By Kevin E. Noonan —

Undersecretary of Commerce and U.S. Patent and
Trademark Office Director David Kappos today announced a three tiered patent
prosecution regime, termed "Three Track" to be instituted in the
Office.  The scheme will be implemented
as rulemaking pursuant to 35 U.S.C. § 2 and after a Notice and Comment period
under the Administrative Procedures Act, although the Director noted
that Congress would (under current law) need to set fees for the different
prosecution options (or enact legislation providing the Office with fee-setting authority; see "New USPTO Fee-Setting Bill Introduced in House").  The Director's
announcement was made to a group of about a dozen reporters on a conference
call this afternoon, as well as a press release published on the Patent and
Trademark Office website.

The Directed explained the three tiers as
follows.  The first tier, "Fast
Track" or "Track One," constituting an accelerated examination
procedure, is aimed at having a first Office Action issue within four months
after filing, with final disposition (defined as allowance or Final Rejection)
in no more than twelve months.  Notably, there will be no requirement for an Examination Support
Document (ESD), due to the "resistance of the patenting community" over
this requirement in current accelerated examination procedures and the response
to this requirement in earlier-proposed patent "reform" bills and the
infamous "claims and continuations" rules finally rescinded by the
Director last fall (see "'New Rules' Officially Rescinded").  In response
to a question, the Director explained that this first tier examination was not
intended to replace existing accelerated examination (which does contain an ESD requirement).  The Director said the Office did not want to take away
applicant options, but did say that if applicants abandoned existing
accelerated examination procedures in favor of the "Fast Track"
approach, he could see the Office eliminating these other existing
protocols.  He also said that the
Office would take advantage of its experience and infrastructure with these other
accelerated examination schemes.  In response to another question, the Director said that there had been 3,714
applications that have used existing accelerated examination procedures since
2005.  Answering yet another
question, the Director predicted that the time required to examine applications
in certain arts (making these arts less amenable to accelerated examination),
and the costs would be an impediment to large corporations requesting this
accelerated "Fast Track" examination.  The Director said that the fee would not be trivial, but
that in the absence of independent fee-setting authority (something which the
Director took the time to mention was in a presently-pending bill in the House
of Representatives introduced by Rep. Conyers and Smith (H.R. 5322) and that was supported by the Obama administration), fees to be imposed
for first tier Fast Track examination would need to be set by Congress.  The Director also noted that any
reduction in fees for traditional small entities (50%) or (even smaller) "microentities"
(75%), constituting individual inventors and others (as defined in the current
Senate patent "reform" bill, S. 515) would likewise require
Congressional implementation.  The
Director cited small entities and microentities as components of the economy that
create the most innovation and new jobs, saying the Office "really wants
to help them."  The Director also commented on the Patent Prosecution
Highway (PPH) as a way to accelerate examination, conserve Office resources, and
reduce the backlog.

The second tier ("Track Two") constitutes
the status quo, and would be the "default" mode for examination,
according to the Director.  Applicants would need to do nothing to elect this examination mode
different from what is done currently.  The Director also noted his hope that the pendency under this track will
be reduced to 10 months to first action and 20 months to final disposition.

The "Track Three" third tier is an
extended or delayed examination, which would permit an applicant to defer
examination for up to 30 months from the earliest priority date.  Analogizing this tier to the current
Patent Cooperation Treaty timetable, the Director asserted that discussions
with many constituencies ("small entities, large entities, pharma,
information technology, and everybody in between") tell him "regularly"
that applicants wanted a way to defer examination as a way to reduce costs.  The
Director also noted that he envisions a system where the Office's actions were
tied to payment of the fee for that action, and to provide a way to "exit"
the process when an application is no longer desired (such as when a search
shows anticipating prior art).  The
Director conceded that this tier was expected to address, in part, the current
application backlog.  The Director's
hope is that by deferring examination some applications would be abandoned and
thus not contribute to the backlog or consume Office resources.  (This behavior is observed in foreign
patent offices, albeit where application pendency requires a yearly annuity
payment.)  This is particularly important in view of reductions in the examiner
corps occasioned by attrition not counterbalanced by new hiring.  Unaddressed was the effect (if any) of
electing this third tier on patent term adjustment; in view of the current
statutory provisions and Office rules that reduce such adjustments for
applicant "failure to diligent prosecution" it is likely that deferring
examination will incur such costs.  This can be expected to make the third tier much less attractive for
arts, such as biotechnology and pharmaceuticals, where reduced term has
real-world economic consequences.  As with first-tier examination, the costs for deferring
examination, including delayed payment of search fees or examination fees, will
depend on Congressional authorization unless the Office is granted independent
fee-setting authority.

In another Office initiative, the Office will delay
examination until a first Office Action is issued by a foreign patent office
(including for example the Japan Patent Office) for applications arising
from a first foreign filing.  The
USPTO will treat this Action as a "first office action" on the
merits and require an applicant to file a paper addressing the rejections
contained in such a foreign action.  The Director hypothesized that in some instances this will be a
perfunctory response, such as those occasions where the basis of the rejection
does not have a counterpart in the U.S. ("absolute novelty"-based
rejections are one example).  For
other grounds of rejection in common between the U.S. and the foreign patent
office (such as § 102(b) rejections, for example), the applicant would be
required to address the rejection in the form of a preliminary amendment, which
the Director contended would thus advance prosecution of the U.S. application
by overcoming rejections before substantive examination by a U.S. examiner, as
well as avoiding RCE practice and get the application in condition for final
disposition.  While this proposal
certainly has benefits for the Office, the requirement that an applicant with a
first foreign-filed application wait until the applicant receives an action from a
foreign patent office can be expected to delay U.S. examination (since there is
typically a much longer delay to first action in foreign offices compared with
the U.S.; the Director suggested applicants can take steps to reduce this delay).  This suggests that foreign filers may
benefit from the practice (which already is advantageous for creating § 102(e)
prior art) of filing a U.S. provisional application on the same day that the
foreign application is filed.  This
would provide such applicants with a first U.S. filing that would enable them
to avoid such delay.

Finally, in response to a question from a Reuters
reporter, the Director stated that the Office expects to collect between
$146-242 million more than was appropriated to the Office (and likely, he said,
to be towards the high end).  Thus,
the rationale for a 15% surcharge in fees (and fee-setting authority generally)
seems to have evaporated, but the Director notes that the Office has needs
(like increased hiring and IT infrastructure improvements) that have not been
addressed.  (He did not mention
that the problem seems most easily resolved by preventing Congress from
diverting these funds from the Office by the appropriations process.)  He also noted that another use for the
monies would be to fund a reserve mandated by the Office of Management and
Budget.

This proposal incorporates features either
instituted (accelerated application) or earlier proposed (delayed examination) intended to address both the backlog and arguments that the backlog is
harming innovation.  The Director
expressed the opinion that the proposal would provide the circumstances for "gobs
of jobs" to be created based on more a efficient patent application
system.  Clearly, the Director has
the correct attitude (helping applicants get patents under the law efficiently
and effectively) and recognizes the relationship between a properly-functioning
patent system, innovation, and the economy.  It is an attitude that remains refreshing in view of recent
history of the Office.

In the Office's press release announcing the "Three Track" initiative, the Office noted that it was seeking input from the patent community regarding the proposal.  As part of that effort, the Office will be holding a public meeting on July
20 at 1:30 pm (EDT) at the USPTO’s Madison building, 600 Dulany Street,
Alexandria, Virginia.  Those interested in attending the meeting must
register by 5:00 pm (EDT) on July 16.  The Office is also seeking written comments, which must be submitted by
August 20.  A June 4 Federal Register notice will provide additional details regarding the initiative.