Archive for April, 2011

The Importance of Keeping the Infringer in Mind When Preparing Patent Claims

April 29, 2011

Suppose I invent a new chemical molecule.  I begin testing the molecule to determine its usefulness.  After testing, I determine that when the molecule is combined with certain other ingredients to form a drug, it exhibits a utility in killing cancer cells.  I find that administering the drug by a novel method maximizes the cancer-killing ability of the drug.  Finally, I develop a novel way to manufacture the drug that can increase its potency.

Based on this information, what can I patent?  Assuming that each of the inventions is novel and non-obvious, I have a number of options.  First, I should write claims directed to the molecule itself.  Then, I can keep anyone from making, using, offering for sale, selling, or importing this molecule for any purpose.  That would be pretty good protection.

But, I’m concerned that someone might find prior art that shows that this molecule (or an obvious variation) was actually discovered a number of years ago.  Therefore, I should also try to protect that drug that includes this molecule as the active ingredient.  I will not be able to prevent others from using the molecule for other purposes, but again, anyone who makes, uses, sells, offers for sale, or imports the drug (putting aside FDA approval) would be infringing claims to the drug.

Again, let’s assume that the drug itself is not patentable.  It has been used before to treat baldness.  Because the use of the drug to treat cancer is new and patentable, I should prepare claims that are directed to methods of treating cancer (or killing cancer cells or something similar) by administering the drug.  Now, what can I stop others from doing?  The molecule can still be made, the drug can still be made; I can only protect the method of using of the drug to treat cancer.  Who actually performs the steps this method?  Probably the doctor, maybe the patient.  Do I really want to sue doctors or patients for infringement?  I might be able to sue the manufacturer for indirect infringement if they contribute to or induce infringement of these claims by the doctor or patient.

A similar analysis applies to the novel method of administrating the drug.  Again, the doctor is probably the direct infringer of such a claim because the manufacturer of the drug does not perform the steps of administration.  Conversely, if I claim the novel method of manufacture, that claim would be infringed by the manufacturer and not by the doctor or patient.

Akamai Techs., Inc. v. Limelight Networks, Inc.

The inventors in Akamai developed an improved method for storing web page content.  Limelight sought to avoid infringement of the claims by having some of the method steps be performed by its customers rather than itself.  Akamai sued under the theory of joint infringement arguing that Limelight provides specific instructions to its customers to perform the missing method steps to infringe the claims of the patent.

Although the jury agreed with Akamai and found Limelight liable for infringement, the district court disagreed and set aside the jury’s verdict.  The Federal Circuit affirmed.

The Federal Circuit held that joint infringement requires more than merely direction or even control.  It requires that the acts of one party can be attributed to the other, such as through an agency or contractual relationship.  The court then rejected Akamai’s argument that Limelight’s customers were acting as agents of Limelight, as well as the argument that the customers had a contractual obligation to perform the infringing method steps.  The court held that the contract did not require the customers to perform the method step, but only explains the steps that should be undertaken if the customer wants to take advantage of Limelight’s service.

The lesson from the Federal Circuit is one that they have given many times:

[T]his court has noted that such concerns can usually be offset by proper claim drafting. A patentee can usually structure a claim to capture infringement by a single party.

So again, proper claim drafting is key.  When preparing the claims for a patent application, it is not enough to merely ask what the invention is; one must also ask who would be the infringer and how claims should be prepared to permit the patent owner to prevent infringement by that infringer.

Last week, the Federal Circuit agreed to hear Akamai en banc to decide the question:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

Perhaps the court will ease the requirement of agency or contractual relationship for a finding of joint infringement.  The lesson regarding proper claim drafting, however, remains.  The Federal Circuit continues to instruct inventors and patent attorneys to take more care when preparing patent applications and claims.


Guest Post: David Boundy – Defeat the America Invents Act

April 25, 2011

The following is a guest post of David Boundy who is a Vice President and Assistant General Counsel for Intellectual Property at a well-known financial services firm.  The views he expresses here are not those of his employer or its clients.  The post is similar to one published last week at Patent Docs.  His post follows: 

Dear fellow patent attorney:

      I need your immediate assistance to help defeat a particularly bad patent bill now in its final stages of consideration by the U.S. Congress.  You have seen the blogs and emails explaining how the America Invents Act (formerly the Patent Reform Act of 2011) will dismantle our carefully-balanced patent system, the system that has made America the innovation engine for the world.  The bill is bad for America, bad for your clients, and bad for you as a patent attorney.  Other countries innovate at half our rate.  The multinationals want to “harmonize” our laws with those unsuccessful systems for their own convenience.  This bill imposes about $1 billion in costs by taking away options that domestic American businesses use, to save a comparatively trivial amount for the Patent Office and a small number of multinational corporations.

      The appendix to this letter outlines the proposed law and how it will significantly damage our clients, our profession, and our country.

      Because this bill has passed the full Senate and the House Judiciary Committee, it could be enacted within weeks.  The big multinational corporations have plowed untold sums of money into lobbying, and have the bill they want.  It’s essential that Congress hear from domestic American businesses and inventors, and hear from them now.  Congress desperately needs to learn from small businesses and startups how they actually use the patent system to create new products, jobs, and wealth. 

      Congress is on recess until May 2, and your Representative will be in your district.  This is your best opportunity to inform your Representative that this bill will destroy American jobs by making it impossible for startups, small companies, and university spinoffs to protect the inventions they create, to obtain the funding they need to commercialize their inventions, and to earn the profits they need to grow new R&D-intensive businesses.

The “Asks”

      Go to to find your Representative’s contact info.  To schedule a meeting, many offices will want you to FAX in a request letter.   Second best is a phone call to your district office (not the D.C. office).   Third best—and far less effective, but better than nothing—is an email. can help you with some of these contacts.

      Ask your clients to join you at a meeting, or at a minimum, to call or write.  This letter is accompanied by a “script” you can give to clients for them to make their calls.  Your representative should simply vote the bill down—overall, the bill does more harm than good, regardless of any other changes that might be incorporated.

      If you live in Ohio, call Governor Kasich’s office, (614) 466-3555.  Point out that the governor’s $700 million Ohio Third Frontier jobs program cannot work, and that the Innovation Ohio Loan Fund will be not be repaid, if the federal Patent Act is changed to deter investment in university spin-offs and startups, and to make it harder for new businesses to succeed.

      Please take the opportunity to meet or phone, or at least email your Representative. (A phone call has several times the weight of an email, and a meeting will have many times the impact of a phone call). You will be more likely to get a personal meeting, and you will have far more impact, if you as an attorney bring one or two of your clients with you.  Stay away from patent jargon, because the person you talk to will almost certainly know nothing about patent law.   It’s crucial that you discuss the effects of the bill in terms of destruction of innovation, jobs, start-up businesses, and the like, issues that a Representative or staffer can relate to.  Urge your clients to join you for a meeting.

      It’s crucial to act now.  Please help preserve our gold standard patent system, one of the biggest engines of job growth in the U.S., and part of the reason U.S. attorneys can create so much more value for their clients than our counterparts in the countries to which Congress proposes to “harmonize.”

David Boundy

Boston MA

(212) 294 7848,


      The bill tilts the playing field in favor of multinational corporations and market incumbents.  The bill shifts from today’s emphasis on disclosure and disruptive innovation to favor trade secret and market incumbency, in the following ways.

  • The § 102(a) grace period is totally repealed.  Every inventor will be in a race against all other possible disclosures—no inventor will have the time to perfect and test an invention before filing.  All companies will be forced to file before an invention is fully understood or tested.  That will be expense for your clients and trouble for you as an attorney, and reduce patent quality.
  • Inventors, entrepreneurs, and startups use the grace period of § 102(a) to meet with investors, do the trial-and-error of R&D, and test their inventions. Under today’s law, the implied obligations of confidentiality in conversations with investors and early-stage partners give sufficient protection to permit these ordinary business activities.  The bill repeals all these protections, and replaces them with a flimsy grace period that creates unacceptable risk of loss of patent rights, that no business can rely on—though adds strong protections for large companies that can raise all their financing, and do all their manufacturing and testing in-house.  Inventors won’t be able to talk to investors without a patent, and won’t be able to file an application without an investor.
  • The bill states that an inventor can recover patent rights if he can prove that all other disclosures originated with the inventor—but the bill neglects to create a procedural forum for showing derivation in cases where the leak is not embodied in a patent application, or where the leak neglects to attribute the original inventor.  As a practical business matter, the bill leaves no commercially-feasible grace period, an integral part of U.S. patent law since 1839.—you will have to file every application as soon as possible, often long before the invention is ready.
  • Today’s law gives Americans several advantages over foreign inventors (under the “Hilmer rule”).  The bill removes these advantages, and instead places American inventors at a disadvantage to foreign inventors.   Consider this fact pattern:
  • A German inventor files a patent application in Europe, and later in the U.S. under a bilateral treaty
  • Shortly after the German’s first filing, an American files a patent application in the U.S. on a similar (not identically the same) invention, and then under the same treaty in Europe

Under the proposed legislation, the German’s patent application will be prior art that blocks the American in the U.S.  If we switch them around, so that the American files first, then the American does not block the German in Europe.  The bill does not “harmonize” the law, and the difference disfavors Americans.

  • The bill provides that all disclosures within and by a single company do not create bars.  This is great for multinational companies, with large in-house staffs, but totally useless for a startup or small company that has to partner with outsiders.  Startups use and need the options and protections of current law, but the new bill cuts them away.
  • A single offer for sale or public demonstration one day before filing a patent application will irretrievably destroy patent rights, if the poorly-drafted language is interpreted literally.
  • The § 102(b) grace period is cut back—it no longer protects against activities by third parties, but only the inventor’s own activities.
  • Patents can become liabilities—because a new “post grant review” procedure allows a competitor, who
  • As a patent attorney, you will no longer have time to do a good job preparing a patent application, you’ll be “forced to file” prematurely.  This will expose you to risks and destroy your weekends.  Poor initial applications will drive up post-filing prosecution costs.   The stricter and earlier filing deadlines will place you at a blocking point for many of your clients’ business activities, harming your client relationships.  Where good patent attorneys are allies in creating value for businesses today, the bill will move you to being a cost—at a much lower billing rate.

The bill also destroys commercial certainty and corrupts the incentives in the system:

  • Various statutory requirements that an applicant act “without deceptive intention” are repealed—in the future, applicants will have incentive to act with deceptive intent.
  • Key terms of art are redefined—you’ve spent a career learning the meaning of “on sale” and “public use,” but the legislative history fundamentally redefines these terms.  It will take decades for courts to establish new precedent to provide any meaningful commercial certainty.
  • The Metallizing Engineering “secret commercial use” bar is repealed—a company will be able to use an invention as a trade secret, and then spring a patent on the public years later.  That favors market incumbents, but makes innovation harder for everyone else.
  • The “best mode” requirement is reduced to a sham: a patentee will be permitted to disclose only a fictitious embodiment, while holding the best as a trade secret.
  • The bill gives companies the right to patent and repatent inventions for years, to keep them locked up, neither using them nor permitting them to be used, for far longer than 20 years.
  • Several aspects of the “first-inventor-to-file” provision—the ones that give patents to second inventors, and to companies that kept inventions in secret for years before filing patent applications—violate constitutional limits on Congress’ authority—years more litigation and commercial uncertainty.
  • The Act allows Wall Street banks to attack “business method” patents that they are infringing.  This doesn’t extend to any other industry, only business methods—another Wall Street giveaway.

The bill is out of committee—further amendments are unlikely. It is literally impossible to alter the bill to meet the needs of startups through an amendment strategy at this late date.  The multinationals and their congressional allies smell victory.  They see no reason to allow any weakening of their preferred bill through amendments favoring small businesses.   The only option at this point is to vote it down.

Typical inventor activities that no longer “work”

      Most startups, and many inventions at established companies, go through at least one of two “stories.”  They’re reasonable commercial practice under today’s law, but not under the bill:

  • An entrepreneur with nothing but an idea typically has to present his idea to dozens of venture capitalists and potential manufacturing or marketing partners, without formal confidentiality agreements, to get a company started. (VC’s never sign confidentiality agreements for first meetings.)  This works under today’s law, because of the implied obligation of confidentiality and the protection of § 102(a), but under the bill, these conversations will create commercially-unacceptable risks to the investor and partner.  U.S. inventors will be under the same “Catch-22” as European inventors—unable to talk to potential investors until a patent application is filed, but unable to file a patent application without an investor.  Startups will die before being born.
  • Companies that need a long “invention incubation” period—trial and error, conceive, test and discard, until finding the “magic combination” of techniques—use the § 102(a) grace period to do their R&D in confidence, and file patent applications only when it’s clear which inventions are valuable, and how they work.  Under the bill, a company will have to file a continuous stream of patent applications, many directed to inventions that are dumped under current law.  This will increase patent costs remarkably.

      Almost every startup goes through one of these two, many through both, as new companies create new wealth and new jobs under today’s law.  Inventors wait to file quality patent applications until they have quality inventions.  America’s unique and strong right to file in the future, after the inventor and investor know whether the invention is valuable, makes business easy, and prevents wasted costs for inventions that prove worthless.

      The “America Invents Act” revokes this historic right.  Property rights turn on non-business legal technicalities created to satisfy bureaucrats, technicalities that will cost $1 billion annually. The bill requires a company to file premature, hasty, and expensive patent applications on every baby-step idea to preserve rights against third parties who are dabbling in the field without intent to develop a commercial product.  The America Invents Act makes these two stories nonviable for startups—because the authors “didn’t think” about them, or didn’t want to.

      In 2010, the Kauffman Foundation and Census Bureau released two studies on job creation.  Both found that “net job growth occurs in the U.S. economy only through start up firms.”  If creating new jobs is Congress’s Job One, then killing the America Invents Act is a good place to start.

The proponents’ arguments do not survive scrutiny

      Proponents suggest that the bill does away with complex and costly interferences.  That’s true, but irrelevant.  Under 100 applications per year end up in interferences.  In contrast, the change to today’s “§ 102(a)” grace period affects commercial decisions and raises costs for hundreds of thousands of inventions per year, during the time before filing, by giving inventors and patent attorneys time to get it right the first time.  Because the Patent Office has no insight into the pre-filing process of invention, it simply hasn’t taken into account the realities of invention incubation and the costs of its proposal.  Further, the proposed replacement, “derivation proceedings,” are the most costly disputes in patent law in those jurisdictions where they exist.

      Second, proponents argue that provisional applications will be a cheap way to preserve rights.  But that isn’t true under the new law.  Under current law, a cheap provisional is useful to show conception and diligence.  But under Patent Reform, a provisional application only provides legal benefit if prepared with full § 112 ¶ 1 care and completeness.   For a typical startup invention, the cost in attorney fees and inventor time for a provisional application is $10,000 or more—a formidable barrier to an entrepreneur’s first conversation with an investor.

      Third, proponents argue, “The bill locks in rights if you publish a disclosure of the invention.”  But all companies rely on secrecy for their future plans.  No company publishes its most sensitive and advanced technology years before introduction.  This argument ignores business reality.

Congress Creates PTO Budget Crisis

April 25, 2011

Just when we thought things were looking up at the PTO, Director Kappos announced on Friday in a blog post that the newly passed 2011 budget allocates $2.09 billion to the PTO, about $100 million less than it anticipates in revenue from user fees.  Thus, the PTO must make a number of cuts.

First, the PTO has postponed indefinitely the Track I Prioritized Examination scheduled to go into effect on May 4.  This comes less than 3 weeks after the agency published final rules for implementation of the regime to permit applications to receive final PTO determination within 12 months.

Next, the PTO has postponed indefinitely the opening of the Detroit satellite office that was announced in December.

The PTO has also frozen all hiring and overtime.  Travel, conferences, contracts, and other non-compensation spending have been reduced.  Employee training will be significantly reduced.  Needed IT improvements have been scaled back.

During the economic downturn, the PTO saw a significant reduction in patent and trademark filings.  This caused a budget crisis because the PTO does its work significantly later than it receives filing fees from applicants. 

Now that filings are increasing, Congress has severely hamstrung the PTO while continuing to play lip-service to wanting the agency to improve operations.  There is no excuse for this.  The country is facing a budget crisis, but the PTO is a user-funded agency; it doesn’t use tax dollars, so it should not be affected by other budget cuts.  Instead of jamming through a patent reform bill that has significant problems, Congress should be working on ways to fix the PTO’s funding issues and stop taking money that it doesn’t have a right to.

Siphoning PTO user-fees to the general fund is, at best, a form of taxation on patent filers and, at worst, pure theft.

Thoughts on Microsoft v. i4i

April 20, 2011

On Monday, the Supreme Court heard oral argument in Microsoft v. i4i regarding the appropriate burden of proof for challenging issued patents.  A transcript of the argument is available hereI have previously summarized the issues in the case.  Many others have already posted summaries and impressions of the argument.  I simply seek to add some of my thoughts on the issues here.

Many groups and individuals, such as UCLA Law Professor Doug Litchman in a New York Times editorial, suggest that the issues are very simple.  Patent examiners cannot rightfully be characterized as experts because they are overworked and under-informed.  Way too many bad patents are being issued.  All bad patent stifle innovation and the economy.  Thus, there should be no deference accorded to the work of patent examiners.

Although I’m not sure that Professor Litchman has the experience to provide an expert opinion on what exactly happens during patent prosecution, that is beside the point.  The issue is clearly more complex than he presents.

During argument at the Supreme Court, Justice Breyer seemed to want to focus almost exclusively on the issue of bad patents and the harm they cause.  He seemed to dismiss concerns on the opposite side raised by Seth Waxman, arguing for i4i, about legitimate patents that have been granted by the PTO being improperly invalidated by lay juries.

Other members of the Court seemed to take a more nuanced approach to the issues in the case.  One of the issues is the intent of Congress when it enacted the relevant statutory provision 35 U.S.C. § 282:

A patent shall be presumed valid. . . . The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.

The legislative history of this section seems to indicate that Congress sought to codify existing Supreme Court standards of proof when it enacted this law in 1952.  Supreme Court precedent before, and lower court precedent after, 1952 were anything but crystal clear.  Only once the Federal Circuit took over reviewing patent decisions did it standardize the burden of proof to clear and convincing evidence.

During argument in i4i, there was a great deal discussion about Justice Cardozo’s 1934 opinion in RCA v. Radio Engineering Labs.  In that case, Justice Cardozo appears to have set forth a high burden for invalidating a patent (“a heavy burden of persuasion”).  Microsoft’s attorney, Thomas Hungar, tried to distinguish that case, but the Court seemed to give it a great deal of weight.

Another issue in the case, initially alluded to by the Court in dicta in KSR, is that there doesn’t seem to be any justification for a heightened burden when using evidence that was not previously considered by the administrative agency.  This could create a dual-burden regime where invalidity must be proven by clear and convincing evidence when evidence was considered by the PTO and by a preponderence of the evidence when it was not.

The government, arguing in support of i4i’s position, suggested that this approach would be unworkable.  First, it would require the jury to make an initial finding as to whether the evidence was previously considered by the PTO and, if not, whether it is more pertinent to prior art that was considered.  Then, it would need to apply two different standards of proof to various evidence presented in the case.  When multiple prior art references are considered, the jury may need to apply different evidentiary standards to each.  Neither party was aware of any other area of administrative law having multiple burdens of proof.

The Federal Circuit’s current approach is much more workable and errs in favor of deference to the expertise of the Patent Office.  All challenges to issued patents must be proven by clear and convincing evidence.  If some particular evidence was not previously considered by the PTO, this evidence could be weighed more heavily than evidence that was reviewed by the agency.

Justice Breyer did cite positively to the AIPLA’s brief where it noted that the burdens of proof apply to facts and not to the underlying decision.  Under current law, to prove invalidity, facts supporting such a finding must be proven by clear and convincing evidence.  The ultimate conclusion of invalidity is a legal determination made by the court.  Although this is a legitmate distinction that has been countenanced by the courts, in practice, juries are usually simply asked whether the patent claim is invalid under one or more provisions of the Patent Act.

The Chief Justice has recused himself from this case.  A decision by the Court is expected by the end of the current term in June.

(Lack of) Grace Period in America Invents Act

April 15, 2011

As noted earlier, the two congressional versions of the America Invents Act, S. 23 and H.R. 1249, both seek to eliminate the ability to ante-date or “swear behind” prior art dated within a year of an application’s filing date.

Disclosure v. Public Use or Sale

That should still leave the current grace period intact for public disclosures or commercial activity by the inventor, right?  Actually, no.  The bill that passed the Senate provides an exception to what is considered prior art for “disclosures” of the invention by the inventor (or someone who obtained or derived the invention from the inventor) within one year prior to filing the patent application.  There is no such grace period, however, for public uses or commercialization activities such as sales or offers for sale.  Thus, an offer for sale one day prior to filing a patent application would be a bar to obtaining a patent.

Isn’t a public use or sale a “disclosure”?  Actually, Supreme Court and other Federal court precedent dating to 1829 provide that a public use or even a secret sale prior to filing a patent application will defeat the applicant’s ability to obtain a patent.  The Federal Circuit has also followed this precedent.

The saving grace (pun intended) for inventors under current law is that § 102(b) specifically recites that public use or sale is only a problem if it takes place “more than one year prior to the date of application for patent.”

This seems to have been an oversight on the part of the Senate, as demonstrated by some of the legislative history during the debate prior to passage, but is most readily demonstrated by remarks from Sens. Patrick Leahy (D-VT) and Orrin Hatch (R-UT) after the bill had passed the Senate.  See 157 Cong. S1496 (March 9, 2011).  Although these remarks probably won’t have any affect on the plain language of the bill, perhaps Sens. Leahy and Hatch were signalling the House to fix this issue in its version of the bill.

House Bill

Unfortunately, when the bill was introduced in the House, it contained the same language that was included in the Senate bill.  No problem.  The issue was addressed by Judiciary Committee Chairman Lamar Smith (R-TX) in his Manager’s Amendment.  His amendment sought to basically overrule the earlier court decisions and change the definition of prior art in the bill from “. . . in public use, on sale, or otherwise available to the public” to “otherwise disclosed to the public.”  The exceptions for inventor’s activities within one year of filing were amended to be consistent with this and a definition was added to make clear what was intended by “disclosed to the public.”

(o) IMPLEMENTATION BY THE PATENT AND TRADEMARK OFFICE.–In any guidelines for the examination of patents addressing whether a disclosure to the public has been maded under section 102 of title 35, United States Code, as amended by this section, the Office shall use the public accessability criteria employed by the courts in addressing whether a disclosure constitutes a printed publication under section 102 of title 35, United States Code, as in effect on the day before the date of the enactment of this Act.  Such public accessability criteria shall be used regardless of the manner in which the disclosure resulted in the subject matter disclosed being known or used.

Thus, the Manager’s Amendment sought to fix this issue so that any public use, sale, or other public disclosure by the inventor within one year of the application’s filing date would not preclude him from getting a patent on the invention.  This would restore the grace period as it currently exists for inventor activities.

Judiciary Committee Action

As I noted earlier today, however, Rep. Zoe Lofgren (D-CA) introduced an amendment that specifically undoes the fix to the grace period in the Manager’s Amendment.  Rep. Lofgren’s change passed the Judiciary Committee by voice vote.

Do all members of the Committee really intend for a public use or sale by an inventor one day prior to the application filing to defeat his ability to obtain a patent?  Or is something else going on here?  Will this section be fixed on the House floor or in conference committee?

To be sure, there are better and easier ways to fix this provision than that proposed in the Manager’s Amendment.  Hopefully, Congress restores the grace period prior to final passage of the bill.

HT:  Hal Wegner and Patently-O for originally pointing out this issue.

FY2011 PTO Numbers: PTO Explanation

April 15, 2011

Yesterday, I provided an update on the numbers from the PTO’s Data Visualization Center for the first half of FY2011.  One number that I indicated was difficult to grasp was the First Action Pendency because of the extreme fluctuation, including a jump from 24.2 months in January to 25 months in February and now to 25.3 months in March.

David Fitzpatrick, Office of Patent Financial Management at the PTO, has provided the explanation.  It concerns the PTO’s relatively new Cleaning the Oldest Patent Applications (COPA) initiative.  Through this effort, the PTO is seeking to reduce the “tail” of the backlog of patent applications by providing first office actions for applications that are more than 16 months old. 

The initiative has been fairly successful in that it has reduced the number of applications more than 16 months old from 299,099 at the beginning of FY2011 to 197,583 at the end of March, a reduction of more than 1/3.  Another way to look at the numbers is that the percentage of the backlog of unexamined applications that are more than 16 months old dropped from 42.2% (299,099/708,535) to 27.9% (197,583/708,912).  That is good progress on the oldest applications.

As Mr. Fitzpatrick correctly notes, making the oldest applications a priority necessarily increases the average time to first office action.  His explanation follows:

Commissioner Stoll requested that I contact you in regards to your “PTO FY2011 Numbers So Far” blog dated April 13. In your blog you referenced the change in the average first action pendency result for March compared with February. I wanted to try and explain the fluctuation for you. First action pendency is an indicator of the average age of all first actions completed over a three-month period. Between February and March, there was a shift in the age of first actions completed by examiners. If examiners pick up older cases over newer cases, the average pendency will increase. On the flip side, if examiners work newer cases, average first action pendency will decline. In order to reach our goal of 10-month pendency by fiscal year 2014, we need to reduce number of older applications awaiting a first office action. This is one of the reasons why we implemented the Clearing the Oldest Patent Applications (COPA) initiative. By encouraging examiners to work on older cases, we will see a temporary increase in pendency; however, as older cases are removed from our backlog, our first action pendency number will decline as we strive to hit the 10-month goal.

I appreciate this explanation and the PTO, Commissioner Stoll and Mr. Fitzpatrick, for taking the time to read my blog and to provide the patent community with this explanation.  I also want to thank the PTO for its progress on the backlog and pendency issues.  I still think that 10 months by FY2014 will be extremely difficult to achieve.  Now, it’s time to focus on the problems facing the Board.

If only Congress would cooperate . . .

Director Kappos referred to this issue in his latest Director’s blog post where he also reported a projected 4.9% increase in application filings for FY2011, up so far from 232,468 to 249,209 (a 7% increase).

House Judiciary Committee Passes Patent Reform Bill

April 15, 2011

Yesterday, the House Judiciary Committee passed H.R. 1249, the America Invents Act, by a vote of 32-3.  Only Reps. John Conyers (D-MI), Steve King (R-IA), and James Sensenbrenner (R-WI) voted against the bill.  This result is a bit surprising given the luke-warm reception of the Committee when the bill was introduced last month.

The Committee held a lengthy hearing on the bill yesterday.  Chairman Lamar Smith’s (R-TX) Manager’s Amendment was adopted by the Committee by a vote of 29-2.  There were then a number of amendments that were offered by various members of the Committee.

The Manager’s Amendment contained a sunset provision for the PTO’s fee-setting authority at 4 years.  This provision was changed by another amendment to 6 years.

Rep. Bob Goodlatte (R-VA), chairman of the subcommittee for intellectual property, competition and the internet, successfully introduced an amendment to the prior user rights defense provision.  His amendment would exclude from prior user rights situations where:

(ii)  the claimed invention that is the subject of the defense was disclosed to the public in a manner that qualified for the exception from the prior art under section 102(b) and the commercialization date relied upon under paragraph (1) for establishing entitlement to the defense is less than 1 year from such disclosure to the public.

One very strange amendment introducted by Rep. Zoe Lofgren (D-CA) undoes the fix to section 102(b) regarding disclosures to the public by the inventor during the grace period.  This passed the Committee by voice vote.  Why did Chairman Smith seek to fix this provision only to have it undone?  Do the members of the Committee intend to eliminate the grace period or do they not understand the issue?

Rep. Judy Chu (D-CA) introduced an amendment that requires the PTO to establish pro bono programs to assist financially under-resourced independent inventors and small businesses.

Rep. Debbie Wasserman Schultz (D-FL) withdrew a proposed amendment that sought to exempt genetic diagnostic testing facilities from infringement suits.  She presented an emotional story of how she was unable to obtain a second opinion on a genetic test because of a patent.

Next Steps

Now that the Committee has reported the bill, it heads to the House floor for further debate and amendment.  The controversial provisions on first-to-file, prior user rights, and the near elimination of the grace period remain in the bill.  If the House passes the bill, it must be reconciled with the Senate bill in a conference committee.  The final bill would then need to be re-passed by both houses of Congress.  It would then go to Pres. Obama for his signature.

It seems that barring an unexpected development or the inability of the House and Senate to work out the differences in their bills, we will have patent reform in 2011.  All interested parties should tune in and contact their senators and representative now with their opinions on the bills before it’s too late.

Patent Docs has a detailed post on yesterday’s proceedings.

PTO FY2011 Numbers So Far

April 13, 2011

March marked the end of the first half of FY2011 and provides a time to refer to the PTO’s numbers again, as reported by the Data Visualization Center.  The numbers below are comparisons of the numbers at the end of March 2011 with the end of September 2010.

First Action Pendency – 25.3 Months

This number is down from 25.7 months at the end of FY2010; first office actions are occurring about 12 days sooner.  This number is really hard to get a handle on because of its extreme fluctuation.  It reached a low of 24.2 months in January, but shot up by 0.8 months from February to March.

“Traditional” Total Pendency – 33.9 Months

There is good news here as this is down from 35.3 months.  This number is the lowest it has been since June 2009.

Application Pendency with RCEs – 41.6 Months

This number is down 1 month from 42.6 months.  Any decrease is good, but this number needs to go down faster for the PTO to meet some of its production goals.

Applications Awaiting First Office Action – 708,912

This number is virtually unchanged since September when it was 708,535.  Digging a bit inside the numbers, however, reveals a bit more information.  The PTO cut 20,000 off this number during September 2010.  This appears to have been a bit artificial because the number actually went up during the first quarter of FY2011 reaching 721,831 in December.  Presumably, this is when the examiners exhaled after the September push.  During the second quarter of FY2011, the number has been steadily declining.

Patent Application Allowance Rate – 46.2%, 62.9%

The first number counts RCE filings as abandonments, while the second number does not, but counts them as continuing prosecution.  These numbers are up from 45.6% and 61.1%, respectively, at the end of FY2010.  These numbers continue to show that many patents are allowed by forcing applicants to file RCEs that are not allowed initially.  Proposals to simply eliminate RCE filings must first deal with this issue before they can be taken seriously.

Number of Patent Examiners – 6,840

The PTO has had a net increase of 711 examiners during FY2011, up from 6,129.  The 11.6% increase in the size of the examining corps is significant.  Due to training and efficiency issues with new examiners, it may take a while to see a benefit from this in the other numbers.

Pendency from Application Filing to Board Decision – 78.6 Months

And here’s the really bad news.  This number is up from 76 months at the end of FY2010 and continues to climb sharply due to a significant increase in the number of appeals filed.  The PTO was set to hire a number of additional patent judges and staff members for the Board to help in this area.


Another interesting number is that it now takes about 3.3 months from the filing of an RCE to the next office action.  This seems to contradict the new policy announced in October 2009 of placing RCE filings on the “special new” docket.

The PTO continues to make some headway on its pendency and backlog problems.  The additional examiners should certainly help here.  The crisis at the Board, however, seems to be getting worse.

Congress Continues to Play Politics with PTO Appropriations

April 13, 2011

The PTO budget for FY2011 lists expected revenue from user fees at $2.19 billion.  Yet, in H.R. 1473, the Full-Year Continuing Appropriations Act, 2011, that was passed by Congress on Friday to avert a government shut-down, the PTO is only allocated $2.09 billion to spend on its operations.  Thus, the PTO is expected to contribute $100 million in user fees to the general federal budget.  This is, of course, an additional tax on PTO customers that is not required to be paid by the general public.

The federal government is currently in a crisis situation regarding its budget.  It took 6 1/2 months to pass a budget for FY2011; Congress will next be debating a raise to the debt ceiling and the budget for FY2012.  The deficit problems are the result of recent runaway spending and reduced government tax revenue during our current economic recession.  Once the economy improves, the revenue side will increase as it always does.  It is clear, however, that Congress needs to seriously cut spending.

As discussed previously, the PTO is a user-funded agency.  It does not use tax dollars for its operation.  Those who desire the benefits of PTO services–patents, trademarks, etc.–pay for those services in the form of filing fees and the like.  Yet, the PTO’s user-fee derived revenue goes into the general federal Treasury.  Congress then allocates the amount the PTO can spend each year in its annual budget.  In theory, the PTO’s revenue is completely independent of its spending budget.  Congress could permit the PTO to spend more or less than it takes in.  Which way do you think it will and does go?

In the last 20 years, Congress has appropriated huge amounts of user-fee generated money from the PTO to the general fund.  During the last couple of years, the outrage from the user community, patent and trademark attorneys and filers, has forced Congress to allow the PTO to keep all of the revenue that it collects.  Yet, in H.R. 1473 Congress is back to its old tricks.

Predictably, AIPLA and similar organizations are again outraged.  Yesterday, the organization sent letters expressing its concern to leaders in the House and Senate. 

Given its need to address the patent application backlog and the need for an updated information technology system, at this point, the PTO needs every dime that it collects.  It is simply inappropriate for Congress to continue to impose an additional tax on PTO users that is not imposed on the rest of the public.

Manager’s Amendment for H.R. 1249

April 12, 2011

Today, Rep. Lamar Smith (R-TX) introduced a Manager’s Amendment to H.R. 1249.  The amendment makes a number of changes to the text of the original bill.

First, the definition of prior art is amended under § 102.  Subsection (a)(1) is amended to read:

the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public or otherwise disclosed to the public before the effective filing date of the claimed invention;

Subsection (b) which defines exceptions for disclosures by the inventor within one year of the filing date is also amended to use the term “disclosed to the public.”  The amendment then adds a new subsection that seems to be an attempt to define “disclosed to the public.”

(o) IMPLEMENTATION BY THE PATENT AND TRADEMARK OFFICE.–In any guidelines for the examination of patents addressing whether a disclosure to the public has been maded under section 102 of title 35, United States Code, as amended by this section, the Office shall use the public accessability criteria employed by the courts in addressing whether a disclosure constitutes a printed publication under section 102 of title 35, United States Code, as in effect on the day before the date of the enactment of this Act.  Such public accessability criteria shall be used regardless of the manner in which the disclosure resulted in the subject matter disclosed being known or used.

This seems to be Rep. Smith’s attempt to deal with problems regarding the grace period associated with disclosures by the inventor.

Next, the Amendment requires the GAO to conduct a study of patent litigation conducted by non-practicing entities.  The study would include information as to the volume of such cases, the number found to be without merit after judicial review, the time required for such litigation, the estimated costs associated with the litigation, and the economic impact to the country of such litigation, including possible benefits to commerce.

The House appears to have backed down on the inter partes review standard.  The bill is now amended to permit institution of such a review based on a “reasonable likelihood” that the challenger will prevail on invalidating at least one challenged claim.  This is now the same language used in the Senate bill and is an improvement over the “substantial new question of patentability” standard where the PTO grants nearly all such petitions. 

The House version still permits post-grant review within 12 months of the patent’s issuance, while the Senate version only permits review within 9 months of issuance.

The Amendment also amends the false marking statute to preclude liability for virtual (Internet) false marking for which the marker would otherwise be liable if it “is engaged in during the 3-year period beginning on the date on which the patent at issue expires.”  Futher, after the patent has been expired for 3 years, there is no liability if the word “expired” is inserted before the expired patent number.  This seems redundant and unnecessary.  If the word “expired” is listed, it is hard to see how this would deceive the public.”

The Amendment also contains a provision to make it more difficult to join additional parties to an infringement action as accused infringers unless the proposed defendants are jointly, severally, or alternatively liable based on the same transaction or occurrence, and the questions of fact are common to all defendants.

Conversely, courts must permit intervention of a manufacturer of a product that is accused of infringement, or the user of a manufacturing process or the manufacturer of a system or components that implement the process alleged to infringe.  In fact, the amendment permits a stay of suits against non-manufacturers, including distributors, resellers, customers, or users if the manufacturing party has filed or does file a declaratory judgment action against the patent owner.

Several other wording amendments were also introduced in the document.  Other than some wording changes, there was no significant revision to the controversial prior user rights defense section of the bill.

Thanks to Hal Wegner for sending around the Manager’s Amendment.