to develop and market products or services that include the invention of the customer," where "customer" refers to the individual contracting with an invention promoter. While the definition is somewhat ambiguous, the services provided by a promoter appear to be those related to finding a licensee, buyer or developer for an invention. The definition is further clarified by the particular requirements imposed on promoters and by those entities exempted from the new statute.

The new requirements imposed on invention promoters involve mandatory disclosures designed to ensure that an inventor is fully informed of a prospective promoter's past business dealings and practices. Prior to entering into a contract with an inventor, a promoter must disclose in writing the total number of inventions evaluated over the previous five year period, including whether the inventions received positive or negative evaluations, and the total number of customers over that same time period who have contracted with the promoter. In addition, the invention promoter is required to disclose the number of contracting customers who have received a net financial profit and/or license agreements as a result of the promoter's services. Finally, an invention promoter must provide the names and addresses of all previous invention promotion entities with which the promoter has been affiliated in the previous ten years.

Entities exempt from the disclosure requirements by falling outside of the definition of "invention promoter" are (1) governmental agencies; (2) any nonprofit, charitable, scientific, or educational organizations qualified under applicable state and federal law; (3) individuals or entities involved in evaluating or offering to license or sell an issued utility patent or a previously filed non-provisional utility patent application; (4) parties participating in the sale of the stock or assets of a business; and (5) those who directly engage in the retail sale or distribution of products. Exemption (3) appears directed to promotions involving issued patents or filed utility patent applications, while exemption (4) appears directed to activities involving the transfer of equity of an existing business, such as venture capital investments. The last exemption, however, may provide a potentially significant loophole from the disclosure requirements of the new statute by permitting invention promoters who sell or distribute any product at the retail level to escape inclusion.

Remedies for violation of the disclosure requirements are also provided. Any inventor who contracts with an invention promoter and is found by a court to have been injured by a promoter's failure to adhere to the disclosure requirements, by any material false or fraudulent statement or representation, or by any omission of material fact, may recover the amount of actual damages or, if elected, statutory damages of not more than $5,000. Attorneys' fees and costs are also recoverable. In addition, treble damages may be awarded if it is found that the invention promoter intentionally or willfully engaged in deceptive conduct.

Finally, the legislation requires that the PTO keep records of all complaints and responses involving the activities of invention promoters and make those records available to the public. However, an invention promoter must be given a reasonable opportunity to submit a response to any complaint received by the PTO prior to it being made publicly available.

The implications of this new provision are generally beneficial to members of the public who would otherwise be subject to the unscrupulous activities of some invention promoters. The disclosure requirements should force invention promoters to stop taking advantage of inexperienced inventors. However, the possibility of a loophole for promoters who sell some retail products may permit many invention promoters to escape the disclosure requirements.

These Inventors' Rights provisions took effect on November 29, 1999.

Patent and Trademark Office Efficiency Act

Since a 1989 recommendation by the National Academy of Public Administration, several bills have been introduced to reorganize the U.S. Patent and Trademark Office (PTO) and render it more efficient by increasing its flexibility in management. Motivations for these bills included perceptions that (1) the rules governing federal employment made it difficult for the PTO to attract and retain top-level talent; (2) Department of Commerce authority over PTO decisions about personnel and facilities led to inefficiencies; and (3) fees collected by the PTO should not be diverted for the purpose of deficit reduction by the Federal Government at large.

The AIPA, in amendments to sections 1-3, 5, 6 and 13 of title 35, addresses these issues by changing the administrative organization and the management flexibility of the PTO. Generally, the new statute restructures both the organization and operational abilities of the PTO, maintaining it as an agency within the Department of Commerce while making it essentially independent on matters of budget, personnel, and procurement. Significantly, the PTO would remain under the policy direction of the Secretary of Commerce. This is in contrast to previous legislative attempts to divert the PTO into an independent, government owned corporation.

The new statute provides the PTO with new powers and duties. Among these new abilities is authority (1) to "acquire, construct, purchase, lease, hold, manage, operate, improve, alter, and renovate any real, personal, or mixed property, or any interest therein, as it considers necessary to carry out its functions"; (2) to make purchases of property, contracts for construction, maintenance, or management and operation of facilities, as well as to contract for and purchase printing services without regard to existing federal statutes governing such proceedings; and (3) to retain and use revenues and receipts of the PTO. The first two of these powers are to be exercised in consultation with the federal Administrator of General Services.

Another notable part of the restructuring effort is in the separation of patent and trademark operations within the PTO. Importantly, this restructuring provides that receipts from trademark operations be limited to trademark related activities. The separation is further accomplished by replacing the existing positions of Assistant Commissioner for Patents and Assistant Commissioner for Trademarks with a new Commissioner for Patents and a new Commissioner for Trademarks, who serve renewable five year terms as chief operating officers of the respective operations within the PTO. Each of these two new Commissioners may receive up to a 50% bonus of their salaries based upon their individual performance.

The Commissioner of Patents and Trademarks, who also serves as Assistant Secretary of Commerce for Patents and Trademarks, is replaced by an Under Secretary of Commerce for Intellectual Property. This Under Secretary, who will be appointed by the President with the advice and consent of the Senate, will serve as policy advisor to the Secretary of Commerce on intellectual property issues. The Under Secretary is also referred to as the Director of the PTO, and will be responsible for the management and policy direction of the PTO. Like the current Commissioner for Patent and Trademarks, the Director has the annual duty of providing a report to Congress. The Director's report must be made within 180 days of the end of each fiscal year and detail PTO receipts and expenditures, the quality and quantity of PTO work, evaluations and compensation of the two Commissioners, and other related information.

Another part of the AIPA emphasizing the separation of patent and trademark operations within the PTO is the establishment of two new Public Advisory Committees, one for patents and one for trademarks. Each of these two Committees has nine compensated voting members appointed by the Secretary of Commerce and serving staggered terms of three years each. The Committees will also have nonvoting representative members from each labor organization recognized by the PTO. The duties of the two Committees are to represent the interests of the users of the PTO, "review the policies, goals, performance, budget, and user fees" with regard to patents and trademarks, respectively, and advise the Director on these matters. Additionally, the Committees are to prepare annual reports to the Secretary of Commerce, the President, and the Committees on the Judiciary of the Senate and the House of Representatives as well as for publication in the Official Gazette of the PTO. In turn, the Director is to consult with the respective Committees on a regular basis regarding PTO operations and before submitting budgetary proposals to the Office of Management and Budget or changing user fees or regulations relating to patents or trademarks.

Lastly, and as part of increased PTO management flexibility, the AIPA addresses the recruitment and retention of workers by exempting the office from Federal government-wide personnel ceilings (or full-time equivalents) and by authorizing the Director to hire employees as considered necessary. The PTO is to develop an incentive program for retaining patent and trademark examiners of the primary examiner grade or higher for the purpose of training other examiners. Nevertheless, PTO employees remain entitled to federal civil service protections available under title 5.

These changes in PTO organization and operations should be helpful to both the patent and trademark communities. With the ability to retain and spend funds, PTO users should expect that fees paid will be directed by the PTO to the services it provides. Additionally, the restriction of trademark revenue to trademark related expenditures should prove to be of benefit to the trademark community since the revenue would not be available for patent related expenditures. These positive expectations may be further supported by the exemption of the PTO from government ceilings on hiring new employees, permitting the PTO to expand its ranks of examiners and support personnel to better serve its users. Moreover, there is a strong likelihood of improved training for these new employees upon implementation of the incentive programs for retaining more experienced examiners.

Responsiveness to user needs is also likely to result from the new statute. The added incentive, in the form of up to 50% bonus pay, for the respective Commissioner for Patents and for Trademarks should encourage them to provide improved service and sensitivity to PTO users. Moreover, the implementation of the two Public Advisory Committees, charged with reviewing operations and planning for the patent and trademark units, should further facilitate the communication of user needs and concerns to the PTO management. The duty of each Committee to independently report and publish their reviews will provide another means of monitoring PTO operations.

These PTO organizational provisions take effect on March 29, 2000.

Additional Patent Law Amendments

Minor changes introduced by the AIPA include the ability of trademark fees to be adjusted without indexing to inflation beginning in fiscal year 2000, and a requirement for a study on alternative fee structures for the PTO.

The AIPA also includes a "Fee Fairness Act" reducing certain patent fees. Beginning December 29, 1999, the fees for filing (1) an original utility application, (2) a reissue application, and (3) the national phase of an international application are all reduced from $760 to $690. Also, the maintenance fee for patents 3 1/2 years after issuance is lowered from $940 to $830.

Perhaps more importantly, the use of "substantially identical", as discussed above in section I.B.2, was also introduced into the existing parts of title 35 concerning the reissue of defective patents. Specifically, 35 U.S.C. § 252, directed to the effect of reissue, is amended to also use the "substantially identical" language. This change suggests that the rights of owners of reissued patents have been broadened by the ability of "substantially identical" claims in a reissued patent to constitute a continuation of, and have effect continuously from the date of, the original patent. Thus the amendment will likely make reissue proceedings more palatable to patent owners.

Additional aspects of the AIPA address a variety of largely unrelated issues that have been identified as requiring clarification and technical changes.

35 U.S.C. § 103(c), which exempts from obviousness considerations certain prior art subject matter under specific conditions, is amended to include, as part of the exception, subject matter qualifying under 35 U.S.C. § 102(e), which bars the granting of a patent if the invention was described in a published application or issued patent (see above discussion on the new scope of 35 U.S.C. § 102(e) to include published patent applications in section I.B.2). The effect of this change is to permit an applicant to obtain a patent on a claimed invention with only obvious differences from prior art subject matter qualifying only under 35 U.S.C. § 102(e), (f) or (g) as long as the claimed invention and the subject matter were, at the time of the invention was made, owned by the same person or subject to an obligation of assignment to the same person. This change will apply to any application for patent filed on or after November 29, 1999.

35 U.S.C. § 102(g) is amended to clarify that an invention made abroad as permitted under 35 U.S.C. § 104 is subject to the requirements of § 102(g). This removes the ambiguity of whether inventors who made their inventions abroad in a North American Free Trade Agreement (NAFTA) or WTO country were subject to the provisions of § 102(g), which requires that inventions not be abandoned, suppressed, or concealed and that the relative dates of conception, reasonable diligence and reduction to practice be considered in determining priority of invention.

The 12 month conversion date of a provisional application to a non-provisional application can fall on a weekend or Federal holiday. The new amendment to 35 U.S.C. § 111(b)(5) addresses this problem by extending the conversion date to the next business day. 35 U.S.C. § 119(e) is amended to extend pendency of provisional applications to the next business day if the 12 month date falls on a weekend or Federal holiday. Section 119(e)(2) is amended to remove the need for a provisional application to have actual co-pendency with a non-provisional application for claims of benefit from the provisional application. These changes concerning provisional applications took effect on November 29, 1999.

35 U.S.C. § 119(a) is also amended for conformity with the requirements of the Trade Related Aspects of Intellectual Property Rights (TRIPs) Agreement that was part of the Uruguay Round Agreements as part of the General Agreement on Tariffs and Trade (GATT). Specifically, the amendment permits applicants who previously filed a patent application in a World Trade Organization (WTO) country to claim priority in a subsequent patent application filed in the United States.

New provisions have been added as 35 U.S.C. § 119(f) and (g) to address cases where an applicant for a U.S. plant or utility application for a plant variety previously filed for breeder's rights in a WTO member country or an International Convention for the Protection of New Varieties of Plants (UPOV) contracting party. Since many of these countries and parties only provide a sui generis system of protection for plants, there was no previous ability to claim priority from a filing for breeder's rights. This is addressed by the new provision that provides a right of priority in the United States from an application for a plant breeder's right in a WTO member or a UPOV contracting country.

35 U.S.C. § 287(c)(4) was amended to clarify that § 287(c) does not apply to patents issued "based on an application the earliest filing date of which is prior to September 30, 1996" rather than patents issued "before the date of enactment of the subsection." Subsection 287(c) was added on September 30, 1996 to provide limitations on liability arising from a medical practitioner's performance of a medical activity that otherwise constitutes an infringement.

A technical amendment was made to 35 U.S.C. § 22 to explicitly provide for the filing of papers to the PTO in electronic form. 35 U.S.C. § 11(a) is amended to permit the Director of the PTO to publish in electronic form. 35 U.S.C. § 13 is amended to permit the Director to supply electronic forms of patent specification drawings to public libraries. 35 U.S.C. § 41(i)(1) is amended to require the Director to maintain electronic collections of U.S. patents, foreign patent documents, and U.S. trademark registrations to permit search and retrieval.

35 U.S.C. § 12 is amended to prevent the Director of the PTO from entering into an agreement to provide copies of specifications and drawings of U.S. patents and applications to a foreign country outside NAFTA and WTO membership without authorization of the Secretary of Commerce. This change appears significant in limiting the dissemination of published U.S. applications, which were previously not available.

Another portion of the new statute charges the Comptroller General and the Director of the PTO to conduct a study and submit a report to Congress on the potential risks to the U.S. biotechnological industry from biological deposits in support of biotech patents. Specifically, the study will include an examination of the risk of export and transfers to third parties of deposits; the risks posed by the new 18 month publication requirement discussed above; an analysis of comparative legal and regulatory regimes; and any related recommendations. The PTO is also charged with considering these recommendations when drafting regulations affecting biological deposits.

Satellite Home Viewers Improvements Act (SHVIA)

Background of SHVIA

The Satellite Home Viewers Improvements Act (SHVIA) is intended to increase competition in the market for multichannel video programming (now dominated by the cable TV companies) by removing a competitive disadvantage of the direct broadcast satellite (DBS) industry. Specifically, the SHVIA creates a statutory license under which DBS providers may transmit to their customers the programming of their local broadcast television stations, and protects satellite subscribers now receiving local broadcast signals over their DBS service from termination of those transmissions. The SHVIA also extends until December 31, 2004, the statutory license that permits satellite carriers to transmit the signals of broadcast networks to unserved households and transmit the signals of distant, non-network stations to all households. This compulsory license had been scheduled to expire in December 31, 1999.

A number of provisions that created controversy in the Congress do not appear in the version of the SHVIA that went to the President. Notably, the bill does not include a proposed federal loan program for companies that provides local broadcast service in rural areas (although it mandates a study of rural local television service availability), and also does not contain a provision that would have denied to Internet-based "streaming video" services the same compulsory license for broadcast programming that is available to cable TV operators and satellite carriers. Congress omitted these provisions when the Intellectual Property and Communications Omnibus Reform Act was attached to the appropriations bill.

This brief summary of the SHVIA's provisions is not exhaustive. SHVIA does not use the term "DBS carrier," but refers instead to "satellite carriers." The former expression is used here because it is a commonly-understood term for direct-to-home video services provided by satellite carriers.

Discussion of SHVIA's Provisions

The SHVIA amends the Copyright Act to extend until December 31, 2004 the statutory license for retransmission of network signals and distant non-network station signals by satellite carriers, and permits DBS carriers to transmit programming of broadcast television stations within those stations' local markets. The second of these provisions, which removes a competitive impediment to DBS service as a rival to wireline cable television service, is especially important. Specifically, the SHVIA creates a statutory license for secondary transmission of local broadcast programming if the satellite carrier satisfies certain conditions, including compliance with Federal Communications Commission (FCC) broadcast regulations and assessment by the satellite carrier of a direct or indirect charge for those secondary transmissions. The SHVIA also requires satellite carriers to submit subscribership reports to the television networks whose signals are transmitted on the DBS service, so long as those networks file with the Register of Copyrights the name and address of persons to whom those reports must be submitted. See 17 U.S.C. § 122(b). Satellite carriers have no royalty obligation for secondary transmissions subject to the statutory license; but willful or repeated secondary transmissions that are not in compliance with FCC rules or the SHVIA reporting requirements, or that include willful alterations to the broadcast programming's content (including the content of commercials), will constitute infringements under the Copyright Act. Id. §122(d)-(e). Secondary transmissions of broadcast programming to DBS subscribers outside the broadcast station's local market, if those transmissions are willful or repeated, also may give rise to liability under the Act. Id. §122(f).

The SHVIA also revises the formula for royalty fees paid by satellite carriers for "superstation" signals and broadcast stations, and makes the Public Broadcasting Service the agent for all public television claimants in actions before copyright arbitration royalty panels. Id. §119(c).

Other sections of the SHVIA revise the Communications Act, 47 U.S.C. § 151 et seq., rather than the Copyright Act. These provisions of the SHVIA include a "must-carry" requirement, providing that after January 1, 2002, if a satellite carrier retransmits the signal of any broadcast television station within that station's local market, the satellite carrier must carry upon request the signals of all stations within that market. See 47 U.S.C. §338(a)(1). Satellite carriers may not charge any fee for carriage of local broadcast signals under the must-carry requirement, but the stations may be required to bear the cost of delivering a good quality signal to the satellite carrier's facility. Id. §338(e). The SHVIA also defines certain circumstances under which a satellite carrier may retransmit, or continue to retransmit, the signals of distant broadcast television stations. Id. §339.

Finally, the SHVIA revises the requirements for retransmission of a broadcasting station's signal by a cable television operator or other multichannel provider. Notably, the Act repeals the exemption from those requirements for retransmission of a non-commercial station's signal.

The majority of these provisions took effect on November 29, 1999, while a few were retroactively made effective as of July 1, 1999.

Anticybersquatting Consumer Protection Act

Background of the Cybersquatting Act

In recent years, there have been numerous instances where third parties have registered marks belonging to others as Internet domain names. On occasion, these third parties have demanded substantial payment for the domain names. This practice of "cybersquatting" has led to extensive litigation. Congress concluded that there were gaps in existing trademark and antidilution laws which made it difficult to attack this practice. Specifically, a trademark or antidilution action can be brought only if the mark is used in commerce. If a person registers the mark as a domain name, and then "squats" on the registration but does not use the name, the owner of the mark arguably has no cause of action. Further, even if the registrant uses the name, but the name