Before the enactment of the American Invents Act (“AIA”), I identified four key provisions of the new law that will impact retailers.  My colleague Daniel Farris provided some additional depth into the effects of the AIA on retailers, particularly with respect to the patent prosecution process and creation of patent rights – the first in a three part series.  In this second part, Daniel provides greater depth regarding challenges to patentability and validity issues that arise during and after the prosecution of a patent application.  In particular, Daniel discusses the transition from interferences to derivation proceedings, the repeal of the best mode defense, and changes to reexamination proceedings.  The most interesting change may be to inter partes reexamination proceedings, which will now allow for discovery and a more complete adversarial process.  Daniel is a part of my retail patent litigation team with a particular focus on internet and computer technologies. Repeal of Interference Proceedings; New Derivation Proceedings Before the passage of the AIA, interference proceedings were a unique feature of the U.S. patent system.  Because the pre-AIA system used a first-to-invent, rather than a first-to-file, system (as more thoroughly discussed in Part I of the Series), disputes sometimes arose when two or more inventors maintained separate applications each claiming rights in the same invention.  An interference proceeding, also referred to as a priority contest, was an administrative proceeding in the USPTO to determine which of the applications had priority – that is, who was really the first to invent.  With the passage of the AIA, interference proceedings will no longer be available for applications filed after March 16, 2013.  Instead, the AIA introduces a new procedure called “Derivation Proceedings.” Under 35 U.S.C. § 135, individuals who believe themselves to be the true inventors of material subject to an earlier-filed patent application may initiate a Derivation Proceeding in the USPTO challenging the earlier-filed application.  Essentially, a Derivation Proceeding allows the true inventor to claim priority over an earlier-filed application if the alleged second inventor “derived the claimed invention from” the true inventor, and then filed the earlier-filed application “without authorization” from the true inventor. It is not yet entirely clear what the standard will be to prove that an applicant “derived the claimed invention from” another inventor, but if U.S. law follows foreign law, it will generally mean that the applicant has gotten his idea, or a portion of his idea, from the inventor.  Derivation Proceedings must be filed within one year of the first publication (not necessarily issuance) of a claim to an invention that is the same or substantially the same as the earlier application’s claim to the invention, and must be supported by evidence.  Although the full effect of the law will not be known until the Derivation Proceedings provisions of the AIA go into effect, the new procedures could create more inventorship disputes in the USPTO, and may require retailers seeking to stave off trolls to more closely monitor USPTO publications, not just issued patents, pushing patent troll fights from federal courts to administrative agency proceedings. Repeal of Best Mode Defense One change made by the AIA that should have retailers particularly concerned is the repeal of the Best Mode defense pursuant to 35 U.S.C. § 282.  As the USPTO and Federal Circuit have described it, “the best mode requirement creates a statutory bargained-for-exchange by which a patentee obtains the right to exclude others from practicing the claimed invention for a certain time period, and the public receives knowledge of the preferred embodiments for practicing the claimed invention.”  Under the AIA, an inventor is still required to set forth the best mode for accomplishing his claimed invention, however the failure to do so is no longer a basis for invalidating or rendering unenforceable the patent in litigation.  As some prominent patent lawyers have argued, this is like giving a child a box of matches, telling him not to play with it, but letting him know that there will be no punishment if he does.  The practical effect of this change may be that inventors attempt to limit the completeness of their disclosure, so as to maintain a competitive advantage, making it that much more difficult for retailers to identify the scope of claims asserted by patent trolls.  This also takes at least one arrow from the quiver that retailers have in defense of patent trolls. Post-Grant Oppositions One portion of the AIA that benefits retailers relates to post-grant review, codified in 35 U.S.C. §§ 321-329.  For the first time, the AIA provides a mechanism for third parties to challenge an issued patent that allows for the consideration of invalidity arguments other than prior art pursuant to §§ 102 or 103.  Under the new post-grant review provisions, a patent may be challenged on any invalidity ground, including prior art, lack of written description, or lack of enablement (but not lack of Best Mode disclosure).  A post-grant opposition must be filed within nine months of issuance of the patent, but only if the party challenging the patent has not also initiated a lawsuit challenging the patent’s validity, although a defendant who has filed a counterclaim challenging patent validity in a suit asserting the same patent is not precluded from seeking post-grant review.  The standard for post-grant review is higher under the AIA than the current standard for reexamination.  Whereas reexamination currently requires a substantial new question of patentability, post-grant review under the AIA must show that it is more likely than not that at least one challenged claim is not patentable.  These new post-grant opposition procedures may prove useful in staving off patent troll applications that are overly broad, ambiguous, or that do not sufficiently disclose the specification in the patent, so long as retailers are watching for patents as they issue. New Re-Exam Procedures and Judicial Review of Re-Exams Another potentially beneficial change to the patent laws brought on by the AIA is the new rules allowing third-parties to submit materials to the USPTO to be considered in pending applications or placed in the record of issued patents.  Under the old rules, pursuant to 35 U.S.C. § 301, third parties were allowed to submit prior art documentation for consideration by the USPTO in relation to any application.  Under the new rules, third parties will be allowed to submit prior art documents and statements by the patentee regarding the scope of any claims for issued patents as well.  The most noteworthy change is the ability to anonymously file statements “in which the patent owner took a position on the scope of any claim of [an issued] patent.”  Third parties may also now anonymously, and without any duty to serve an applicant, submit prior art documentation to the USPTO with a statement regarding the relevance of the prior art to any application.  This provides retailers with an opportunity to defeat pending applications, or to limit the scope of a patent, without: 1) the cost of being involved in litigation; 2) the risk of allowing the patent to issue; or 3) an inter partes re-exam proceeding. For those retailers who prefer to challenge a patent’s validity via inter partes reexamination, there are new rules as well (35 U.S.C. §§ 311-319).  Unlike the new post-grant review procedures discussed above, inter partes reexamination proceedings remain limited to challenges to validity under §§ 102 and 103, but can be brought at any time during the life of the patent.  The standard is also lower, requiring only a showing that the challenger has a reasonable likelihood of prevailing against at least one claim of the patent at issue.  The AIA provides for discovery during the reexamination proceedings, and shifts oversight and decision-making authority from the more traditional examiner-driven prosecution model to a new trial proceeding system before the newly created Patent Trial and Appeal Board (PTAB).  In this sense, the threat of reexamination by a retailer during litigation may bear more weight to patent trolls, who may be faced with the stay of their patent litigation in favor of a trial-type proceeding before the PTAB, which includes discovery and other of the traditional litigation costs, but with only the risk of losing patent rights, not any opportunity for recovery from the retailer.