How the AIA violates TRIPS

by Dennis Crouch

While in UK this summer, UK patent attorney Jim Boff and I had an interesting discussion regarding the special treatment of US Universities in the America Invents Act (AIA) constitute a violation of the international agreement on Trade-Related Aspects of Intellectual Property (TRIPS). In the mid 1990's the US successfully pushed TRIPS as a required element of membership in the World Trade Organization (WTO). As such the vast majority of countries around the world are member nations. TRIPS sets down certain minimum standards for national intellectual property systems and also incorporates the national treatment requirements exemplified in the Paris Convention of 1883. TRIPS also includes a dispute resolution system allowing member nations to take action against a fellow members that is violating the agreement. The typical penalty is a trade-restriction such as a quota or tariff applied against goods from the guilty country.

National Treatment: non-US inventors are allowed to obtain and enforce US patents. In fact, most US patent applications come from foreign applicants. At least in the short-run, US consumers (voters) may well enjoy the potential lower prices associated with having those patents wholly rejected. However, the US has long agreed to allow foreign-owned patents as part of a quid-pro-quo that guarantees that US-owned inventions can be patented in nations around the word. The "national treatment" system worked out in the 1883 Paris Convention and continued in TRIPS essentially requires that each member-nation treat patent applicants from other member-nations at least as well as it treats its own citizens.

On two particular points, the America Invents Act provides benefits to US Universities that are not provided to foreign applicants.

  1. Not Subject to Prior User Rights: AIA-patents are subject to a prior commercial user defense that – as its name suggests – allows a prior commercial user of an invention to avoid infringement liability even if that prior commercial user cannot identify any prior art that sufficient to invalidate the patent. This is a defense to infringement and thus weakens the power of an individual patent. The AIA has a special provision for US universities stating that the defense does not apply to patents covering inventions that were owned by the US university (or subject to contractual obligation to assign to the university) at the time of the invention. The provision defines universities by reference to the US Higher Education Act of 1965 (20 U.S.C. 1001(a)). That provision includes only universities located within the United States.
  2. 75% reduction in Fees: The AIA also includes a micro-entity provision that allows qualified applicants to receive a 75% reduction in most patent office fees. US universities qualify for the fee reduction while foreign universities do not. (Foreign individuals (natural persons) can qualify for micro-entity status if they meet the requirements.)

It is pretty clear that these are two benefits given to US universities that are not enjoyed by their counterparts in other countries. Now, the fee reduction could still pass muster – especially if seen as a subsidy rather than merely a fee discount. See National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012) (a fine is a tax).

The greater problem stems from the prior user right that is clearly a legal benefit given to a particular US group and not extended to foreign applicants.

Resolving the Problem: Although the US as a country is bound by the TRIPS agreement, US courts do not treat the agreement as controlling. Thus, violations of TRIPS cannot normally be addressed by filing a lawsuit in US court. Rather, the resolution is conducted at the national level through the rather ineffective WTO dispute resolution procedures and other diplomatic channels.

23 thoughts on “How the AIA violates TRIPS

  1. Dennis,

    It is reported that the Russians have accepted that differential fees for domestic and foreign applicants violated TRIPS – see

    link to melisbek.com

    I wonder how much this acceptance was induced by US pressure?

  2. Procedurally this can't happen b/c violation of TRIPS does not confer standing in US courts. Rather, the only way to fight it is to get your home country to complain to the WTO and wait for the US to listen. 

  3. 1) Although the USPTO agreed to it during congressional negotiations, the USPTO has no love of the university exception for micro-entity fees. 
    2) The USPTO is very unlikely to support an international expansion of the micro entity fees. Look, they have plans for how to spend the incoming money and are not looking to disrupt its flow. 

  4. It may require a non-US university to raise the defence and appeal it to the Supreme Court after the lower court doesn’t uphold their defence

  5. I agree that a technical amendment giving rights to universities around the world would fix this. However, I don't believe that the USPTO would support that — especially the micro entity fee for all universities worldwide.  I don't understand how the US Universities have such strong lobbying power here, but they would fight incredibly hard if the technical amendment went the other way – cancelling their micro entity status.  

  6. I think it would, and I think it’s needed right away, but including granting them the fee reduction as well. I noticed these problems from the beginning, and was amazed it has taken so long for anyone else to notice. There again, it’s another prize example of American isolationism, so it shouldn’t really have surprised me.

  7. “AIA violates TRIPS”

    It is far worse that that. The Patent Act violates the US Const at least as in per the eBay case the right to exclude has been abridged.

    Just because they call it “reform” doesn’t mean it is.

    “patent reform”…America Invents Act, vers 2.0, 3.0…

    “This is not a patent reform bill” Senator Maria Cantwell (D-WA) complained, despite other democrats praising the overhaul. “This is a big corporation patent giveaway that tramples on the right of small inventors.”

    Senator Cantwell is right. All these bills do is legalize theft. Just because they call it “reform” doesn’t mean it is. The paid puppets of banks, huge multinationals, and China continue to brain wash and bankrupt America.

    They should have called these bills the America STOPS Inventing Act or ASIA, because that’s where they’re sending all our jobs.

    The patent bill (vers 2, 3, etc) is nothing less than another monumental federal giveaway for banks, huge multinationals, and China and an off shoring job killing nightmare for America. Even the leading patent expert in China has stated the bill will help them steal our inventions. Congress passed it and Obama signed it. Who are they working for??

    Patent reform is a fraud on America. Congress and Obama are both to blame. This bill will not do what they claim it will. What it will do is help large multinational corporations maintain their monopolies by robbing and destroying their small entity and startup competitors (so it will do exactly what the large multinationals paid for) and with them the jobs they would have created. The bill will make it harder and more expensive for small firms to get and enforce their patents. Without patents we cant get funded. In this way large firms are able to play king of the hill and keep their small competitors from reaching the top as they have. Yet small entities create the lion’s share of new jobs. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” This bill is a wholesale destroyer of US jobs. Those wishing to help fight this bill should contact us as below.

    Small entities and inventors have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. The smaller the firm, the more they rely on patents -especially startups and individual inventors. Congress and Obama tinkering with patent law while gagging inventors is like a surgeon operating before examining the patient.

    Those wishing to help fight big business giveaways and set America on a course for sustainable prosperity, not large corporation lobbied poverty, should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.

    Please see link to truereform.piausa.org for a different/opposing view on patent reform.
    link to docs.piausa.org

  8. Dennis,

    I am not so sanguine on the issue of fee discrimination.

    The footnote to Article 3 TRIPS reads:

    3 For the purposes of Articles 3 and 4, “protection” shall include matters affecting the availability, acquisition, scope, maintenance and enforcement of intellectual property rights as well as those matters affecting the use of intellectual property rights specifically addressed in this Agreement.

    I don’t see how fees can fail to affect the acquisition of rights.

  9. Re: “the fee reduction could still pass muster – especially if seen as a subsidy rather than merely a fee discount..”

    But does it make a difference that the U.S. PTO is entirely funded by user fees, so that all the big university, micro entity and small entity PTO fee reductions are paid for by increased fees for all other entities, roughly half of which are foreign entities filing in the U.S.? That is, this is not a governmental subsidy, and it is clearly discriminatory against large companies, but is there anything actually illegal about that?

  10. Ah, I see. Either “owned” or “subject to an obligation of assignment”. So, the language of the statute covers BOTH my “at the time the invention was made” possibilities equally unambiguously. Thanks Ned.

  11. Max, the invention must be owned or assignable to a U or a U’s TTO and “fundable” by the US Government:

    “(A) IN GENERAL- A person commercially using subject matter to which subsection (a) applies may not assert a defense under this section if the claimed invention with respect to which the defense is asserted was, at the time the invention was made, owned or subject to an obligation of assignment to either an institution of higher education (as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), or a technology transfer organization whose primary purpose is to facilitate the commercialization of technologies developed by one or more such institutions of higher education.
    (B) EXCEPTION- Subparagraph (A) shall not apply if any of the activities required to reduce to practice the subject matter of the claimed invention could not have been undertaken using funds provided by the Federal Government.”

  12. Thanks for that. I can see that there are multiple inchoate rights when, for example, a plurality of universities and a plurality of corporations are all busily and creatively researching a topic in, say, nanotechnology. I think I understand the university prior user defence exception, that any one of the corporations, by now manufacturing what it itself invented, cannot use PUR as a defence in the moment when any one of the universities asserts its issued patent against that manufacture.

    But I was still curious about ownership of conceptions by employees who are “paid to invent”. Does the law in the USA i) define the inventive conceptions made in the course of doing what they are being paid to do as ab initio the property of the employer (UK) or does the law (like in Germany) ii) view them as belonging initially to the inventor but require ownership to be assigned to the employer?

    However, this is off-thread so perhaps we should leave it at that. Instead, how can it be legitimate under TRIPS to gift the non-availability of the PUR defence ONLY to US universities, and deny it to non-US university owners of duly issued US patents?

  13. MaxDrei,

    Thinking of the “invents” as inchoate rights might help you understand that there can be multiple people invited to the track race.

    Only the first across the finish line earns the full legal patent rights, but PUR can be considered a consolation prize.

    What many can own are the inchoate rights. Only one can own the patent rights. Two very different things.

    What the univesity exemption does is negate the consolation prize, maintaining the pre-AIA “winner take all” mentality. It is also the mentality of the carrot and stick approach that is otherwise lost with the adoption of PUR. The carrot being the spoils of winning the race, and the stick the threat to those not sharing what they have invented and being punished by allowing the inventor exclusivity over what they did not share (notably PUR was championed by the big international corporations who felt “disadvantaged” by their desire not to share, and shamefully “bought” by our congressmen and made a part of patent law (even over my direct words to my congressman and senators, no less).

  14. These words puzzle me: “…. the defense does not apply to patents covering invents that were owned by the US university at the time of the invention”

    I mean, first, what is “owned” by the US Uni, the patents or the invents? Second, can anybody but the inventor “own” an invention in the very moment it is conceived? I’m thinking, in the UK the inventor’s employer can but, in Germany, not.

  15. What if a group of monks had been using the invention beforehand? Would they get a priory use right?

  16. Nice write-up Dennis.

    The only correction I would add is that the University benefit is not a Prior User Right (which itself is arguably unconstitutional), but is an exemption from the Prior Use Right.

    Would a technical amendment granting the exemption to equivalent foreign universities resolve the issue?

  17. If only this were the biggest problem facing our patent system. Before worrying about foreign rights, let’s confront our system’s ever present shortcomings. In practical terms, our system does not do obviousness rejections all that well and still cannot say when something is too “abstract” to be patented.

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