By Donald Zuhn —

The following is part of a continuing series on how to address the
very real problems facing the U.S. Patent and Trademark Office.

A day after the day of rejoicing for inventors, patent practitioners,
examiners, and seemingly all of civilization, fair-minded people will
concede that the U.S. Patent and Trademark Office faces a daunting
task.  After years of neglect – from Congress raiding the users’ fees,
an inadequate number of examiners, technology-driven increases in the
number of applications filed, and a "count" system that has not
rewarded a style of examination that encourages prosecution to a
definitive end point – the Office is facing a massive backlog of
applications without sufficient resources to process them in a timely
manner.

If the patent bar is gladdened by District Court Judge Cacheris’
decision enjoining implementation of the new rules – representing an
attempt, albeit a misguided one, on the part of the Office to address
the pendency and backlog problems – it behooves us to propose
alternatives.  Patent Docs
will be posting a series of such proposals, and we invite our readers
to provide their own ideas.  As they used to say in the days of the
counterculture, "if you are not part of the solution, you are part of
the problem."  Patent Office management clearly thinks the patent bar
is part of the problem; it would be satisfying to prove them wrong.

Deferred examination

Patent Docs readers have proposed a number of suggestions for helping the U.S. Patent and Trademark Office deal with its pendency and application backlog problems (we’ll have more on readers’ suggestions in another article).  One proposal that has been frequently suggested is that the Patent Office allow applicants to defer examination.

Such a deferred examination system exists in Japan, where an applicant can put off examination for up to three years after filing (see "Procedures for Obtaining a Patent Right" at the JPO website).  If an applicant has not requested examination within three years of filing, however, the application will be regarded as irretrievably withdrawn.  By requiring applicants to request examination, and thereby defer examination by withholding such a request, the Japan Patent Office does not waste valuable examination resources on an application the applicant may later deem to be of little value.  In addition, an applicant can request examination immediately after filing in order to expedite prosecution of applications the applicant deems to be more valuable.

Two Patent Docs readers noted that the U.S. Patent Office already has a deferred examination system in the form of the suspension of action provisions of 37 C.F.R. § 1.103.  Under Rule 103(a), an applicant may request a suspension of action of up to six months "for good and sufficient cause," provided that a reply by applicant to a pending Office action is not outstanding.  Under Rule 103(b), an applicant can secure a three-month suspension, but only for a continued prosecution applications (CPA).  Under Rule 103(c), an applicant can request a three-month suspension upon filing a request for continued examination (RCE).  The provision of Rule 103 that the two astute readers were specifically pointing to, however, is 103(d), which permits an applicant to defer examination for up to three years provided that the applicant has not filed a nonpublicaton request (or has rescinded the nonpublication request), the application is in condition for publication, and the Patent Office has not issued an Office action under 35 U.S.C. § 132 or a notice of allowance.  For the deferred examination request under Rule 103(d), the Patent Office even provides a form:  PTO/SB/37.

It seems, therefore, that the U.S. Patent Office already has a deferred examination system that appears to be the equal of Japan’s deferred examination system.  So why are these provisions of the rules (especially Rule 103(d)) so little known and so little used?  Perhaps it has something to do with the Patent Term Adjustment ramifications of requesting a suspension of action or deferred examination under Rule 103(a)-(d).  According to M.P.E.P. § 709, such a request "will cause a reduction in patent term adjustment accumulated (if any) under 37 CFR 1.703."  More likely, however, it’s because the system has one significant difference from Japan’s deferred examination system.

In Japan, the default is no examination and an applicant can request examination at any time after filing.  Thus, in Japan, an applicant can request examination immediately, wait three years to request examination, or wait anytime in between to request examination.  In the U.S., however, the default is examination, an applicant must request deferral, and at the time of this request, must specify a deferral period of up to three years.  According to M.P.E.P. § 709:

Once the deferral of examination has been granted, the application will not be taken up for action by the examiner until the suspension period expires.  For example, if an applicant files a request for deferral of examination under 37 CFR 1.103(d) for the maximum period permitted under the rule in an application that claims priority of a foreign application filed 1/3/00, the action by the Office on the application will be suspended and the application will automatically be placed in a regular new case status on the examiner’s docket on 1/4/03 (36 months from the effective filing date of the application, i.e., 1/3/00).

Thus, it would seem from this portion of the M.P.E.P. that in the U.S., an applicant will be stuck with the deferral period originally requested.  In other words, if an applicant chooses a deferral period of three years and circumstances change, tough luck; the applicant could be out three years of patent term adjustment.  However, as usual with the USPTO, everything is not always as it seems.  According to M.P.E.P. § 709(D), an applicant can "submit[] a request for termination of the suspension of action prior to the end of the suspension period," and such a termination "will be effective when an appropriate official of the Office takes action thereon."  Of course, it’s unclear how long the Patent Office might take to terminate the suspension of action, and for certain biotech or pharma patents, the loss of even a few months of adjusted patent term could cost a patentee millions.

Clearly, U.S. applicants would be better off with a Japanese-style deferred examination system in which no examination is the default, examination must be requested, and an examination request can be lodged at anytime between filing and three years after filing.  Because the current U.S. deferred examination system appears to see so little use (Patent Docs readers who have requested deferred examination in the U.S. are encouraged to submit comments regarding their experience), the USPTO might also benefit from the implementation of a Japanese-style deferred examination system by allowing the USPTO to expend examination resources on applications that applicants deem to be the most valuable.

For additional articles in the "Post-GSK" series, please see:

• "Co-owned, Co-pending Applications," November 11, 2007
• "Increased Fees for Continuations," November 8, 2007
• "Regional Patent Offices," November 7, 2007
• "Tailoring Protection and Examination," November 6, 2007
• "Annuities," November 1, 2007

    By Kevin E. Noonan —

The following is part of a continuing series on how to address the
very real problems facing the U.S. Patent and Trademark Office.

A day after the day of rejoicing for inventors, patent practitioners,
examiners, and seemingly all of civilization, fair-minded people will
concede that the U.S. Patent and Trademark Office faces a daunting
task.  After years of neglect – from Congress raiding the users’ fees,
an inadequate number of examiners, technology-driven increases in the
number of applications filed, and a "count" system that has not
rewarded a style of examination that encourages prosecution to a
definitive end point – the Office is facing a massive backlog of
applications without sufficient resources to process them in a timely
manner.

If the patent bar is gladdened by District Court Judge Cacheris’
decision enjoining implementation of the new rules – representing an
attempt, albeit a misguided one, on the part of the Office to address
the pendency and backlog problems – it behooves us to propose
alternatives.  Patent Docs
will be posting a series of such proposals, and we invite our readers
to provide their own ideas.  As they used to say in the days of the
counterculture, "if you are not part of the solution, you are part of
the problem."  Patent Office management clearly thinks the patent bar
is part of the problem; it would be satisfying to prove them wrong.

Identification of co-owned, co-pending applications

One of the little-discussed provisions of the new rules enjoined by Judge Cacheris of the District Court of the Eastern District of Virginia on October 31st were two disclosure provisions.  37 C.F.R. § 1.78(f)(1) required that applicants prosecuting an application must identify other commonly owned applications or patents having (a) an inventor in common with the application being prosecuted, and (b) a claimed filing or priority date within two months of the claimed filing or priority date of the application being prosecuted.  This rule was comprehensive, in the sense that for an application having an actual filing date of December 1, 2006, claiming the benefit of a nonprovisional application filed on June 1, 2004 and a foreign application filed on June 1, 2003, an applicant would be responsible for identifying all co-owned applications naming one inventor in common that were filed within two months of each of the December 1, 2006, June 1, 2004, and June 1, 2003 dates, according to an example published in the Federal Register to illustrate the rules.

The impetus for this reporting requirement was to prevent an applicant from "cheating" on the new rules by filing related applications naming the same inventors.  This aspect was most directly evidenced by subsection 78(f)(2) of the new rules, which created a rebuttable presumption that an application being prosecuted and other commonly owned application or patent contain at least one patentably indistinct claim when the application being prosecuted and the commonly owned application or patent have (a) an inventor in common, (b) substantial overlapping disclosure, and (c) the same claimed filing or priority date.  Subsection 78(f)(1), however, was broader than was required to identify relevant co-owned and co-pending applications, since it did not encompass the requirement for "substantial overlapping disclosure" (which at least could be understood to be an indication that the applications were sufficiently related to raise the rebuttable presumption.

All this has been discussed at length in earlier posts (see, e.g., "An Analysis of the New Rules: 37 C.F.R. § 1.78(f): Commonly Owned Applications and Patents"), and with Judge Cacheris’ injunction granted October 31st they are (at least for now) in abeyance.  Assuming the preliminary injunction becomes permanent after the parties have had a chance to fully litigate the issue, the question becomes whether any part of these reporting requirements could or should survive?  On the one hand, providing this information (particularly under the ministerial guise of submitting a pre-approved Patent Office form) would enable applicants to satisfy at least a good portion of the disclosure requirements implicated in the Federal Circuit’s McKesson Information Solutions, Inc. v. Bridge Medical, Inc. decision (see Patent Docs report on that case).  Absent the specific circumstances the Court noted in its decision to uphold a finding of inequitable conduct based on an applicant’s failure to disclose the existence of co-pending applications, it should be difficult for an infringer to argue that a patentee committed McKesson inequitable conduct in the face of specific disclosure of such applications pursuant to 37 C.F.R. § 1.78(f)(2) (or some judicially-sanctioned equivalent).

Paradoxically, these disclosure requirements that so concerned members of the patent bar (and their clients) might be useful for reducing the backlog of unexamined patents.  In order to comply with the identification requirement, practitioners would need to know about the existence, content, and priority claims of all commonly owned applications or patents having an inventor in common with the application the practitioner is prosecuting.  This raised a burden under the now-enjoined new Rule 78(f) for practitioners who prosecute applications for larger assignees that employ the services of multiple outside counsel.  For each application, Outside Counsel A prosecuting a first application would need to know the identities of all other applications being prosecuted by Outside Counsels B through Z (and, of course, the converse).  This requirement to merely identify co-owned and co-pending applications is less burdensome in the absence of the more extensive analysis required to comply with now-enjoined new Rule 78(f)(2), but still could represent an administrative nightmare for a corporation such as IBM which has, according to its amicus brief filed in the consolidated Tafas v. Dudas and GSK v. Dudas case, 30,000 pending applications.

And this is where the convergence of the rule and the backlog might take place.  It is at least possible that a company like IBM would conclude that a portion of these pending applications are not sufficiently valuable to justify the administrative costs incurred by complying with the notification rule.  This does not imply that these applications were filed improperly or unnecessarily.  However, it is the case that some applications lose value over time, either because the inventions they protect have not had the expected or hoped-for commercial success, or because these inventions have been overtaken by "new and improved" embodiments (that are the subject of their own applications), or for other business reasons.  It is impossible to know the magnitude of this category of cases, but if it is as little as 10% of IBM’s pending  application, the backlog would be reduced by 3,000 applications from just this one applicant.  If this pattern were to apply across the spectrum of just the large companies, by this one administrative device alone the patent backlog could be reduced by 75,000 applications.  This is close to the number (11% of the backlog, or about 82,500 applications) that the Office has said contain more than 5 independent claims and 25 total claims, or more than the number of applications having more than 2 continuations.

There are several advantages to this approach.  First, small, high-tech start-up companies and other small entities (including universities) would be relatively unaffected by the rule, since these companies typically do not have 30,000 pending applications, and the burden of complying with the rules is reduced exponentially the fewer the number of pending applications an applicant has.  Second, it is voluntary.  Third, it does not negatively impact patent rights or the ability to apply for as many patents as an applicant may want.  Fourth, it is not merely an administrative device since it facilitates compliance with disclosure rules highlighted in the McKesson decision.  And lastly, by eliminating the rebuttable presumption portion of now-enjoined new Rule 78(f)(2), it imposes no requirement that an applicant provide statements on the prosecution history record that could be (mis)interpreted later by an infringer to be an admission useful to support an inequitable conduct or invalidity challenge.

It is certainly the case that implementation of this rule would impose some costs on applicants, particularly those with large portfolios of pending applications.  However, this aspect of the rule as a certain equitable attractiveness; although it is not the case that large portfolio applicants are "the problem" (as Patent Office sentiment would have it), these applicants are certainly part of the backlog burden.  Encouraging them to do what they can to help ease the backlog is not unreasonable.

For additional articles in the "Post-GSK" series, please see:

• "Increased Fees for Continuations," November 8, 2007
• "Regional Patent Offices," November 7, 2007
• "Tailoring Protection and Examination," November 6, 2007
• "Annuities," November 1, 2007

    By Kevin E. Noonan —

The following is part of a continuing series on how to address the
very real problems facing the U.S. Patent and Trademark Office.

A day after the day of rejoicing for inventors, patent practitioners,
examiners, and seemingly all of civilization, fair-minded people will
concede that the U.S. Patent and Trademark Office faces a daunting
task.  After years of neglect – from Congress raiding the users’ fees,
an inadequate number of examiners, technology-driven increases in the
number of applications filed, and a "count" system that has not
rewarded a style of examination that encourages prosecution to a
definitive end point – the Office is facing a massive backlog of
applications without sufficient resources to process them in a timely
manner.

If the patent bar is gladdened by District Court Judge Cacheris’
decision enjoining implementation of the new rules – representing an
attempt, albeit a misguided one, on the part of the Office to address
the pendency and backlog problems – it behooves us to propose
alternatives.  Patent Docs
will be posting a series of such proposals, and we invite our readers
to provide their own ideas.  As they used to say in the days of the
counterculture, "if you are not part of the solution, you are part of
the problem."  Patent Office management clearly thinks the patent bar
is part of the problem; it would be satisfying to prove them wrong.

Increased filing fees for continuation applications

Under the current fee regime, Patent Office filing fees can be broken down into fixed and variable, where the fixed fees are charged for every application but the variable fees are applicant-dependent.  For example, the fees for a utility application containing no more than 3 independent claims and 20 total claims is made up of the basic filing fee ($310.00, 37 C.F.R. § 1.16(a)(1)), a search fee ($510.00, § 1.16(k)), and an examination fee ($210.00, § 1.16(o)); all values are for large entities, and the basic filing fee is waived if the application is filed electronically.  Applicant-dependent fees include fees for filing more than 3 independent claims ($210.00 per claim, § 1.16(h)), total claims in excess of 20 ($50.00 per claim, § 1.16(i)) and a surcharge for filing multiply-dependent claims ($370.00, § 1.16(j)).  The Office also charges more for extra sheets of an application ($260.00 per 50 sheets in excess of 100 total; specification, claims, abstract and drawings), a fee reduced for applications filed electronically.

Several comments received at Patent Docs have suggested that one way of handling the backlog of unexamined applications would be to charge applicants a series of increasing fees for each additional continuation or request for continued examination (RCE) filed in an application.  Suggestions have included a 25% surcharge for the second continuation or RCE, a 50% surcharge for the third, a 100% surcharge for the fourth, etc.  Similarly, it has been suggested that claims in excess of 25 have an additional surcharge (some suggestions are as much as $200 per claim, and double that for claims in excess of 50).  The rationale is that these applications are the cause of the backlog and Patent Office burden, using (maybe even overusing if not actually abusing) Office resources that cannot be used for other (presumably more deserving) applicants, and that our capitalist system supports such a "pay-as-you-go" or "pay-for-play" approach.

The difficulty with these suggestions is that they fall into the same trap that caused (or at least encouraged) the ill-conceived Patent Office "new rules."  First, they blame the applicant for years of neglect, underfunding, and mismanagement at the Office.  Second, they are to be applied indiscriminately against applicants with inventions that legitimately require more than 25 claims to fully protect them.  And while they are frankly intended to influence behavior, brief consideration suggests that the behavior they produce will not solve the problem.  For applicants, burdensome excess claims fees will encourage multiple filings, on the same day, of the same application with claims directed towards different aspects of the invention (compositions, methods of making, methods of using, etc.).  It is unlikely that the problems in the Patent Office will be solved by encouraging more applications to be filed.  Examiner behavior will also be influenced; if an examiner "knows" that an invention isn’t patentable, but cannot craft an Office action that does not provoke an applicant to abandon the application or appeal the asserted rejection(s), the examiner will simply be able to continue to reject the claims until the cost of another RCE or continuation becomes too burdensome.  And the examiner will be increasing fees for the Office, a behavior unlikely to be discouraged by PTO management.  The experience of applicants in the biotechnology arts relating to restriction practice is indicative of the problem:  during the past 10 years it has not been uncommon for the Office to issue multiple (in excess of 10) restricted groups, with a view towards reducing examiner burden and increasing divisional application filings (having claims of more restricted scope).  Any policy that encourages examiners to "stick to their guns" with a negative consequence for applicants is no better than the new rules the Office promulgated on August 21st; they would put a premium on intransigence among those examiners who believe they "know something is unpatentable when they see it."  This result would also be expected to increase pendency times.

Any system of increasing fees would have to protect those applicants who can least afford excessive patent filing fees.  Exempting small entities is one possibility in this regard.  However, it is not clear that even large corporations (like GSK) would be able to continue to pursue their applications if the fees, and the time in prosecution, increased dramatically.  GSK’s strongest argument was that an applicant, any applicant large or small, has an expectation of fair and timely examination, and that this expectation (and any resulting patent) is the benefit obtained in exchange for full disclosure of the claimed invention.  One of the great weaknesses in the new rules was that they frustrated this reasonable expectation, and it would be unfortunate indeed if this frustration became a part of any proposal to address the real problems the Patent Office faces.

For additional articles in the "Post-GSK" series, please see:

• "Regional Patent Offices," November 7, 2007
• "Tailoring Protection and Examination," November 6, 2007
• "Annuities," November 1, 2007