The New Provisional Rights Provision

October 200082 J. Pat. & Trademark Off. Soc'y 742, October, 2000

Philippe Signore, Ph.D. [1]

I.  INTRODUCTION 

II.  NEW 35 U.S.C. § 154(d): THE PROVISIONAL RIGHTS PROVISION 

III.  THE SCOPE OF THE ACTIVITIES TRIGGERING PROVISIONAL RIGHTS REMEDIES 

      A.  No Rights Until Patent Actually Issues 

      B.  Not Before Publication, Not After Issuance  

      C.  Inducement and Contributory Activities  

      D.  Temporary Presence in the U.S. 

      E.  Doctrine of Equivalents 

 IV.  "ACTUAL NOTICE"

      A.  The Requirements of "Actual Notice" 

      B.  Effect of Actual Notice: Declaratory Judgment Actions and Laches Defense 

V.   "SUBSTANTIALLY IDENTICAL"

VI.  REMEDIES

A.  Criticism of the Reasonable Royalty Standard 

B.  Congress Adopts the Reasonable Royalty Standard 

C.  Other Remedies 

D.  Provisional Rights Versus Extended Patent Term 

VII.  CONCLUSION 

INTRODUCTION

What do vegetable cutters have to do with the "American Inventor Protection Act of 1999?" Answer: new 35 U.S.C. § 154(d) entitled "Provisional Rights." National Presto Industries, Inc. ("Presto") introduced a vegetable cutter in 1991 for which it had filed a U.S. patent application. [2] Upon hearing that the West Bend Company ("West Bend") was developing a similar product, Presto warned West Bend that a patent was pending and sent a copy of the allowed claims. West Bend accelerated production and flooded the market with its vegetable cutter prior to issuance of the Presto patent. On February 18, 1992, Presto's patent issued and Presto filed suit against West Bend. The CAFC affirmed the district court's finding that West Bend was not liable, as a matter of law, for inducing infringement under 35 U.S.C. § 271(b) based on West Bend's pre-issuance activities. [3] The court concluded that liability could not be retroactively imposed based on an activity that was legal at the time of the activity, but later would have been illegal. Since they were made prior to issue of the Presto patent, West Bend's sales were legal, and Presto had no remedy against these sales under U.S. patent laws. Under the "American Inventor Protection Act of 1999," however, Presto would have had a remedy and could have recovered a reasonable royalty for West Bend's pre-issuance sales under new 35 U.S.C. § 154(d), as will be discussed in this article.

II. NEW 35 U.S.C. § 154(d): THE PROVISIONAL RIGHTS PROVISION

The concept of provisional rights is not new and has been implemented under some form in several of the patent systems around the world, such as the European and the Japanese systems. Provisional rights provisions are tightly linked to publication of pending patent application provisions. One of the most important goals of a patent system, is a full disclosure of the invention to be patented. [4] In a system that publishes pending patent applications, inventors expose themselves to copying by competitors before they obtain any patent protection. In order to motivate applicants to fully disclose their invention, protection against pre-issuance activities by others must be provided. Provisional rights offer such protection.

Over the past decade, there has been a strong effort to harmonize the United States patent system with the other major patent systems. For example, the 1992 Bush Administration's Advisory Commission on Patent Law Reform report [5] recommended a first to file system, a twenty year patent term, publishing application within twenty-four months of the earliest priority date, [6] and giving prior art effect to foreign filed applications. [7] One corner stone of this harmonization is the "American Inventor Protection Act of 1999" (the "Act"), which amends 35 U.S.C. § 122, effective November 29, 2000, to provide for publication of pending U.S. applications [8] eighteen months after their earliest claimed priority date, [9] thereby matching European, Japanese and PCT publication practices. Accordingly, the Act also provides a new provisional right provision, i.e., 35 U.S.C. § 154(d), permitting a patentee to be awarded a reasonable royalty for activities performed by another between the publication date of the patent application and the issuance of the patent:

(d) PROVISIONAL RIGHTS.--

(1) IN GENERAL.--In addition to 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 under section 122(b) ... and ending on the date the patent issued--

  (A)(i) makes, uses, offers for sell, or sells in the United State 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.

The new provisional right statute, however, raises a number of unanswered questions. For instance, what is the scope of the activities triggering provisional rights remedies? What is meant by "actual notice," or "substantially identical"? What remedies are available under the new provisional right statute? These questions will be addressed successively in the remaining of this article.

III. THE SCOPE OF THE ACTIVITIES TRIGGERING PROVISIONAL RIGHTS REMEDIES

A. No Rights Until Patent Actually Issues

First, provisional rights remedies cannot be triggered until a patent actually issues. In other words, the new rights exist in a patent, not in a patent application. If the patent never issues, then no rights exist, thus the name "provisional" rights. This position is supported by the statute itself that requires that the provisional rights are only available if the invention "claimed in the patent" is substantially identical to the invention "as claimed in the published application." Therefore, the existence of the provisional rights depends on a comparison that can only be made after the patent issues.

B. Not Before Publication, Not After Issuance

Next, only activities occurring during the period from the date of publication to the date of issuance of the patent can give rise to the right of a reasonable royalty under 35 U.S.C. § 154(d). Here again, the statute explicitly supports that position at 35 U.S.C. § 154(d)(1). [10] Activities that take place before publication are thus excluded. This limitation may encourage applicants to request an early publication, i.e., earlier than 18 months from their earliest claimed priority date, as provided by amended 35 U.S.C. § 122(b)(1). Post issuance activities are also excluded. However, applicants should not be motivated to delay issuance in order to increase their compensation since their post issuance remedies may be more favorable than the prior issuance reasonable royalty available to them under the provisional rights provision. [11]

C. Inducement and Contributory Activities

The new provisional right statute does not refer to acts of "infringement," but instead refers to making, using, offering for sell, selling and importing the invention/process "as claimed in the published patent application." 35 U.S.C. § 271(a) defines infringement as making, using, offering to sell, selling, or importing "any patented invention during the term of the patent." Technically, the activities described in 35 U.S.C. § 154(d)(1)(A)(i)-(ii) do not constitute "infringement" because the invention is not "patented" at the time they occur and because they do not happen "during the term of the patent," as required by 35 U.S.C. § 271(a). The drafters of 35 U.S.C. § 154(d) seemed to have recognized that point and kept the statute self-consistent at the expense of delivering a wordy provisional rights provision.

35 U.S.C. § 271(b) and (c) provide for remedies for inducement of infringement and contributory infringement, respectively. Because the activities triggering provisional rights do not constitute infringement, 35 U.S.C. § 271(b) and (c) should not apply to activities that induce or contribute to the making, using, offering to sell, selling, and importing of an invention/process as claimed in the published patent application.

Furthermore, the statute is silent on providing a remedy for such inducement and contributory activities within the provisional rights context, and thus appears to exclude them with respect to provisional rights. The legislative history does not provide any guidance on this topic. Arguably, had Congress intended to inflict liability for inducing or contributing activities triggering provisional rights, Congress would have provided such remedies explicitly, as it did for infringement activities in 35 U.S.C. § 271(b) and (c). Therefore, a court is likely to interpret the provisional rights statute as excluding inducement and contributory liabilities.

D. Temporary Presence in the U.S.

Following the same type of reasoning, the provision rights statute does not exclude from liability activities triggering provisional rights taking place on foreign vessels, aircraft and vehicles "temporarily or accidentally" in the U.S.. 35 U.S.C. § 272 states that "the use of any invention in any vessel, aircraft, or vehicle ... entering the United States temporarily or accidentally, shall not constitute infringement of any patent," (emphasis added). Again, because the activities triggering provisional rights do not constitute infringement, 35 U.S.C. § 272 should not apply in the context of provisional rights.

Furthermore, Congress could have easily duplicated the exception for provisional rights, had Congress intended to provide for the exception. A court is thus not likely to excuse from liability an activity triggering provisional rights based on a temporary or accidental presence theory. In practice, the absence of this exception may have little effect since the patentee may only be awarded a reasonable royalty during the temporary presence, which is likely to be a relatively small sum.

E. Doctrine of Equivalents

Is a patentee entitled to a reasonable royalty under the new provisional rights provision if the defendant's activities do not literally exploit (i.e., make, use, offer for sell, sell or import) the invention covered by the patentee's published claims, but exploit an invention that meets all the limitations, or equivalents thereof, of the published, claimed inventio