AIA Technical Corrections Bill and Trade Secret Penalties Bill Await President’s Signature

As most Americans focused on the Congressional efforts to avoid the “fiscal cliff,” IP practitioners noted that Congress passed Senate-amended versions of a bill to amend the Smith-Leahy America Invents Act (AIA) (H.R. 6621) and a bill to increase penalties under the Economic Espionage Act (EEA)(H.R. 6029) on to the White House on January 1, 2013, for signature by President Obama. It is expected that President Obama will sign both bills into law shortly.

H.R. 6621 – amendments to the AIA

As we earlier reported, Representative Lamar Smith introduced H.R. 6621 to Congress on November 30, 2012, proposing a number of technical corrections to the America Invents Act as enacted on January 5, 2011, including:

• eliminating a 9 month “dead zone” for inter partes review of patents granted for applications having an effective filing date before March 16, 2013;
• extending the time for filing the inventor’s oath or declaration until the payment of the issue fee;
• eliminating a prohibition on post grant review for reissue patents with narrowing amendments;
• clarifying the standards for initiating derivation proceedings;
• clarifying the calculation for patent term adjustment; and
• repealing 35 U.S.C. § 373, which restricted the types of inventors or applicants that could file PCT applications at the U.S. Patent Office.

Another proposed correction that generated substantial controversy was a proposal to eliminate 35 U.S.C. § 154(c)(1). For applications filed prior to June 8, 1995, this section provides that the patent term will be determined as the greater of 20 years from the effective U.S. filing date or 17 years from grant. By eliminating the section, the proposed correction removes the option of obtaining a 17 year term from grant or applications filed prior to June 8, 1995 in order to eliminate the possibility of substantially extended terms for so-called “submarine patents.” In amended H.R. 6621, this correction is withdrawn. Representative Smith indicated in a speech to the House of Representatives on December 30, 2012, that the correction would be replaced by a provision requiring the PTO to prepare a report providing “relevant information” about currently pending applications filed prior to June 8, 1995 in order to understand whether any additional actions should be taken.

H.R. 6029 – increasing EEA penalties

Representative Smith introduced H.R. 6029 to Congress on June 27, 2012, as a measure to increase penalties for violations of the Economic Espionage Act of 1996, codified as 18 U.S.C. §§ 1831. As amended by the Senate, H.R. 6029 maintains a maximum prison term penalty for individual offenses at Section 1831(a) at 15 years, but increases the present limit for individual fines from $500,000 to $5,000,000. In addition, amended H.R. 6029 increases the upper limit for corporate offenses of Section 1831(b) from $10,000,000 to the greater of $10,000,000 or 3 times the value of the stolen trade secret to the organization, including “expenses for research and design and other costs of reproducing the trade secret that the organization has thereby avoided.”

H.R. 6029 follows the Theft of Trade Secrets Clarification Act of 2012 (S. 3642), which became law on December 28, 2012. As we previously reported, the legislation was prompted by a district court decision in United States v. Aleynikov, which overturned a jury verdict finding that the defendant violated 18 U.S.C. § 1832(a) by stealing computer code from his employer. In that decision, the Federal Circuit Court narrowly construed trade secrets as defined in § 1832(a) as “related to or included in a product that is produced for or placed in interstate commerce” to mean an actual product that was either placed in interstate commerce or intended ultimately to be placed in interstate commerce.” Amended S. 3642 revised § 1832(a) to broaden the definition of trade secrets as being “related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof.” With this revision, there is no longer any requirement for the trade secret to be embodied in a commercial product.

Gibbons will continue to monitor developments and to provide counsel regarding H.R. 6621 and H.R. 6029.