Archive for June, 2009

Congress Attempts to Aid PTO in its Budget Crisis

June 25, 2009

uspto_sealThe National Journal and Reuters are reporting that Sens. Patrick Leahy (D-VT) and Jeff Sessions (R-AL) have introduced a bill to permit the PTO to use the $60-70 million surplus of funds on the trademark side of the office in an effort to alleviate the budget crisis on the patent side.  By statute, the PTO has to keep its operations and revenue separate for patent and trademark  activities.  While the trademark side of the PTO is operating at a budget surplus, the patent side is facing a financial disaster due to decreased filings.

Commerce Department and PTO officials have been making their rounds on Capitol Hill in an effort to get assistance from Congress.  The PTO has slashed $120 million from its budget by curbing hiring and has recently cut examiner overtime pay.  Jay Reich, deputy chief of staff of the Commerce Department, reports that the PTO is cutting everything from its budget that it can.  A move that it is trying to avoid is placing examiners on unpaid furloughs.

Unfortunately, this measure may only be a band-aid.  The PTO’s budget woes could get worse before they get better.


Bilski and Beyond: Changing IP for the Information Age

June 24, 2009

I attended a CLE meeting of the Virginia State Bar Intellectual Property Section last week.  The speakers were Prof. Kristen Osenga of the University of Richmond Law School and Denise Defranco of Finnegan Henderson.

The speakers presented a short paper (written prior to the Supreme Court’s grant of cert.) and an associated Powerpoint presentation.  Prof. Osenga has granted me permission to publish the paper and slides here if you are interested.

One of the most notable intellectual property cases from this past year is the Federal Circuit’s opinion in In re Bilski.[1] In the decision, the court called into question the patent eligibility of business methods (and potentially software) by imposing the “machine or transformation test,” discussed in detail below.   The ruling, however, could have implications that reach far beyond the business method and software arenas.   Certainly, in all fields of business and information technology, these types of inventions are key components of everyday activity.  But other areas, such as financial services and biotechnology, make extensive use of methods for manipulating data which may also fall under the business method umbrella.  Love it or hate it, the Bilski decision has the potential to drastically reshape patent law.

[1] 545 F.3d 943 (Fed. Cir. 2008).

Continue reading the paper here; view the Powerpoint presentation here.

PPAC Meeting Summary

June 24, 2009

The 271 Patent Blog has a good summary of the recent Patent Public Advisory Committee (PPAC) meeting at the PTO.  Recall that PPAC was created to advise the Director of the PTO on management of patent operations in the Office.

Several notable items were discussed:

The PTO is experiencing a 7% decrease in patent filings that has resulted in a $140 million budget shortfall.  A portion of this amount ($110 million) has been cut from the budget by the hiring freeze.

The optimism earlier this year about Patent Reform legislation is dwindling and prospects for passage appear unlikely in this session of Congress.

Marc Adler, Acting Deputy Director for Patent Examination Policy, and Peggy Focarino, Acting Commissioner for Patents, discussed a number of issues as well.

There was a great deal of discussion of improving patent quality.  First, the PTO realizes that patent quality needs to be defined to include application quality, search and examination quality, and prosecution quality.  Compliance with § 112’s written description and enablement requirements is a key to improving quality.

Examiners need additional training on how to conduct interviews with applicants to advance prosecution.  Examiners need to work to reduce the number of unnecessary continuing applications by not issuing premature final rejections.  The current system that provides incentives to examiners for continuing applications needs to be revised to instead provide examiners with disincentives for continuation filings.  Finally, examiners need training on how to shorten prosecution by issuing high quality initial Office Actions.

These sound like great initiatives by the PTO.  I and others have argued that better enforcement of § 112 (and §§ 102 and 103) would render decisions like Bilski unnecessary.  Further, I have seen way too many second and subsequent non-final Office Actions where the examiner simply does a new search and finds new prior art after the first Office Action.  This creates unnecessary delay in prosecution and increases the cost for applicants to continue to respond to these Office Actions.  The initial Office Action should include all pertinent rejections up front.  Finally, incentivizing examiners by giving additional “counts” for continuations and RCEs is in direct contradiction to the PTO’s attempts to reduce or get rid of these filings with the new rules.

David Kappos Nominated to Direct PTO

June 22, 2009

kapposAs has been widely reported, President Obama has finally announced the nomination of David Kappos, vice president and assistant general counsel of IBM, to be the next Director of the PTO. 

The nomination comes as no surprise, as Kappos has been thought to be the nominee for some time, especially once James Pooley was selected for a leadership role at WIPO.  I reviewed his biography in a previous post on the potential nominees.

I believe that this nomination is a good choice to fix the PTO that, quite frankly, is in dire need of leadership with management experience and strong knowledge of patents and patent law and their implications on the business world.  There are a couple of areas in Kappos’ record, however, that are concerning.

Kappos is strongly against business method patents.  IBM filed an amicus brief in Bilski where it argued in favor of the Federal Circuit’s new machine-or-transformation test.  While the patentability of such methods is left for the Supreme Court to decide, the newly appointed director of the PTO could have a strong influence on developing policy against such patents, especially if Congress gets involved with them legislatively.

Kappos is also a strong proponent of the peer-to-patent experiment where competitors and the public can submit prior art to patent examiners on pending patent applications.  While this program sounds good in theory, in reality the participation in the program has been low.  There is not a strong incentive for companies or individuals to spend a lot of time researching prior art for pending applications, given the uncertain nature and outcome of the examination and litigation processes.

On patent reform issues, Kappos is generally in favor of reforms that improve patent quality, but not in favor of those that reduce patent protection.  Thus, Kappos favors enhanced post-grant opposition and inter partes reexamination provisions, while being opposed to initiatives restricting damage awards for infringement.  The post-grant review procedures could be problematic for the PTO unless it is given a significant increase in resources to deal with it.

Reaction to Kappos’ nomination has been generally positive.  Patent reform rivals, the Biotechnology Industry Organization (BIO) and the Coalition for Patent Fairness (CPF), both issued statements supporting the nomination.  The BIO statement called the nomination a “strong choice,” while CPF “applauds” the choice.

The nomination must next be confirmed by the Senate.  It is not known when the Senate will conduct hearings on the nomination.  While the position of Director of the PTO is certainly less contentious than that of Supreme Court justice, given the schedule for Judge Sotomayor’s confirmation hearings and the Senate’s August recess, it is unclear when Kappos will be confirmed.  The sooner, the better to be sure.

Update: Debate on Gene Patenting Continues

June 17, 2009

As an update to my post on the ACLU suit challenging the patenting of genes, Kevin Noonan of Patent Docs has a great post from yesterday that discusses how the debate has gone from patent law circles to the mainstream.

He contends, and I agree with him, that most of the anti-patenting arguments in the debate are based on a misunderstanding and outright mischaracterization of the law and science surrouding the issues.  He references editorials in the New York Times on the issue as well as debates on NPR and adequately addresses most of the arguments against gene patenting.  There is a fairly extensive debate in the comments to the post between Dr. Noonan and Professor David Koepsell that is worth checking out.

Today, Patent Docs has a post referencing an editorial in USA Today written by Jim Greenwood, President and CEO of the Biotechnology Industrial Organization (BIO) that the isolation and purification of genes has led and is leading to many new therapies, vaccines, drugs, and other innovations in the health care and pharmaceutical field.

I would suggest that as long as the other sections of the Patent Act that preclude patents whose claims are not novel, non-obvious, or adequately disclosed and enabled, there is really no need to have a particular prohibition on a particular category of subject matter per se.  This applies equally to genes, software, and business methods.

Looming Crisis at BPAI

June 16, 2009

Last week, Patently-O reported on another crisis looming at the PTO. 

Appeals Backlog Increasing Dramatically

There are now nearly 11,000 pending appeals at the Board of Patent Appeals and Interferences (BPAI).  The BPAI is doing a reasonable job by disposing of 523 appeals during the month of May and nearly 4,000 so far in the current fiscal year.  In that same month of May, however, over 1,600 new appeals were filed with nearly new 11,000 appeals filed during the current fiscal year.  At the end of FY2008, there were fewer than 4,000 pending appeals.  The rate of appeals being filed is nearly 3 times the rate of BPAI disposal.  The data from the BPAI are here.

Although completely unsurprising, the increase in appeal filings is putting the BPAI in an impossible situation.  It wasn’t too many years ago that appeals at the BPAI took 3+ years between the filing of the brief and a decision.  This discouraged the filing of appeals and gave examiners greater power knowing that it was unlikely their decisions would be appealed.  The BPAI did a great job of reducing its backload in recent years by issuing many decisions in less than a year.  Now, however, it appears we are headed back to the days of 3+ years pendency.  Presumably, the number of appeals filed will decline again when this starts to happen.

Recently, in an effort to get the judges to focus on efficient dispoal of appeals, the BPAI has been trying to reduce the number of dissenting and concurring opinions written by the judges and to reduce the number of remands back to the examiners.  The BPAI has also been pushing for controversial new rules that would make it more onerous to file an appeal brief.  Ostensibly, these changes are being done to increase efficiency.

What can or should the BPAI do?

One important step would be to increase the quality of examination by PTO examiners.  Often, applicants will appeal cases where they believe the examiner is being unreasonable and not considering all of their arguments.  It may be that the new KSR obviousness standard has examiners feeling more empowered to make rejections and applicants feeling more like their arguments are not being fully and carefully considered.

The PTO needs to give examiners sufficient time to consider arguments made by applicants during prosecution by eliminating the “count” system and replacing it with a system that more accurately reflects the effort required for conducting a proper examination.  While beyond the scope of this post, this is an area where the PTO could significantly affect examination and operation.

Attempting to reduce or eliminate the number of RCEs and continuation applications filed will definitely not decrease the number of appeals filed.  Any new rules to that effect would have the opposite result.  So, the second recommendation would be to stop screwing around with the examination and appeal rules.

More on BPAI Statistics

It is also interesting to note that the BPAI is affirming the examiner’s rejections 55% of the time, affirming some and reversing some of the rejections 13.6% of the time, and reversing the examiner’s rejections 23% of the time (the remaining cases are remanded or dismissed for various reasons).

Guest Post at

June 11, 2009

I have published a short article on a false patent marking lawsuit at, a news site.  You can read my post here.

Entire Federal Circuit Hears Argument on Whether 271(f) Applies to Method Claims

June 4, 2009

On Friday, the Federal Circuit heard argument in Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc. I reviewed the issues in this case in an earlier post.  Basically, the Federal Circuit will decide whether § 271(f) applies to method claims.  BNA (subscription service) has reported on the argument.

A major part of the argument was whether methods can have “components” as recited in § 271(f).  St. Jude argued that indeed, methods have components.  The components of methods are steps or acts, not devices, apparatus, machines, or material.  Not surprisingly, Cardiac Pacemakers argued that components refers to any statutory category under § 101 of the Patent Act.  Cardiac also tried to distinguish the Supreme Court’s Microsoft decision by arguing that the master disk in that case was not a “component” of the claimed method, but only a blueprint.  The component was the computer program.

The other major part of the argument was the extra-territorial effect of the US patent laws.  St. Jude argued that the Supreme Court had called the issue of § 271(f)’s effect a close question, but erred on the side of not extending the extra-territorial effect of the US patent laws.  Cardiac Pacemakers argued that Congress enacted § 271(f) to close a loop-hole in US patent law that allowed an infringer to perform most of the infringement in the US and complete infringement overseas without liability.

The tone of the questions seems to indicate that the court is ready to overturn Union Carbide and hold that § 271(f) does not apply to method claims.  A decision by the court should come later this year.

GSK’s Petition for Rehearing in Tafas v. Doll

June 4, 2009

As an update to my earlier post, GSK has also filed a petition for rehearing en banc.  Thanks to Hal Wegner for supplying this.

In its brief, GSK argues that the panel’s decision conflicts with the Supreme Court’s test for determining whether rules are procedural or substantive.  Substantive rules are those that are a “legislative-type” and that “affect[] individual rights and obligations.”

GSK also argued that the majority opinion and the concurring opinion by Judge Bryson are in conflict with each other.  Thus, the PTO and the public do not know the appropriate test to apply.  Judge Prost’s opinion noted that the rules are procedural because they do not “forclose effective opportunity” to file patent applications.  Judge Bryson did not address the procedural/substantive dichotomy, but instead reviewed each rule to determine whether they were within the congressional delegation of power to the PTO.  The dissent follows the Supreme Court test for procedure/substance.

Finally, GSK argues that the rules have a significant impact on inventors’ rights and obligations.  GSK details each rule and how the panel does not understand the impact of the rule on individuals.  The panel was too quick to dismiss the implications of the rules and their drastic effects.

Interestingly, GSK provides no argument on the court’s Chevron deference analysis.

Tafas Requests Rehearing En Banc in PTO Rules Case

June 4, 2009

One of the plaintiffs in the PTO rules case, Dr. Tafas, has filed a combined petition for the Federal Circuit panel to rehear the case, or alternatively, for the entire court to rehear the case en banc.  At this stage, it is unclear if either the PTO or the other plaintiff, GlaxoSmithKline, has filed its own petition.  Patent Docs has a good summary of Dr. Tafas’ arguments.

Basically, Dr. Tafas argues that the panel decision misapplied Supreme Court and Federal Circuit precedent in several ways.  First, the panel used the incorrect standard for determining whether a rule is substantive or non-substantive; second, the panel failed to consider the implications of the rules on individual rights and obligations; third, the panel failed to address whether the PTO had authority to enact the rules under the Patent Act; and finally, the panel erred in its Chevron deference analysis.

Often, the court denies these types of petitions out of hand.  When the court believes the matter is a closer call, it may request a response from the other parties, in this case the PTO and GSK.  Even though the panel decision is completely wrong and the case is of significant importance, I still believe the court will deny to rehear the case en banc.

At the recent Biotechnology Industry Organization (BIO) conference, a panel that included Sherry Knowles, Vice President of Corporate Intellectual Property at GlaxoSmithKline, and Professor John Duffy of George Washington University Law School, were asked about their thoughts on the prospects of the Tafas v. Doll case.  Ms. Knowles stated that she believed the plaintiffs would get a better result at the Supreme Court than they would at the Federal Circuit.

Prof. Duffy disagreed.  He believes the plaintiffs would not be happy if the Supreme Court got its hands on the case.  The justices are not familiar with patent law, but they are intimately familiar with administrative law, as a number of them previously taught the subject or were members of the D.C. Circuit Court of Appeals that hears a large number of administrative challenges.  The Supreme Court would probably defer to the PTO’s interpretation of the proposed rules, including the continuation rules struck down by the Federal Circuit.