U.S. Patent Provisional Rights: Impacts of Recent Change

U.S. Patent Laws, amended by the passage of the American Inventors Protection Act of 1999 ('the Act'), now provide for publication of pending patent applications prior to issuance. 35 U.S.C. '122(b). Since the effective date of the amendment, Nov. 29, 2000, the U.S. Patent and Trademark Office ('USPTO') publishes domestic utility applications within 18 months of their earliest priority date. Prior to this amendment, patent applications were not made publicly available until a patent issued, thereby preserving the confidential information of a patentee until remedies for patent infringement were made available to the patentee.

Publication of patent applications prior to issuance exposes patentees to several risks, including publication of proprietary information to third parties without the availability of patent infringement remedies. To counteract the disadvantages of pre-grant publication, the Act also provides to patentees a 'provisional rights' remedy for certain third party acts occurring between the date of publication of the patent application and the issuance of the patent.

'Provisional Rights' Statutory Provisions

This provision, codified in 35 U.S.C. '154(d), provides in part:

(1) IN GENERAL. In addition to the other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent ' and ending on the date the patent is issued '

(A)(i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application or imports such an invention into the United States; or

(ii) if the invention as claimed in the published patent application is a process, uses, offers for sale, or sells in the United States or imports into the United States products made by that process as claimed in the published patent application; and

(B) had actual notice of the published patent application '

(2) RIGHT BASED ON SUBSTANTIALLY IDENTICAL INVENTIONS. The right under paragraph (1) to obtain a reasonable royalty shall not be available under this
subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.

Requirements for Triggering Provisional Rights Remedies

Although 35 U.S.C. '154(d) provides a vehicle for patentees to obtain a remedy for third party unauthorized use during the period of time between publication and issuance, certain conditions must be satisfied before the provisional rights safeguards can be realized. Provisional rights are conditional on the following:

1. Publication. First, a patent application must be published. U.S. domestic applications are normally published 18 months after the earliest priority date. A patentee may, however, request early publication. The pre-grant publication system does not, however, apply to all patent application types. Provisional and design patent applications are not subject to pre-grant publication. Applications that are subject to a secrecy agreement, those that are filed with a non-publication request, or applications that are no longer pending at the time of publication, are also excluded. (The requirements for requesting non-publication are set forth in 37 C.F.R. '1.213.)

2. Issuance. Second, provisional rights remedies cannot be sought until a patent actually issues. The court in Plastic Recovery Techs., Inc. v. Container Components, Inc., 2004 U.S. Dist. LEXIS 22970 (N.D. Ill. 2004) recently confirmed that 35 U.S.C. '154(d) created a provisional right that does not mature until a patent issues. Until the USPTO renders a final determination on patentability, there is no certainty that a specific application will issue and, if it does issue, what rights it would confer.

3. Notice. Third, the relevant third party must have 'actual notice' of the published patent application. This condition raises a number of questions for practitioners of law and members of industry alike. Specifically, the statute requires that the third party must have actual notice of the published application, yet it is silent on whether the patentee has an affirmative duty to place third parties on notice, or whether the third party can come to know of the published application through independent sources. The statute likewise does not indicate whether reasonable royalties begin to accrue from the date the third party has actual notice, or whether reasonable royalties accrue from the date of publication. Furthermore, the statute fails to set forth what information must be provided to a third party to constitute sufficient notice.

In one of the few cases addressing 35 U.S.C. '154(d)(1)(B), the Federal Circuit in Stephens v. Tech Int'l, Inc., 393 F.3d 1269, 1275 (Fed. Cir. 2004) reasoned that a patentee provided 'Section 154 notice' when the patentee sent a letter to the defendant claiming that one of the defendant's products infringed several claims of the patentee's published patent application. The court stated that 'the letter represented [the plaintiff's] adherence to section 154's requirement that [the defendant] be placed on notice of [the plaintiff's] future right to obtain royalties if a patent issued.' Id. at 1276. The Stephens case ultimately concerned an award of attorneys' fees based on litigation misconduct consisting of the patentee's Section 154 notification to the defendant on a separate patent application. Although the remarks therein are dictum with respect to the requirements of 35 U.S.C. '154(d), one can infer from the Stephens case that a letter, including specific supporting allegations regarding the products involved and the relevant claims, may be sufficient to satisfy the 'actual notice' requirement.

In another recent case, Classen Immunotherapies, Inc., v. King Pharm., Inc., 403 F. Supp.2d 451 (D. Md. 2005), the plaintiff did not expressly claim a violation of 35 U.S.C. '154(d) in its complaint. However, the court stated that ”154(d) expands the scope of patent infringement rather than creating a new cause of action. ' As [the plaintiff] has pled that [the defendant] infringed the [plaintiff's issued patent], that claim for infringement includes the right to obtain royalties for infringement from the time the patent application was published.' Id. at 457.

In construing the notice requirement of patent infringement codified in 35 U.S.C. '287(a), the Federal Circuit has held that 'notice of infringement' requires 'affirmative communication of a specific charge of infringement by a specific product or device.' Amstead Indus. Inc. v. Buckeye Steel Castings Co., 24 F.3d 178 (Fed. Cir. 1994). Accordingly, in view of the indication in Classen that '154(d) expands the scope of patent infringement rather than creating a new cause of action, it is likely that future courts will construe the 'actual notice' provisions of 35 U.S.C. '154(d) as analogous to the notice provisions of patent infringement pursuant to 35 U.S.C. '287(a).

The legislative history also confirms that notification without specific supporting allegations may be insufficient 'actual notice' pursuant to 35 U.S.C. '154(d):

The requirement of actual notice is critical. The mere fact that the published application is included in a commercial database where it might be found is insufficient. The published 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.

Sec. 4504 Provisional Rights, State-ments on Introduced Bills and Joint Resolutions, Cong. Rec. S14719 (Nov. 17, 1999).

4. Substantially Identical Claims. Fourth, the claims of the issued patent must be 'substantially identical' to the invention as claimed in the published patent application. Although the phrase 'substantially identical' is not defined in the statute, the purpose of the phrase is explained in the legislative history:

To allow anything less than substantial identity would impose an unacceptable burden on the public. If provisional rights were available in the situation where the only valid claim infringed first appeared in substantially that form in the granted patent, the public would have no guidance as to the specific behavior to avoid between publication and grant. Sec. 4504 Provisional Rights, Statements on Introduced Bills and Joint Resolutions, Cong. Rec. S14719 (Nov. 17, 1999).

The legislative history also indicates that the standards for determining substantial identity with respect to 35 U.S.C. '154(d) should be analogous to the standards for determining intervening rights with respect to the reissue statute 35 U.S.C. '252:

The requirement for 'substantial identity' in this section is based, by analogy, upon the decisional law for establishing intervening rights under the reissue statute. In section 252 of title 35, the term 'identical' has, heretofore, been used without qualification, but the courts have interpreted that term to encompass claims that are 'substantially identical.' Slimfold Mfg. Co., Inc. v. Kin-kead Industries, Inc., 810 F.2d 1113, 1 USPQ2d 1563 (Fed. Cir. 1987). That standard has been adopted here for provisional rights and has now been explicitly codified in section 252 of title 35 by a conforming amendment. Sec. 204 House of Representatives Report 105-039, accompanying H.R. 400, the '21^st Century Patent System Improvement Act' March 20, 1997.

Options to Consider

Provisional rights can potentially provide a patentee with at least some compensation for unauthorized third party acts performed between publication and issuance. It remains to be seen, however, how the courts will interpret the provision of a 'reasonable royalty.' Although this statute has not yet been the subject of extensive review by the courts, a patentee should nonetheless consider certain actions in order best to take advantage of the remedy provided by provisional rights.

1. Republish. If claims are amended between publication of the patent application and issuance of the patent, the patentee should consider requesting that the amended claim(s) be republished. The requirements for republication are set forth in 37 C.F.R. '1.221. Presumably, republication of the amended claims would allow a patentee to gain the benefit of 35 U.S.C. '154(d) as of the date of republication.

2. Provide Detailed Notice. At a minimum, it appears that third party notice indicating a violation of 35 U.S.C. '154(d) should include at least one claim of a published patent application at issue, and at least one product or process that is allegedly covered by the claim.

3. Consider Early Publication. If a patentee becomes aware of a third party product covered by one or more claims of an unpublished patent application, it may be advantageous to consider requesting early publication of the application to extend the period of time for which a reasonable royalty could be obtained.

Lara A. Northrop, an attorney with The Webb Law Firm in Pittsburgh, PA, deals with various aspects of IP law, particularly patent, trademark and licensing matters. She may be contacted at 412-471-8815.

U.S. Patent Laws, amended by the passage of the American Inventors Protection Act of 1999 ('the Act'), now provide for publication of pending patent applications prior to issuance. 35 U.S.C. '122(b). Since the effective date of the amendment, Nov. 29, 2000, the U.S. Patent and Trademark Office ('USPTO') publishes domestic utility applications within 18 months of their earliest priority date. Prior to this amendment, patent applications were not made publicly available until a patent issued, thereby preserving the confidential information of a patentee until remedies for patent infringement were made available to the patentee.

Publication of patent applications prior to issuance exposes patentees to several risks, including publication of proprietary information to third parties without the availability of patent infringement remedies. To counteract the disadvantages of pre-grant publication, the Act also provides to patentees a 'provisional rights' remedy for certain third party acts occurring between the date of publication of the patent application and the issuance of the patent.

'Provisional Rights' Statutory Provisions

This provision, codified in 35 U.S.C. '154(d), provides in part:

(1) IN GENERAL. In addition to the other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent ' and ending on the date the patent is issued '

(A)(i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application or imports such an invention into the United States; or

(ii) if the invention as claimed in the published patent application is a process, uses, offers for sale, or sells in the United States or imports into the United States products made by that process as claimed in the published patent application; and

(B) had actual notice of the published patent application '

(2) RIGHT BASED ON SUBSTANTIALLY IDENTICAL INVENTIONS. The right under paragraph (1) to obtain a reasonable royalty shall not be available under this
subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.

Requirements for Triggering Provisional Rights Remedies

Although 35 U.S.C. '154(d) provides a vehicle for patentees to obtain a remedy for third party unauthorized use during the period of time between publication and issuance, certain conditions must be satisfied before the provisional rights safeguards can be realized. Provisional rights are conditional on the following:

1. Publication. First, a patent application must be published. U.S. domestic applications are normally published 18 months after the earliest priority date. A patentee may, however, request early publication. The pre-grant publication system does not, however, apply to all patent application types. Provisional and design patent applications are not subject to pre-grant publication. Applications that are subject to a secrecy agreement, those that are filed with a non-publication request, or applications that are no longer pending at the time of publication, are also excluded. (The requirements for requesting non-publication are set forth in 37 C.F.R. '1.213.)

2. Issuance. Second, provisional rights remedies cannot be sought until a patent actually issues. The court in Plastic Recovery Techs., Inc. v. Container Components, Inc., 2004 U.S. Dist. LEXIS 22970 (N.D. Ill. 2004) recently confirmed that 35 U.S.C. '154(d) created a provisional right that does not mature until a patent issues. Until the USPTO renders a final determination on patentability, there is no certainty that a specific application will issue and, if it does issue, what rights it would confer.

3. Notice. Third, the relevant third party must have 'actual notice' of the published patent application. This condition raises a number of questions for practitioners of law and members of industry alike. Specifically, the statute requires that the third party must have actual notice of the published application, yet it is silent on whether the patentee has an affirmative duty to place third parties on notice, or whether the third party can come to know of the published application through independent sources. The statute likewise does not indicate whether reasonable royalties begin to accrue from the date the third party has actual notice, or whether reasonable royalties accrue from the date of publication. Furthermore, the statute fails to set forth what information must be provided to a third party to constitute sufficient notice.

In one of the few cases addressing 35 U.S.C. '154(d)(1)(B), the Federal Circuit in Stephens v. Tech Int'l, Inc. , 393 F.3d 1269, 1275 (Fed. Cir. 2004) reasoned that a patentee provided 'Section 154 notice' when the patentee sent a letter to the defendant claiming that one of the defendant's products infringed several claims of the patentee's published patent application. The court stated that 'the letter represented [the plaintiff's] adherence to section 154's requirement that [the defendant] be placed on notice of [the plaintiff's] future right to obtain royalties if a patent issued.' Id. at 1276. The Stephens case ultimately concerned an award of attorneys' fees based on litigation misconduct consisting of the patentee's Section 154 notification to the defendant on a separate patent application. Although the remarks therein are dictum with respect to the requirements of 35 U.S.C. '154(d), one can infer from the Stephens case that a letter, including specific supporting allegations regarding the products involved and the relevant claims, may be sufficient to satisfy the 'actual notice' requirement.

In another recent case, Classen Immunotherapies, Inc., v. King Pharm., Inc ., 403 F. Supp.2d 451 (D. Md. 2005), the plaintiff did not expressly claim a violation of 35 U.S.C. '154(d) in its complaint. However, the court stated that ”154(d) expands the scope of patent infringement rather than creating a new cause of action. ' As [the plaintiff] has pled that [the defendant] infringed the [plaintiff's issued patent], that claim for infringement includes the right to obtain royalties for infringement from the time the patent application was published.' Id. at 457.

In construing the notice requirement of patent infringement codified in 35 U.S.C. '287(a), the Federal Circuit has held that 'notice of infringement' requires 'affirmative communication of a specific charge of infringement by a specific product or device.' Amstead Indus. Inc. v. Buckeye Steel Castings Co. , 24 F.3d 178 (Fed. Cir. 1994). Accordingly, in view of the indication in Classen that '154(d) expands the scope of patent infringement rather than creating a new cause of action, it is likely that future courts will construe the 'actual notice' provisions of 35 U.S.C. '154(d) as analogous to the notice provisions of patent infringement pursuant to 35 U.S.C. '287(a).

The legislative history also confirms that notification without specific supporting allegations may be insufficient 'actual notice' pursuant to 35 U.S.C. '154(d):

The requirement of actual notice is critical. The mere fact that the published application is included in a commercial database where it might be found is insufficient. The published 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.

Sec. 4504 Provisional Rights, State-ments on Introduced Bills and Joint Resolutions, Cong. Rec. S14719 (Nov. 17, 1999).

4. Substantially Identical Claims. Fourth, the claims of the issued patent must be 'substantially identical' to the invention as claimed in the published patent application. Although the phrase 'substantially identical' is not defined in the statute, the purpose of the phrase is explained in the legislative history:

To allow anything less than substantial identity would impose an unacceptable burden on the public. If provisional rights were available in the situation where the only valid claim infringed first appeared in substantially that form in the granted patent, the public would have no guidance as to the specific behavior to avoid between publication and grant. Sec. 4504 Provisional Rights, Statements on Introduced Bills and Joint Resolutions, Cong. Rec. S14719 (Nov. 17, 1999).

The legislative history also indicates that the standards for determining substantial identity with respect to 35 U.S.C. '154(d) should be analogous to the standards for determining intervening rights with respect to the reissue statute 35 U.S.C. '252:

The requirement for 'substantial identity' in this section is based, by analogy, upon the decisional law for establishing intervening rights under the reissue statute. In section 252 of title 35, the term 'identical' has, heretofore, been used without qualification, but the courts have interpreted that term to encompass claims that are 'substantially identical.' Slimfold Mfg. Co., Inc. v. Kin-kead Industries, Inc ., 810 F.2d 1113, 1 USPQ2d 1563 (Fed. Cir. 1987). That standard has been adopted here for provisional rights and has now been explicitly codified in section 252 of title 35 by a conforming amendment. Sec. 204 House of Representatives Report 105-039, accompanying H.R. 400, the '21^st Century Patent System Improvement Act' March 20, 1997.

Options to Consider

Provisional rights can potentially provide a patentee with at least some compensation for unauthorized third party acts performed between publication and issuance. It remains to be seen, however, how the courts will interpret the provision of a 'reasonable royalty.' Although this statute has not yet been the subject of extensive review by the courts, a patentee should nonetheless consider certain actions in order best to take advantage of the remedy provided by provisional rights.

1. Republish. If claims are amended between publication of the patent application and issuance of the patent, the patentee should consider requesting that the amended claim(s) be republished. The requirements for republication are set forth in 37 C.F.R. '1.221. Presumably, republication of the amended claims would allow a patentee to gain the benefit of 35 U.S.C. '154(d) as of the date of republication.

2. Provide Detailed Notice. At a minimum, it appears that third party notice indicating a violation of 35 U.S.C. '154(d) should include at least one claim of a published patent application at issue, and at least one product or process that is allegedly covered by the claim.

3. Consider Early Publication. If a patentee becomes aware of a third party product covered by one or more claims of an unpublished patent application, it may be advantageous to consider requesting early publication of the application to extend the period of time for which a reasonable royalty could be obtained.

Lara A. Northrop, an attorney with The Webb Law Firm in Pittsburgh, PA, deals with various aspects of IP law, particularly patent, trademark and licensing matters. She may be contacted at 412-471-8815.