Patent Expert Says Reform May Make Patents Harder to Obtain and More Suspect

Dec 2007BNA's Patent, Trademark & Copyright Journal, Vol. 75, No.1847 (Dec. 14, 2007), pp. 158-160.

Reproduced with permission from BNA's Patent, Trademark & Copyright Journal, Vol. 75, No. 1847, (Dec. 14, 2007), pp. 158-160. Copyright 2007 by The Bureau of National Affairs, Inc. (800-372-1033).

Patent Expert Says Reform May Make Patents Harder to Obtain and More Suspect

Stephen G. Kunin, former deputy commissioner of patent examination policy at the Patent and Trademark Office, now senior counsel with Oblon, Spivak, McClelland, Maier & Neustadt, Alexandria, Va., on Dec. 3 told a PTO Day audience that some of the proposed patent reform measures, if instituted, will have the unintended effect of potentially weakening the U.S. patent system. Taking an extensive look at how some of these changes would actually be implemented, Kunin said that there is the potential for a "new paradigm" that will result in patents being harder to obtain, more expensive, and easier to challenge.

A Closer Look at Reform

With more than 37 years of expertise in intellectual property rights protection and 24 years of organizational management and leadership experience, Kunin has a unique perspective on both PTO operations and the challenges facing the agency, patent applicants, and patent practitioners. He took the audience through a detailed look at some key provisions of H.R. 1908, which was passed by the House on Sept. 7, and S. 1145, which was reported out of the Senate Judiciary Committee on July 19. While S. 1145 has not been brought before the full Senate, Kunin said it is expected that some the Senate may take some action on the bill in January or February 2008. Kunin qualified his comments by noting that, assuming S. 1145 passes the Senate, many of the provisions may have to be reshaped through negotiations between House and Senate staff in conference committee. In his view, the reform changes, which purport to aim at increasing patent quality and making a more robust patent system, may actually have the combined effect of creating a system in which applicants are more uncertain about what scope of patent protection can be obtained while having to spend more money to obtain patents that may not withstand administrative challenges. First-Inventor-to-File Changes. As U.S. patent law currently provides an absolute "grace period" before the earliest U.S. application filing date, disclosures by the inventor or others within this grace period do not have a patent barring effect. Some foreign patent systems have an "absolute novelty" requirement such that any disclosures, including those by an inventor himself, made prior to the earliest date the application is filed, are considered prior art. • Kunin noted that abandoning the first to invent system would eliminate the local novelty provisions of Patent Act Sections 102(a) and (b), 35 U.S.C. §102(a) and (b). While there is currently a one year absolute grace period, the new law would create a one year personal grace period measured prior to the earliest filing date claimed by the application anywhere in the world, as opposed to being measured one year back from the earliest U.S. filing date, Kunin said. This change would "put U.S. law more in harmony with the Paris Convention," and it would also create opportunities for applicants around the world to take advantage of this personal grace period, he said. • Kunin also pointed out that the change will overrule In re Hilmer, Korger, Weyer, and Aumuller, 359 F.2d 859, 149 USPQ 480 (C.C.P.A. 1966), and void Section 102(e), which both limit the prior art effective date of U.S. patents and U.S. published patent applications to their effective filing date in the United States. Under the new law, the prior art effect of a published U.S. or Patent Cooperation Treaty application designating the U.S. or a U.S. patent will be as of the earliest foreign or domestic priority date, Kunin noted. He also pointed out that the new Section 102 would eliminate current Sections 102(c), (d), (f), and (g). • Kunin then noted that the new system would eliminate interferences in favor of derivation proceedings conducted at the Patent Trial and Appeals Board. Under these proceedings, where there are multiple applicants seeking the same invention, the person who is second to file but first to invent has an opportunity to obtain the patent if he or she can show that the person to file derived the invention from the second applicant. Kunin said that the new Section 102 provision seems to place no prohibition against derivation where there is derivation from someone who is not a patent applicant. For that reason, this feature is at odds with Section 101's requirement that patents be issued only to one who "invents or discovers any new and useful process, machine, manufacture, or composition of matter ...." • Kunin said that a change to a first-inventor-to-file system will definitely change the concept of prior art, making some prior art more available in some cases and less available in others. He also noted that the current loss of right provisions that discourage delays in filing in the U.S., contained in Sections 102(c) and 102(d), will be "significantly altered." Inventor's Oath/Assignee Filing. Both H.R. 1908 and S. 1145 propose adding more flexibility to the inventor's oath requirement. H.R. 1908 specifically provides that an assignee may apply for the patent. • Kunin said that this change should make it easier for an assignee to file patent applications when locating inventors is difficult or inventors refuse to sign the oath. Post-Grant Opposition. H.R. 1908 establishes a "first window" post-grant review proceeding in the first 12 months after the patent is granted or reissued, but it provides for no "second window." There is no presumption of patent validity, and the burden of proof is judged on the preponderance of the evidence standard. S. 1145 calls for a second window, but the petition must be filed within 12 months of notice alleging infringement and show that the continued existence of the challenged claim causes or is likely to cause "significant economic harm." If this second window is enacted, the presumption of validity and a clear and convincing evidence standard would apply. • Kunin said that post-grant proceedings would "create a sea change in practice" and create "new employment opportunities for interference attorneys and litigators" by allowing them to conduct administrative mini-trials at the PTO on patent validity issues. Such a change would put patent owners "at risk of losing patents or having them severely limited by amendment and intervening rights," Kunin cautioned. "The real concern is going to be whether the PTO is going to be able to keep up with the workload" if this proceeding becomes popular, Kunin said. Inter Partes Reexamination. H.R. 1908 expands inter partes reexamination in lieu of a second window in a post-grant proceeding, and it requires an administrative patent judge to hear petitions. However, S. 1145 repeals inter partes reexaminations entirely. • Reiterating his concern as to agency operations under a post-grant opposition regime, Kunin questioned how an already burdened PTO could handle the added workloads of both post-grant and inter partes reexamination proceedings. He also noted that inter partes reexamination may be expanded to include patents filed before Nov. 29, 1999, thus opening up the issue of patentability for a wide range of business method patents granted after the decision in State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F.3d 1368, 47 USPQ2d 1596 (Fed. Cir. 1998)(56 PTCJ 346, 7/30/98). Publication of Applications. S. 1145 requires publication for all pending patent applications at 18 months. However, for applicants who certify that they are not seeking protection abroad, H.R. 1908 requires publication at the later of 18 months or three months after the second Patent Office action. • The publication feature of H.R. 1908 would create a "significant problem for quality examination since the prior art would have a springing back effect of many years in high pendency art areas," Kunin argued. If one considers some of the art areas with the highest workload and longest pendency at the PTO, it is easy to see that the actual result might be an application being published 56 months after its filing date, which would be "absurd" and "disastrous" and in no way lead to better patent quality, Kunin insisted. Third Party Submission of Prior Art. Both H.R. 1908 and S. 1145 allow for third party prior art submissions after publication. • "In general, I think this is a good thing" because it offers an opportunity to help improve examination quality, Kunin said. Mandatory Search Reports. H.R. 1908 authorizes the PTO to require applicants to submit a search report and other information relevant to patentability--"Applicant Quality Submission" report. It provides an exemption for micro-entities. In S. 1145, the requirement is mandatory, not at the agency's discretion. • The result here could be Congress giving the PTO the authority to require an AQS in every application without regard to the number of claims submitted, Kunin said. Considering the 460,000 patent applications filed this year and the PTO's 2008 budget, the cost of these AQS reports to applicants would bulge to "three times the cost of the entire PTO budget," Kunin stressed. "This really creates an obstacle for applicants of all sizes to enter the patent system," he said, noting that applicants would have to shoulder this additional cost while being ever more doubtful of even receiving a patent. Not only would this additional obligation burden the cottage industry that currently performs validity searches, but the required characterizations of the prior art in an AQS it would also greatly increase the risk of patents being found unenforceable for inequitable conduct, Kunin added. Enhanced Rulemaking/Fee Setting. H.R. 1908 would authorize the PTO to promulgate substantive rules, including limitations on continuation applications. It also provides for additional congressional review when such rules are published. S. 1145 provides only fee setting authority for the agency. • Kunin noted that the fee setting provision could be good in allowing the agency to lower fees to prevent fee diversions. At the same time, he noted, the PTO could raise fees if revenue collections fall below levels for projected operational costs. • In Kunin's view, substantive rulemaking could represent a major power shift. He said that the guidelines the agency currently publishes, such as those promulgated on Section 103 obviousness following the Supreme Court's ruling in KSR International Co. v. Teleflex Inc., 127 S. Ct. 1727, 82 USPQ2d 1385 (74 PTCJ 5, 5/4/07), only apply as guidance in practice and procedure. The introduction to all of these guidelines clarifies that 'these guidelines do not have the effect and force of law,' Kunin said. However, "if the PTO has substantial rulemaking authority, all of those guidelines could be fashioned as substantive rules. So, the PTO can tell you what [Section] 101 means, ... what [Section] 102 means, ... what [Section] 103 means." This change would open the door to "rulemaking that goes way beyond what we've seen," even the final rules published Aug. 21, 2007 (74 PTCJ 527, 8/31/07 ), he said. Those rules were to take effect Nov. 1, but a Virginia federal district court enjoined their enforcement (75 PTCJ 32, 11/9/07 ).

'A New Paradigm.'

For Kunin, the "bottom line" of all of these proposed reforms is the potential that "a new paradigm will emerge." With this "new panoply of changes" occurring all at one time, the ultimate result in many instances will be that patents will be harder to obtain and easier to challenge, Kunin concluded. They will also be much more costly, he added. By Eric Yeager