Gerald B. Treacy, Jr.

Surviving and Thriving in the “Tax Patent” Era

Grandfathered In

Even if Congress nixes or just curtails tax patents, those tax patents that already have been granted and those whose applications are still pending, will probably be unaffected. The House and Senate bills tried to get around this fact, but not very successfully.

In its current iteration, the House version of the proposed anti-tax-patent legislation, H.R. 1908, would apply to any patent application that is: “(A) filed on or after the date of the enactment of this Act; or (B) filed before that date if a patent or reissue patent has not been issued pursuant to the application as of that date.” These two sub-provisions seem to contradict one another, with (A) grandfathering applications filed before the date of enactment, but with (B) denying patentability if a patent has not actually issued as of the date of enactment.

Presumably, in light of the constitutional fairness and due process concerns that otherwise would arise as to applicants who already have filed patent applications before the date of enactment, sub-provision, (B) will be stricken in the final version, and (A) will be retained.

In fact, this is precisely what happened with the earlier “medical activity” exception on which the tax patent bill was originally based. In the case of the medical activity exception, while that bill’s original version failed to grandfather applications that already were filed but for which patents had not yet been granted as of the date of enactment, it was deemed necessary to revise the provision so that the final, enacted version notes that the exception does “not apply to any patent issued based on an application the earliest effective filing date of which is prior to” the date of enactment—an altogether more constitutionally sound approach.

Similarly, the current tax patent reform version of the Senate bill, S. 681, would apply to pending applications for which a patent has not been granted as of the date of enactment. This again raises rather serious concerns regarding fundamental fairness and due process as to applicants who have relied on current law in devoting the time and considerable expense of filing under Title 35. As the saying goes, “you don’t change the rules in the middle of the game.”

If these grandfathering provisions are not corrected, the result would be that applications already published on the U.S. Patent and Trademark Office website could be exposed in an unprotected manner to third parties, who would no doubt be delighted to mine the published applications for potentially lucrative intellectual property, an unfair windfall. Had these inventors known that anti-tax-patent legislation was coming, they likely would have sought other forms of protection for their intellectual property, for example under the law of trade secrets. Hence, expect the grandfathering provisions to be revised prior to enactment.

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