By Donald Zuhn —

Last week, the U.S. Patent and Trademark Office hosted a roundtable discussion on deferred examination.  The roundtable, which lasted about four hours, brought together two dozen participants, representing a variety of industries and organizations (as well as positions on the issue), to discuss the advantages and disadvantages of implementing a deferred examination system in the U.S.; the impact such a system would have on applicants, their competitors, the public, and the USPTO; and how such a system could (or should) be implemented.  Roundtable participants included:

As the roundtable progressed, and each participant laid out his or her own case, most of the participants began to separate into two readily discernable camps:  those who favored implementing a deferred examination (or at least believed that the topic warranted serious consideration) and those who maintained a longstanding opposition to the concept (or were only lukewarm at best about such a system being introduced in the U.S.).  Last week, the comments of the five roundtable participants who oppose deferred examination were considered (see "Patent Office Hosts Roundtable on Deferred Examination: The Opposition").  Today's post focuses on the comments of deferred examination proponents, as well as those participants who did not take a stand on the issue.

Among the thirteen roundtable participants who supported (or were at least minimally receptive to) a deferred examination system were Nicholas Godici, Carl Gulbrandsen, Henry Hadad, Alan Hammond, Ron Katznelson, Jeffrey Kushan, Nancy Linck, John Love, Ken Patel, Hans Sauer, Manny Schecter, Peter Thurlow, and John Whealan.

Nicholas Godici (at right), the Executive Director for Birch, Stewart, Kolasch & Birch, LLP, advised proponents of deferred examination to not "fall in love" with the concept because it would save them money since it probably would not.  He also believed the USPTO would have to raise examination fees under a deferred examination scheme in order to offset the loss of examination fees for deferred applications that were eventually dropped.  While Mr. Godici (like Mr. Patel) did not appear to be a true proponent of deferred examination, he did state that if the USPTO could produce modeling indicating that deferred examination would lead to an 18-month pendency, such a system would be "attractive."

Carl Gulbrandsen (at left), the Managing Director for the Wisconsin Alumni Research Foundation (WARF), noted that WARF did not pursue 10-20% of its provisional applications under the current system.  He predicted that if a deferred examination system were implemented in the U.S., the percent of applications dropped by WARF would go up, leading to cost savings for the Foundation.

Henry Hadad, the Vice President & Associate General Counsel of Intellectual Property for Schering-Plough Co., asserted that while the U.S. already had de facto deferred examination via provisional and PCT applications, a true deferred examination system would be a lot more efficient.

Alan Hammond, Chief Intellectual Property Counsel for Life Technologies, asserted that deferred examination was a "practical solution" that should be pursued, and stated that he was "very positive" about deferred examination.  Mr. Hammond also contended that if "[deferred examination] is working elsewhere, it can work here."

Ron Katznelson (at right), the President of Bi-Level Technologies, presented some of the strongest arguments in favor of deferred examination.  First, he predicted that the implementation of a deferred examination system would result in substantial cost savings to the USPTO.  Dr. Katznelson also asserted that such a system would benefit applicants by moving more important applications up in the queue to replace applications that were deferred, many of which would ultimately be dropped altogether.  He challenged opponents of deferred examination to produce a study showing that such a system would increase application pendency, noting that he was unaware of any such study.  In addition, he argued that deferred examination would make the examination process more efficient as applicants presented more focused claim sets to the Office.  Dr. Katznelson thought deferred examination could be implemented without Congressional intervention, noting that the USPTO had obtained a separation of basic, search, and examination fees in 2003 by representing to Congress that the division of fees was needed for deferred examination, which was on its way.  He also argued that the USPTO should act more like a business, and try to generate a better product, namely a patent that "lives longer" (i.e., that is not dropped during the maintenance fee stage when the USPTO stands to collect over $7,500 per patent).  With respect to demands that deferred examination produce an 18-month pendency, Dr. Katznelson contended that the 18-month pendency period was a red herring, and that the true measure of success should be pendency stability.  He argued that deferred examination should not be kept hostage to the goal of 18-month pendency.  With regard to the specifics of a deferred examination system, Dr. Katznelson preferred a three-year deferral period, and a system in which third-party requesters had to pay for examination — but could submit art (since a third-party willing to pay for someone else's examination would probably have good art). 

Jeffrey Kushan (at left), a Partner with Sidley Austin LLP, told the roundtable that the U.S. needed a system in which important applications moved to the head of the queue, leading to quicker issuance of important patents.  He stated that the fundamental driver in favor of a deferred examination system is that it would "eliminate the need to examine applications that shouldn't be examined."

Nancy Linck (at right), Of Counsel with Rothwell, Figg, Ernst & Manbeck, also offered some strong arguments in favor of deferred examination.  Ms. Linck noted that while USPTO solicitor in 1998, she wrote a paper advocating on behalf of deferred examination, and that her views had not really changed.  She also argued that no one had proposed any other solutions or alternatives for reducing the backlog that had "a prayer of working" (noting that the Office had tried raising fees and increasing the size of the examining corps without halting the rising backlog).  Ms. Linck agreed that proponents of deferred examination should not look to Congress to enact a system, reminding the roundtable that Congress took nine years to craft inter partes reexamination legislation.  She also agreed with those who said the USPTO would not be able to implement a deferred examination system tomorrow, but suggested that proponents "shoot for the day after tomorrow."

John Love (at left), the Deputy Commissioner for Patent Examination Policy for the USPTO, asserted that deferred examination would yield benefits other than a reduction in the application backlog, including efficiency gains (since the Office would need to examine fewer cases) and the issuance of higher quality patents.

Ken Patel, the Associate General Counsel of Intellectual Properties Organization for Procter & Gamble, argued that allowing applicants to defer examination for up to seven years would be very bad, since such a system would lead to an increase in "blue sky" filings.  He stated that such a system would force companies like P&G, which would not otherwise file such applications, to follow suit.  Mr. Patel also noted that P&G had observed no real benefit from China's deferred examination system, as P&G had to just "sit and wait" for examination, and could not afford to take every application through accelerated examination.  He feared that the same thing might happen in the U.S. if a deferred examination systen was implemented.  He recommended that if the USPTO were to get serious about deferred examination, it should study Japan's system (even though Mr. Patel did not speak highly of P&G's experiences with deferred examination in Japan).  Notwithstanding the above, however, Mr. Patel (like Mr. Godici) would support deferred examination if it could lead to an 18-month application pendency.

Hans Sauer, the Associate General Counsel of Intellectual Property for the Biotechnology Industry Association (BIO), noted that BIO members defer examination wherever that option is offered.  He also noted that BIO members were no more dissatisfied with the operations of foreign offices offering deferred examination than they were with the USPTO.  Dr. Sauer pointed out that while BIO members had two objections to deferred examination — uncertainty and surrendering the longstanding goal to achieve an 18-month pendency — the benefits of deferred examination outweighed the disadvantages.  As a result, BIO supported further exploration of the concept.  Dr. Sauer also reminded roundtable participants that nine of the United States' ten biggest trading partners have a deferred examination system, and argued that by not having a deferred examination system, the U.S. is routinely the first to examine an application having foreign counterparts (the impact of being the first office to examine was discussed in Bruce Lehman's article on global patent protection; see "Science Progress Article Addresses Global Patent Protection").  Dr. Sauer also noted that not only does the USPTO do the first work on an application family (work that can often be used by other offices), but as a result of the high drop-out rates (between 20-40%) in other offices having deferred examination systems, the USPTO may do the only work on an application family.  With regard to the specifics of a deferred examination system, Dr. Sauer thought the system should be "opt in" (i.e., the default would be no examination), require a fee for maintaining deferral, and force third-party requesters to pay for the examination.  

Manny Schecter, the Associate General Counsel for Intellectual Property Law for IBM, noted that his company "strongly supported" the concept of deferred examination and would use it if implemented.  He reasoned that if 20-25% of patentees decide to forgo payment of the four-year maintenance fee of $980, applicants would likely forgo the examination of a good portion of deferred applications to save the $760 search and examination fees.  With regard to the specifics of a deferred examination system, Mr. Schecter thought a three-year deferral made sense, wanted to see an opt in system (as compared with the little used suspension of action provisions of 37 C.F.R. § 1.103), and agreed with Dr. Sauer's suggestion regarding third-party requests.

Peter Thurlow (at left), who represented the New York IP Law Association (NYIPLA), agreed with other bar association representatives that deferred examination presented some valid concerns, but thought the idea should be pursued.  With respect to the alleged lack of certainty under a deferred examination scheme (as suggested by Mr. Wamsley; see "Patent Office Hosts Roundtable on Deferred Examination: The Opposition"), Mr. Thurlow argued that such uncertainty was already present in the system, noting, for example, that he could not provide clients with clearance opinions of published applications.  He also argued that the idea that the USPTO could reallocate up to 20-25% of its resources on important applications under a deferred examination system seemed "to make sense."

John Whealan (at right), Associate Dean for Intellectual Property Law Studies at George Washington University Law School, and the roundtable's moderator, spent most of the discussion ably moving the participants from one topic to the next.  However, towards the end of the discussion, he observed that deferred examination appeared to be "a little less industry-driven of an issue" (perhaps alluding to the claims and continuations rules package), and that the fact that some industries would use deferred examination and some industries would not could be an indication that such a system "may not be a problem."  Mr. Whealan also stated that a true deferred examination system would be more efficient than the "RCE deferred examination" system that seemed to be in place at the moment.

While most of the roundtable participants indicated a preference for or against deferred examination, five participants appeared to neither support nor oppose the concept during the roundtable.  Among those who did not take a position during the discussion were John Doll, Brad Huther, Stephen Kunin, Arti Rai, and John Thomas.

John Doll (at left), the Acting Director of the USPTO, noted that the Office witnessed a 17% rise in RCE filings and only a 1% rise in original application filings in 2008, and that as a result, deferred examination might not have as significant an impact on the application backlog as its proponents believed.

Brad Huther, who represented the U.S. Chamber of Commerce, noted that during the preparation of a recent report on proposals for improving the U.S. patent system, the organization received few comments about deferred examination.  Interestingly, the organization's report did propose implementing a deferred examination system (see "U.S. Chamber of Commerce Provides Detailed Recommendations to New Administration Regarding USPTO").

Stephen Kunin (at left), a Partner with Oblon, Spivak, McClelland, Maier & Newstad, asserted that trying to add a deferred examination component to our present system would be unworkable, since an applicant should not be expected to merely move from real deferred examination to de facto deferred examination (i.e., lengthy pendency).  In addition, he was not sure that worksharing would mesh with deferred examination.  Mr. Kunin also wondered whether applicants requesting deferred examination should have to do something more (e.g., pay more fees, provide a search), or whether they should be allowed to secure broader claims down the road; he acknowledged, however, that such changes would require Congressional action.

Arti Rai (at right), Professor of Law at Duke University School of Law, cautioned that a deferred examination system would likely have to be implemented via the USPTO's rulemaking powers since Congressional action would take too much time.  She contended, however, that an element of a deferred examination system under which a third-party could request and expedite examination might require Congressional action.

John Thomas (at left), Professor of Law at Georgetown University Law Center, stated that the most contentious issues to be resolved in implementing a deferred examination system would be the amount of the deferral (roundtable participants discussed 3, 5, and 7 year deferral periods) and who could request examination (i.e., whether a third-party could request examination).  He also opined that deferred examination could lead to an increase in original filings (as Mr. Patel suggested).

Proponents and opponents alike will now await the USPTO's next move regarding deferred examination.  For proponents, the fact that the USPTO hosted the roundtable — and that proponents outnumbered opponents two-to-one (even discounting Mr. Godici's and Mr. Patel's far-from-enthusiastic support) — would suggest that the Office may be prepared to take the next step by beginning to craft new rules implementing a deferred examination system.