Pardon Our Dust: US Patent Law Under Renovation

May 2001 – Article
Managing Intellectual Property, Issue 109, page 23

Pardon our dust: US patent law under renovation

Recent changes to patent law and PTO prosecution in the US make prosecution
a much more complex matter. Gregory J Maier and Philippe Signore
take a close look at the reforms.

© 2001 Oblon, Spivak, McClelland, Maier & Neustadt, PC in Arlington, VA.
Gregory J Maier is a managing partner and Philippe Signore is a patent agent with the firm. The opinions expressed in this article are those of the authors and do not represent those of Oblon, Spivak, McClelland, Maier & Neustadt, PC.

Intellectual property is a world commodity which ideally should be governed by uniform law throughout the world. Thus, it should be no surprise that harmonization of US and world patent law has long been the Holy Grail sought by all major US intellectual property law organizations. The goal of patent law harmonization was the principle motivation for the American Inventors Protection Act of 1999 (hereafter the Act), the most comprehensive revision of US patent law since it was last codified in 1952. Unfortunately for patent practitioners, during the five year period in which the US Congress struggled with the Act, patent law became a political issue for the first time, and the direct road to harmonization evolved into a twisting trail of political compromise. The Act, and the rules crafted by the USPTO to implement its provisions, have created a patent practice that is far more complex than could have been imagined a few years ago. The Act adds numerous new provisions such as the publication of pending patent applications, inter-partes re-examinations, patent term guarantees, and a new prior use defence.

In addition, the Court of Appeals for the Federal Circuit (CAFC), has recently rendered landmark decisions that have changed the face of patent law in ways that impact everything from application drafting through court enforcement of patents. The now famous State Street Bankdecision (State St Bank & Trust Co v Signature Fin Group, Inc, 149 F3d 1368, 47 USPQ2d 1596 (Fed Cir 1998), cert denied, 119 S Ct 851 (1999)) by the US Court of Appeals for the Federal Circuit (CAFC) triggered an explosion of business method patent applications being filed. Last November, the Festo decision (Festo Corp v Shoketsu Kinsoku Kogyo Kabushiki Co, 234 F3d 558, 56 USPQ2d 1865, (Fed Cir 2000) (en banc)) created stringent rules significantly affecting the application of the doctrine of equivalents.

In view of these many developments of unprecedented importance, it is essential that those wishing to understand US practice now take a close look at the fully renovated US law. Whether or not we have moved closer to the Holy Grail of harmonization is a matter that will be left to the thoughtful consideration of the readers.

Publication of pending US applications
Mechanics of publication

Prior to the new laws, pending US applications were generally "kept in confidence" by the USPTO until the application issued. Today, the USPTO publishes pending US applications 18 months after their earliest claimed priority date, thereby matching European, Japanese and PCT publication practices. Five categories of applications are not published:

(1) Abandoned applications. The USPTO warns applicants who seek to abandon an application for the purpose of avoiding publication that [t]he Office simply cannot ensure that it can remove an application from publication or avoid publication of application information any time after the publication process for the application is initiated. The USPTO recommends requesting an express abandonment at least four weeks prior to the projected date of publication.

(2) Applications subject to a secrecy order.

(3) Provisional applications.

(4) Design patent applications.

(5) Most importantly, applications not filed abroad and requested not to be published.

The USPTO publishes patent applications every Thursday (patents are issued every Tuesday) by placing both image and text-searchable versions on its web site. The publication includes a front page containing information similar to that contained on the front page of a patent, the drawings, the specification and the claims. The publication does not include any amendments, including preliminary amendments, unless the applicant supplies a copy of the application containing the amendment in compliance with the USPTO's new electronic filing system (EFS) requirements.

The new EFS is an electronic submission procedure available to applicants (or their representatives), which involves (1) obtaining a digital certificate from the USPTO to enable secure communication between applicants and the USPTO; (2) obtaining specific EFS software from the USPTO; (3) converting the patent application into a specialized format; and (4) assembling the parts of the application, validating, digitally signing, and submitting the application. Applicants and their representatives can sign up for the EFS programme and receive a package that includes the digital certificate and the necessary tools to complete the electronic submission. (More information on EFS is available on the USPTO's website.)

Applicants must also use EFS to (1) voluntarily publish an application filed prior to November 29 2000; (2) re-published an application, for example because it was amended; and (3) publish only a redacted copy of an application. Under Rule 1.217, an applicant, whose foreign application is less extensive than the US application, may request that the USPTO only publish a redacted version of the application, eliminating any part or description of the invention that is not also contained in the corresponding foreign application.

Under the new laws, an applicant may request a publication before 18 months. Alternatively, an applicant may request not to publish, but only if the applicant certifies upon filing that the invention disclosed in the application has not and will not be the subject of an application filed in another country, or a PCT application, that requires publication of applications 18 months after filing. Upon subsequently filing a PCT application, or a foreign application, which requires publication of applications 18 months after filing, the applicant will have 45 days to notify the USPTO of such subsequent filing. A failure of the applicant to provide such notice will result in the application being regarded as abandoned, unless the delay can be shown to be unintentional.

Effects on the public

In addition to publishing pending US applications, the USPTO permits any member of the public to obtain (for a fee) a copy of the complete file wrapper and contents thereof, or a copy of a specific paper in, any published application. The USPTO also permits any member of the public to physically inspect the file of any abandoned published application.

In order to prevent a slowing down of issuance of applications due to their publications, the new laws forbid protests or oppositions to the grant of a patent on an application after publication. Prior to the Act, a member of the public could file a public protest under Rule 1.291, which is permitted to present relevant patents, publications, or other information and a concise explanation of the relevance of each item listed. A protest under Rule 1.291 therefore permits a member of the public to provide arguments for rejecting the pending claims of the application. However, because applications were kept in confidence, public protests under Rule 1.291 were usually filed in applications involved in an interference and in reissue applications which are open to the public. Under the Act, it appears that protests under Rule 1.291 are still permitted, but only if filed before the publication of an application. The number of protests under this rule is thus not expected to increase as a result of the new publication provisions.

On the other hand, under new Rule 1.99, a member of the public may submit a request (for a fee) for up to 10 patents or publications (in English or with an English translation) relevant to a pending published application within two months of the application publication. Such submission will be served upon the applicant, but cannot include any explanation of the patents or publication, or any other information, such as non-patentability arguments. Any explanation or information will be disposed of by the USPTO.

A submission under Rule 1.99 may thus provide a quick and inexpensive way to inform an examiner of relevant prior art before a patent issues. However, persons submitting references under Rule 1.99 should carefully consider the effect of not being allowed to argue the relevance of the references. In the event that the applicant is successful at convincing the examiner that the claims are allowable over the references, a request for a re-examination of the patent based on these references would probably be denied, and the presumption of validity of the claims with respect to these references would probably be strong.

The publication of US pending patent applications has at least four effects:

(1) English translations of foreign applications being prosecuted in the US are available to the public sooner.

(2) Published US applications are prior art under 35 USC 102(e), which is easily searchable by USPTO examiners.

(3) Published US applications facilitate USPTO examiners' interference searches.

(4) Published US applications put inventors and assignees on notice of another's application containing interfering claims.

The last two effects should combine to increase the number of interferences declared in the USPTO.

Provisional rights

Prior to the Act, a US patentee could only be compensated for the infringement of his claimed invention by damages calculated back to the issue date of the patent. However, the new laws now provide "provisional rights" to a reasonable royalty from any person who makes, uses, offers to sell, sells, or imports in the United States the invention as claimed in the published application (either US national or PCT application), during the period beginning on the date of publication of the application and ending on the date the patent is issued.

The new provisional rights statute imposes a number of requirements that must be met in order for the patentee to be entitled to the reasonable royalty. Unfortunately, the wording of these requirements raises several questions that must await clarification from the courts. More specifically, the accused infringer must have had "actual notice" of the published patent application. It is unclear whether actual notice means a simple notice of publication, or whether the notice must also include an identification of the alleged infringing products, with an explanation of how these products read on the published claims. The expression actual notice is already used in the context of limitation on damages, where damages for unmarked products are calculated back to the date the infringer was given actual notice. The CAFC has interpreted actual notice in this context as requiring that the recipient is informed [by the patentee] of the identity of the patent and the activity that is believed to be an infringement, accompanied by a proposal to abate the infringement, whether by licence or otherwise" (SRI International Inc v Advanced Technological, 127 F3d 1462, 1470, 44 USPQ2d 1422, 1428 (Fed Cir 1997)). It is therefore likely that the actual notice for provisional rights be interpreted as including similar requirements.

Furthermore, when a PCT application, filed in a language other than English, is the basis for the provisional rights, the new laws require that the accused infringer must have had an English translation of the PCT application. However, the new laws do not specify whether the period of royalties depends on the date at which the alleged infringer has the translation, nor whether the translation must be supplied by the patentee.

In addition, the invention as claimed in the patent must be "substantially identical" to the invention as claimed in the published patent application. Based on the legislative history of the Act, the criteria used to determine whether claims are substantially identical should be the same as those used in determining whether reissued, or re-examined, claims are substantially identical to originally issued claims when addressing the question of intervening right. (An accused infringer may be entitled to intervening rights that limit the patentee's right to exclude others from performing certain activities that did not infringe the original claims, but that do infringe the reissued, or re-examined claims.)

Specifically, the CAFC has held that "[t]o determine whether a claim change is substantive it is necessary to analyze the claims of the original and the re-examined patents in light of the particular facts, including the prior art, the prosecution history, other claims, and any other pertinent information" (Laitram Corp v NEC Corp, 952 F2d 1357, 1362-3, 21 USPQ2d 1276, 1280 (Fed Cir 1991)). In general, a claim change made in order to clarify the claim is less likely to be held substantial compared to a change made in order to overcome a rejection based on prior art. However, there is no per se rule and the courts perform a case by case analysis of what constitutes a substantial change.

Because provisional rights will be lost if the claims are substantially amended between the publication of the application and the issuance of the patent, applicants should consider either (1) filing claims already complying with US claim drafting practice and having a wide range of scope, or (2) requesting a re-publication of the application every time the claims are substantially amended. In particular, foreign applicants who file translations of foreign applications should consider revising their claims according to US claim drafting practice before filing in the USPTO so as to avoid having to re-publish the application. By waiting until prosecution is started to revise the claims, applicants take a chance that a court will later find the issued claims substantially different from the published claims. More importantly, a claim revision prior to filing may avoid losing the scope of equivalents due to prosecution history estoppel under the new rules created by the Festo decision (discussed below).

The new provisional rights provision may motivate certain applicants to publish as soon as possible, before the 18 month date of the earliest filing date, as provided by the new laws. For example, it may be beneficial to file a request to publish at the earliest possible time for rapidly evolving technology. When an invention would become popular upon disclosure but obsolete shortly after a patent issues, it may be beneficial to publish early so as to potentially increase the amount of royalty to which the patent holder is entitled.

Claiming priority

Prior to the publication of US patent applications, claiming priority to a corresponding foreign application could be performed at any time during pendency of the application. However, under the new laws, since the priority date must be known in advance for the date of publication to be set, the USPTO now requires that the claim for priority must be presented within four months from the actual filing date or 16 months from the filing date of the prior foreign application, whichever comes last. This time period is not extendable. The new rules also state that if the claim of priority is not presented during this period, the claim of priority is waived. However, the USPTO rules provide that if the claim for priority is presented after the above period, a claim of foreign priority may be accepted if the delay was unintentional and if presented with a surcharge and a petition stating that the delay was unintentional. The USPTO may require additional information supporting the unintentionality of the delay. In order to avoid any waiver of the right to claim foreign priority, priority should preferably be claimed upon filing the application in the USPTO. Similar timing requirements apply to claiming priority to provisional applications, regular US applications, and PCT applications.

The USPTO's new rules still require that a certified copy of the original foreign application be filed before the patent is granted. With respect to English translations, the USPTO's new rules leave unchanged the prior practice of not requiring an English language translation of a non- English language foreign priority document except (1) when the application is involved in an interference, (2) when necessary to overcome the date of a reference relied upon by the examiner, or (3) when specifically required by the examiner.

Changes to the definitions of prior art
Changes to 35 USC 102(e)

The new laws amended 35 USC 102(e) to provide prior art effect both to published US applications (35 USC 102(e)(1)) and US patents (35 USC 102(e)(2)).

Before further discussing the new 35 USC 102(e), the reader should keep in mind that a first version of amended 35 USC 102(e) was signed into law with the Act on November 29 1999. However, because various USPTO officials and members of the patent bar complained that the first version was flawed and unworkable, a second version is being considered by the Congress. Today, members of the patent bar are complaining about the second version, so that it is possible that a third version will be passed. However, it is believed that the gist of the section was settled with the second version, even though some details may still need to be ironed out. This article thus limits itself to what is believed to be the gist of new 35 USC 102(e).

New 35 USC 102(e)(1) defines the effective date as prior art (the "102(e) date") of a published US application as the earliest US filing date, except for published PCT applications which are discussed in detail below.

New 35 USC 102(e)(2) does not change the 102(e) date of a patent issued from a regular (non- PCT) US application. In other words, the effective date as prior art for a US patent issued from a regular US application is still the earliest US filing date. However, this may not be true for US patents issued from PCT applications, as discussed next.

102(e) Date of published PCT applications

New 35 USC 102(e)(1) provides that the US publication of a PCT application that was published in the English language under PCT Article 21(2) is assigned a 102(e) date as of the PCT application's filing date. This is a significant change, which permits US and foreign PCT applicants (filing PCT applications in English) to benefit from their early PCT filing dates for purposes of establishing effective US prior art.

However, the new 35 USC 102(e)(1) appears to preclude assignment of a 102(e) date to a US publication of a PCT application published in a non-English language. Of course, the non- English publication of the PCT application will still be 35 USC 102(a) and (b) prior art as of the PCT publication date. However, the PCT publication date is always later than the PCT application's filing date. Furthermore, the document being in a non-English language might not be properly considered by a US examiner examining another's patent application. Therefore, it appears to be beneficial under the new law, for the purposes of establishing effective US prior art, to file all PCT applications in English so as to obtain an early 102(e) date.

Date of patents issued from PCT applications

New 35 USC 102(e)(2) provides that a US patent granted on a PCT application that was published in the English language under PCT Article 21(2) is assigned a 102(e) date as of the PCT application's filing date. Again, this change permits US and foreign PCT applicants (filing PCT applications in English) to benefit from their early PCT filing dates for purposes of establishing effective US prior art.

However, new 35 USC 102(e)(2) appears to preclude assignment of a 102(e) date to a US patent granted on a PCT application published in a non-English language.

Unresolved issues

An applicant can by-pass the US national stage by filing a by-pass application, which is a regular (filed under 35 USC 111(a)) continuation application filed in the US claiming domestic priority (under 35 USC 120) to a PCT application. In other words, a by-pass application is not a PCT application in the US national stage. Therefore, a patent granted on a by-pass application is technically not a patent granted on a PCT application. Under the new 35 USC 102(e), a patent issued from, or the publication of, a by-pass application should thus be assigned a 102(e) date as of the US filing date of the by-pass application.

However, the USPTO has struggled in the past with the issue of assigning a 102(e) date to by- pass applications. In an earlier version (July 1998) of the MPEP, the USPTO assigned the international filing date as the 102(e) date of a by-pass application. However, in the latest version (February 2000), the USPTO assigned the US filing date of the by-pass application as the 102(e) date. It is therefore unpredictable how the USPTO will handle the 102(e) date of by-pass applications under the new statute at this time. In any event, the ultimate decision as to the correct 102(e) assignment of by-pass applications will be in the hands of the CAFC, or the US Supreme Court.

Changes to 35 USC 103(c)

The amendment of 35 USC 103(c) is significant. The new 35 USC 103(c) explicitly excludes obvious variations of 35 USC 102(e) prior art for purposes of obviousness determinations, when the 35 USC 102(e) prior art is owned by, or under an obligation to be assigned to, the same person as the claimed invention. In other words, claims of an application may no longer be rejected as being obvious over a 35 USC 102(e) reference assigned to the same person/company to which the application is assigned. New 35 USC 103(c) should favour large companies and research teams that often see their own patents applied as prior art against their pending applications. It is important to keep in mind that commonly assigned/owned 35 USC 102(e) prior art still applies for lack of novelty purposes, ie for rejections under 35 USC 102(e).

The new 35 USC 103(c) provision applies to any application filed on or after November 29 1999. Consequently, it may be advantageous to re-file pending applications that were filed prior to that date, eg, by filing a Continued Prosecution Application (CPA), so as to benefit from new 35 USC 103(c). If a patent has already issued, but a descendant application is still pending, a new continuation application may be filed with slightly different claims to avoid a 35 USC 101 (same invention type) double patenting rejection. An obviousness type double patenting rejection may apply, however such a rejection can easily be overcome by filing a terminal disclaimer.) The new continuation application will benefit from the new law and the patent issued from the continuation should be safe from an invalidity finding based on an obviousness argument relying on commonly owned/assigned 102(e) prior art.

Before re-filing an application, one should always take into consideration the patent term, which may be significantly affected by the re-filing. For example, if the application was filed before June 8 1995, filing a CPA would set the end of the patent term 20 years from the earliest US priority filing date, instead of 17 years from issue.

Optional inter partes re-examinations

A re-examination is a procedure in the USPTO requested either by a patent owner, a third party or the USPTO, that provides for the re-examination of an issued patent. Re-examinations are reserved for cases where one or more patents or printed publications raise a substantial new question of patentability. In other words, only new issues of novelty under 35 USC 102 and obviousness under 35 USC 103, raised by prior art patents and publications, may be re-examined in a re-examination. A request for re-examination is not granted to resolve issues not raised by printed references, for example on sale or public use bars, inequitable conduct, or typographical errors in the patent.

For example, a patent owner can request a re-examination when he/she becomes aware of a prior art printed reference, not considered during the prosecution of the patent and that raises a substantial new question of patentability of the claims. Before launching into an expensive litigation against an infringer with patent claims potentially invalid by the newly-discovered reference, the patent owner decides to let the USPTO re-examine the claims and hopefully issue a certificate confirming patentability. A patent that successfully survives a re-examination can carry an increased presumption of validity during litigation because the examiners of the USPTO, experts in the field, determined that the claims were patentable, despite consideration of the new prior art.

On the other hand, a third party may also be interested in having a patent re-examined based on a newly discovered prior art reference. Again, the idea is that resolving issues through a re- examination procedure costs a lot less than resolving them through litigation. Furthermore, if the argument for invalidity based on the new reference is rather technical, then it may be better to have the technically trained examiners of the USPTO review the case, instead of a judge or jury.

Prior to the new laws, however, third parties were effectively discouraged from filing re- examinations because the re-examinations were conducted ex parte, ie the third party is excluded from the procedure taking place between the USPTO and the patentee. After the initial request for re-examination, the third party in an ex parte re-examination has almost no opportunity to reply to the patentee's arguments in support of patentability of his/her claims in view of the new printed reference.

The new laws give the third party requester the option to either request an ex parte re- examination or request an inter partes re-examination in which the third party can participate in the re-examination procedure. Like ex parte re-examinations, inter partes re-examinations are limited to cases where one or more patents or printed publications raise a substantial new question of patentability. This new procedure was added to reduce the amount of litigation in the US courts and to make the re-examination procedure a more viable alternative to litigation. The new procedure also brings US law a step closer to European patent practice, as inter-partes re- examination resembles the European opposition procedure, although with some important differences, as discussed next.

Third party participation

Any person can file a request for inter partes re-examination. Inter partes re-examinations are only available for patents issued on original (non-reissue) applications filed on or after November 29 1999. In an inter partes re-examination, the third-party requester stays informed of the status of the procedure. Indeed, the patentee and the third party requestor must serve a copy on the other party of every paper each files in the re-examination. Furthermore, the USPTO must send a copy of every communication with the patentee to the third party requestor. The third- party's participation is increased because for each response filed by the patent owner, the third- party requester has one opportunity to file written comments addressing issues raised by the office action or the patent owner's response thereto. However, the third party requester must file the written comments within 30 days. In other words, the third party requester must be ready to respond quickly to the patent owner's arguments and amendments. Before filing the request, the third party should therefore try to anticipate the patent owner's future response and prepare any evidence, such as a technical expert's affidavit, or at least brief the expert so that he may draft an affidavit within a short time.

The USPTO has indicated that the re-examination will be assigned to an examiner other than the one involved in the examination and issuance of the patent undergoing re-examination. This policy was adopted in order to eliminate public perception of bias by the original examiner who handled the patent. No interviews on the merits of the proceedings are available in an inter partes re-examination. This rule was adopted in order to simplify and expedite the inter partes re- examination proceedings. As noted by the USPTO, inter partes interviews would be difficult to arrange, control, conduct, and record.

Contrary to the situation in ex parte re-examinations, the third party requester in an inter partes re-examination has the option of appealing the case to the Board of Patent Appeals and Interferences. However, the third party requester may not appeal the Board's decision. On the other hand, the patentee may appeal the Examiner's decision to the Board and the Board's decision to the CAFC. If the patentee appeals to the Board, the third party requester may participate in the appeal. However, if the patentee appeals to the CAFC, the new laws do not permit the third party to participate.

Patent term guarantees

The Act provides for a number of patent term guarantees by providing patent terms extensions to make up for delays created by the USPTO. For patents filed on or after May 29 2000, the new laws provide three patent terms guarantees: (1) the prompt response guarantee, (2) the guarantee of no more than a three year pendency of patent applications, and (3) the guarantee of adjustment for delays resulting from interferences, secrecy orders and successful appellate review.

(1) The prompt response provision guarantees the following:

(a) The USPTO will mail a rejection, objection, restriction or an allowance within 14 months from the US filing date, ie the filing date under 111(a) or the date of entry in the US national stage.

(b) The USPTO will respond to an applicant's reply to an office action within four months.

(c) The USPTO will act within four months after a decision from the Board or from a federal court in cases in which allowable claims remain in the application.

(d) The USPTO will issue a patent within four months of the date on which the issue fee was paid.

(2) The three year pendency provision guarantees that the issuance of an original patent (ie not a reissue patent) will not be delayed more than three years from the actual filing in the United States. However, time consumed by a continued examination of the application will not be included in the three year calculation. (The new rules provide for a new Request for Continued Examination (RCE) that is intended to replace Continued Prosecution Applications (CPA) as of May 29 2000, except for applications filed before that date, for which both options are available). Furthermore, the three year calculation does not include<