Expanded Protection Under 35 U.S.C. '103(c) via the CREATE Act

On Dec. 10, 2004, 35 U.S.C. '103(c) was amended to expand the common ownership exception for prior art available under ”102(e), (f) and (g). See Cooperative Research and Technology Enhancement Act of 2004, Pub. L. 108-453, 118 Stat. 3596 (2004) (CREATE Act). The U.S. Patent and Trademark Office (USPTO) has published proposed rules to implement the CREATE Act and is currently accepting comments until Feb. 10, 2005. Changes to Implement the Cooperative Research and Technology Enhancement Act of 2004, 70 Fed. Reg. 1818 (2005) (proposed Jan. 11, 2005).

The relevant background to the CREATE Act began with In re Bass, 474 F.2d 1276 (CCPA 1973) and In re Clemens, 622 F.2d 1029 (CCPA 1980) in which the CCPA (now the Federal Circuit) held that subject matter developed by individual(s) on a research team may be available as prior art that can be used to determine obviousness (inventive step) of later inventions of the team.

Recognizing that this result could discourage collaborative research among co-workers, Congress added the former subsection (c) to '103 with the Patent Law Amendments of 1984:

Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.

This amendment was designed to disqualify certain nonpublic information known within an organization from the prior art available to judge obviousness and encourage communication among research team members, leading to the eventual patenting and dissemination of resulting inventions to the public.

However, a question was left open as to whether or not '102(f) created prior art for purposes of determining obviousness under '103, particularly, in light of dictum in Bass suggesting that secret subject matter was not available as prior art and that '102(f) and '103 were unrelated. The Federal Circuit settled that question in OddzOn Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. 1997), holding that secret subject matter that is prior art only under '102(f) could be combined with other information to render a claimed invention unpatentable for obviousness under '103; unless, the subject matter and the claimed invention were assigned or subject to an obligation of assignment to the same entity at the time the invention was made. Under OddzOn, absent common ownership, subject matter available as prior art under '102(f) was clearly determined to be usable as prior art under '103.

The CREATE Act responded to OddzOn by expanding the disqualification of ”102(e), (f) and (g) prior art beyond the limited common ownership exception provided by former '103(c). Relevant portions of '103(c) as amended by the CREATE Act read:

(c)(1) Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.

(2) For purposes of this subsection, subject matter developed by another person and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person if '

(A) the claimed invention was made by or on behalf of parties to a joint research agreement that was in effect on or before the date the claimed invention was made;

(B) the claimed invention was made as a result of activities undertaken within the scope of the joint research agreement; and

(C) the application for patent for the claimed invention discloses or is amended to disclose the names of the parties to the joint research agreement.

(3) For purposes of paragraph (2), the term “joint research agreement” means a written contract, grant, or cooperative agreement entered into by two or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention.

The explicitly stated legislative intent for the CREATE Act was to extend the common ownership exceptions of former '103(c) to situations where the parties do not or cannot establish common ownership via ownership by a single entity.

Under the CREATE Act, subject matter available against a claimed invention under one or more of subsections (e), (f), and (g) of section 102, can be excluded if:

• The excluded subject matter is owned or under the control of a party to a joint research agreement;
• The claimed invention was made by or on behalf of a party to the joint research agreement in effect on or before the date the invention was made;
• The claimed invention arose from work done within the scope of the joint research agreement; and
• The patent application for the claimed invention names the parties to the joint research agreement.

To qualify for this exception, a patent (including any reissue patent) arising from an invention under a joint research agreement must be granted on or after Dec. 10, 2004. Moreover, the CREATE Act does not affect any pending proceeding or final decision rendered before Dec. 10, 2004.

The definition of “joint research agreement” in '103(c)(3) does not prescribe any specific form of written agreement. The document need only demonstrate that a qualifying collaboration existed before the claimed invention was made and that the invention was derived from activities performed by or on behalf of parties that acted within the scope of the agreement.

The CREATE Act provides a new and flexible mechanism to deal with situations where it is not possible to establish common ownership by assignment to a single entity. Nevertheless, it appears that common ownership by an assignment remains the easier and more reliable mechanism for obtaining the benefit of '103(c). Some useful principles that should be kept in mind when considering common ownership are:

• Neither a license nor an obligation to license the claimed invention, the subject matter, or both, will destroy common ownership;
• Common ownership may exist between two or more entities, if each entity jointly owns the invention and the subject matter being excluded, as long as the sum of the ownership interests of all the entities add up to 100% for both the invention and the subject matter being excluded;
• The common ownership required to exclude prior art under '103(c)(1) cannot be created after an invention is made; '103(c)(1) clearly requires common ownership at the time an invention is made;
• Inventions made by wholly owned subsidiaries are 100% owned by the parent unless otherwise agreed; and
• Division of U.S. and foreign rights in an invention will destroy common ownership of the invention.

See The Manual of Patent Examining Procedure (MPEP) '706.02(l)(2) (2d rev. 8th ed. 2004).

On Dec. 10, 2004, 35 U.S.C. '103(c) was amended to expand the common ownership exception for prior art available under ”102(e), (f) and (g). See Cooperative Research and Technology Enhancement Act of 2004, Pub. L. 108-453, 118 Stat. 3596 (2004) (CREATE Act). The U.S. Patent and Trademark Office (USPTO) has published proposed rules to implement the CREATE Act and is currently accepting comments until Feb. 10, 2005. Changes to Implement the Cooperative Research and Technology Enhancement Act of 2004, 70 Fed. Reg. 1818 (2005) (proposed Jan. 11, 2005).

The relevant background to the CREATE Act began with In re Bass, 474 F.2d 1276 (CCPA 1973) and In re Clemens, 622 F.2d 1029 (CCPA 1980) in which the CCPA (now the Federal Circuit) held that subject matter developed by individual(s) on a research team may be available as prior art that can be used to determine obviousness (inventive step) of later inventions of the team.

Recognizing that this result could discourage collaborative research among co-workers, Congress added the former subsection (c) to '103 with the Patent Law Amendments of 1984:

Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.

This amendment was designed to disqualify certain nonpublic information known within an organization from the prior art available to judge obviousness and encourage communication among research team members, leading to the eventual patenting and dissemination of resulting inventions to the public.

However, a question was left open as to whether or not '102(f) created prior art for purposes of determining obviousness under '103, particularly, in light of dictum in Bass suggesting that secret subject matter was not available as prior art and that '102(f) and '103 were unrelated. The Federal Circuit settled that question in OddzOn Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. 1997), holding that secret subject matter that is prior art only under '102(f) could be combined with other information to render a claimed invention unpatentable for obviousness under '103; unless, the subject matter and the claimed invention were assigned or subject to an obligation of assignment to the same entity at the time the invention was made. Under OddzOn, absent common ownership, subject matter available as prior art under '102(f) was clearly determined to be usable as prior art under '103.

The CREATE Act responded to OddzOn by expanding the disqualification of ”102(e), (f) and (g) prior art beyond the limited common ownership exception provided by former '103(c). Relevant portions of '103(c) as amended by the CREATE Act read:

(c)(1) Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.

(2) For purposes of this subsection, subject matter developed by another person and a claimed invention shall be deemed to have been owned by the same person or subject to an obligation of assignment to the same person if '

(A) the claimed invention was made by or on behalf of parties to a joint research agreement that was in effect on or before the date the claimed invention was made;

(B) the claimed invention was made as a result of activities undertaken within the scope of the joint research agreement; and

(C) the application for patent for the claimed invention discloses or is amended to disclose the names of the parties to the joint research agreement.

(3) For purposes of paragraph (2), the term “joint research agreement” means a written contract, grant, or cooperative agreement entered into by two or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed invention.

The explicitly stated legislative intent for the CREATE Act was to extend the common ownership exceptions of former '103(c) to situations where the parties do not or cannot establish common ownership via ownership by a single entity.

Under the CREATE Act, subject matter available against a claimed invention under one or more of subsections (e), (f), and (g) of section 102, can be excluded if:

• The excluded subject matter is owned or under the control of a party to a joint research agreement;
• The claimed invention was made by or on behalf of a party to the joint research agreement in effect on or before the date the invention was made;
• The claimed invention arose from work done within the scope of the joint research agreement; and
• The patent application for the claimed invention names the parties to the joint research agreement.

To qualify for this exception, a patent (including any reissue patent) arising from an invention under a joint research agreement must be granted on or after Dec. 10, 2004. Moreover, the CREATE Act does not affect any pending proceeding or final decision rendered before Dec. 10, 2004.

The definition of “joint research agreement” in '103(c)(3) does not prescribe any specific form of written agreement. The document need only demonstrate that a qualifying collaboration existed before the claimed invention was made and that the invention was derived from activities performed by or on behalf of parties that acted within the scope of the agreement.

The CREATE Act provides a new and flexible mechanism to deal with situations where it is not possible to establish common ownership by assignment to a single entity. Nevertheless, it appears that common ownership by an assignment remains the easier and more reliable mechanism for obtaining the benefit of '103(c). Some useful principles that should be kept in mind when considering common ownership are:

• Neither a license nor an obligation to license the claimed invention, the subject matter, or both, will destroy common ownership;
• Common ownership may exist between two or more entities, if each entity jointly owns the invention and the subject matter being excluded, as long as the sum of the ownership interests of all the entities add up to 100% for both the invention and the subject matter being excluded;
• The common ownership required to exclude prior art under '103(c)(1) cannot be created after an invention is made; '103(c)(1) clearly requires common ownership at the time an invention is made;
• Inventions made by wholly owned subsidiaries are 100% owned by the parent unless otherwise agreed; and
• Division of U.S. and foreign rights in an invention will destroy common ownership of the invention.

See The Manual of Patent Examining Procedure (MPEP) '706.02(l)(2) (2d rev. 8th ed. 2004).