Recent Changes in U.S. Patent Law

Early strategic decisions required by German companies interested in selling their products in the U.S. market

The United States is a critical market for German companies seeking to sell their products and services. Recent changes in U.S. patent law have significantly limited the scope of what can be patented, and have reduced the overall commercial value of many U.S. patents already granted.

These changes affect a wide variety of industries, including the pharma, biotech, medical device, consumer electronics and software industry. German companies would be well served to seek advice from U.S. patent counsel to understand these changes at the earliest stages of their research and development programs. Two of these changes that are most far-reaching relate to the subject matter that is no longer patent eligible and to new mechanisms available to invalidate already granted patents.

As to patent eligibility, U.S. law originally provided that anything under the sun made by man—as opposed to products of nature—can be patented. That meant for example that naturally occurring products, e.g., DNA, could be patented so long as they were purified and removed from their natural environment. The European patent system follows a similar approach.

However, the U.S. Supreme Court now specifies that purification or other simple modifications are insufficient to confer patent eligibility on otherwise patent ineligible products of nature. In other recent decisions, the U.S. Supreme Court has made it much more difficult to obtain patent protection for certain medical diagnostic methods and software enabled inventions. As to patent validity, the America Invents Act (AIA) of 2012 has introduced the so-called Inter Partes Review (IPR), a mechanism that has made it easier and more cost effective to challenge the validity of a patent.

Prior to the AIA, truly effective challenges to patent validity were largely limited to proceedings in U.S. federal courts. Such validity challenges have certain drawbacks. First, they usually cannot be initiated preemptively because they typically are limited to situations where the patent has at least threatened a lawsuit for patent infringement. Second, patents issued by the U.S. Patent and Trademark Office (USPTO) enjoy a presumption of validity in a court proceeding, and overcoming that presumption is often difficult. Third, validity challenges in a U.S. federal district court usually have a million dollar plus price tag, which often makes them prohibitively expensive.

IPRs on the other hand are trial-like proceedings conducted at the USPTO, not in a U.S. federal court. These proceedings can be initiated preemptively and often cost only a fraction of the cost of a typical patent litigation in a U.S. federal court. Moreover, patents issued by the USPTO do not enjoy a presumption of validity in an IPR proceeding once it has been instituted. And, unlike juries in a federal court trial, the judges adjudicating IPRs are subject matter experts who are more receptive than juries to the arguments that may lead to the invalidation of the patent at issue. Because patents can now be challenged and invalidated much more cheaply and easily in an IPR than by a U.S. federal court, U.S. patents have become more vulnerable to invalidation. As a result, the overall commercial value of many U.S. patents has been reduced. This means it is no longer sufficient to simply obtain any type of U.S. patent to protect high value technology products.

Rather, when seeking patent protection, a strong effort should be made to obtain robust patents that can withstand the new types of validity challenges introduced by the AIA. Thus, German companies would be well advised to seek guidance from their U.S. patent counsel during the earliest possible stage of their product development efforts, even before their basic German/European patent application has been filed. Only this approach will allow the development of robust patent strategies specifically designed for the U.S. market that result in the strongest possible patent protection for the companies’ products and technology.

Written for German American Chamber of Commerce by Mark. Baghdassarian and Freidrich Laub of Kramer Lavin Naftalis & Frankel LLP.