If You’re Not First, You’re Last: Federal Circuit’s First Review of an AIA Derivation Proceeding

Nearly a decade and a half after the passage of the Leahy-Smith America Invents Act (“AIA”), the Federal Circuit finally had its first occasion to review an appeal of a derivation proceeding that was litigated before the Patent Trial and Appeal Board (“Board”) in Global Health Solutions LLC v. Selner. This case provides helpful guidance for patent litigators regarding the proper legal framework in a derivation proceeding and serves as a reminder that patent applications should be filed as soon as possible. As the facts of this case show, it is important that inventors retain documents and other evidence of the conception of their invention, as well as its communication to others, should there be any challenge to their invention.

Before getting into the merits of the actual case, the Court in its decision set up the relevant framework that would guide its derivation analysis. The Court began with a reminder that prior to the AIA, a first inventor could obtain a patent even if a later second inventor filed an application for the same invention first, as long as the first inventor could prove that they were the first to invent (i.e., conception and reduction to practice). This was known as the “first to invent” system and inventorship disputes were resolved in “interference proceedings.” The AIA replaced this with the “first inventor to file” regime. Under this regime, a first inventor will generally not be entitled to a patent, if a later second inventor files an application first. But there is a narrow exception for a second filer first inventor: this second filer can still obtain patent if they conceived of the invention first and communicated the invention to the first filer, proving the first filer later derived the invention from information received from the first inventor. See 35 U.S.C. § 135(b). These types of disputes are now resolved in “derivation proceedings.”

The Court clarified that while there were similarities and overlaps between a pre-AIA interference proceeding and a post-AIA derivation proceeding, the focus of the latter was no longer on who was the first to invent; instead, the inquiry centered on whether the second filer conceived and communicated its invention to the first filer. Thus, “to meet its prima facie burden in an AIA derivation proceeding, the [second filer] must produce evidence sufficient to show (i) conception of the claimed invention, and (ii) communication of the conceived invention to the [first filer] prior to [first filer’s] filing of that patent application.” A first filer “can overcome the [second filer’s] showing by proving independent conception prior to having received the relevant communication from the [second filer].” So in a derivation proceeding, a first filer “need only prove that [its] conception was independent.”

The Court then turned to the facts of the case.  Marc Selner (a.k.a. the “first filer”) filed his patent application, listing himself as the named inventor, on August 4, 2017. Four days later, on August 8, 2017, Global Health Solutions (“GHS”) (a.k.a. the “second filer”) filed its patent application, identifying its founder, Bradley Burnam, as the named inventor. The parties’ applications claimed the same or substantially the same method for making a particular type of wound treatment ointment. (They had a business relationship at one point.) This sequence of events led GHS, as the second filer, to petition the Board that Selner derived the invention from him.

Ultimately, the Board ruled here that the first filer prevailed against the claim of derivation made by the second filer. Before the Board, Burnam met his initial prima facie burden by producing a February 14, 2014, email, with a 4:04 pm timestamp, from him to Selner, that recited the invention. But Selner rebutted this prima facie case of inventorship, by not only personally testifying about his conception, but also corroborating that testimony with production of an earlier February 14, 2014, email from him to Burnam, with a 12:55 pm timestamp, that described the invention. The Board eventually sided with Selner because Burnam’s 4:04 pm email contained language substantially resembling that of Selner’s 12:55 pm email, which was indicative that Selner did in fact send the earlier email, as well as the fact that an email that Burnam to Selner’s daughter in April 2014 acknowledged that her dad was the inventor. Because Selner proved independent conception before any communication from Burnam, Selner could not have derived the invention from Burnam, defeating GHS’s derivation claim.

On appeal, the Court affirmed the Board’s derivation decision in favor of Selner based on the substantial evidence in the record. As a preliminary matter, the Court noted that it was not deciding whether the second filer’s burden of proof was a clear and convincing evidence standard or a preponderance of the evidence standard because the parties proceeded throughout litigation as if derivation could be proven by preponderant evidence and they did not ask the Court to address the issue on appeal. In affirming the Board, the Court rejected a couple of arguments from GHS. First, the Court rejected the argument that the Board placed too much weight on the emails as corroborating evidence. The Court explained that these emails had evidentiary value because GHS did not challenge their authenticity and because the emails did not have to be independently corroborated, especially given that the metadata underlying these emails, such as the timestamp, were not authored by Selner (they were generated by the web-based mail server). Second, the Court rejected the argument that Selner had to show reduction to practice to also show conception. This was not one of the rare cases where an inventor was unable to envision the invention without reducing it to practice because the 12:55 pm email on February 14, 2014, from Selner to Burnam showed that Selner had a definite and complete idea of the invention by then. Lastly, the Court rebuffed the GHS’ attempt to have Burnam listed as a co-inventor because GHS did not adequately preserve the issue for appeal.

Looking Forward

The case serves as a reminder that entitlement to a patent under the AIA is primarily determined by the inventor that is the first to file an application for an invention. Nevertheless, a second filer can still obtain a patent for that invention, if it can prove that: (i) it conceived of the invention; and (ii) and communicated the invention to the first filer. The notion of conception—as it did before the AIA—still requires inventor testimony to be supported by corroborating evidence, such as physical or electronic documents.  In that regard, companies should implement or continue to maintain recordkeeping practices, such that evidence that is corroborative of conception and reduction to practice is not lost.  Moreover, companies should continue filing applications as soon as practicable after they have conceived of an invention. If a derivation dispute arises, the first filer has a litigation advantage in a derivation proceeding—it has no initial burden of proof. A second filer will bear the initial burden of proving a prima facie case of derivation.