« Revenge of the Jedi | Main | Drive Train »

October 18, 2007

Spoiled Child

Susan Dudley, Administrator of the Office of Information and Regulatory Affairs (OIRA) for the Office of Management and Budget (OMB), overseer of regulatory shenanigans by government agencies, is a bad mother to the errant child known as the patent office; letting it eat far too much cake of its own baking for everybody's own good. Ms. Dudley was the one who let the examination limits rules slide on by without so much as a "boo." Now comes a crowd of community-minded citizens to complain once more, that Dudas the Menace is fibbing again; this time over new rules for requiring Information Disclosure Statements (IDS) for patent submissions: "In the proposed IDS Rule, USPTO has again misrepresented to OMB the breadth and depth of the effects likely to result. The proposed IDS Rule is clearly “economically significant.” If finalized, it will impose billions of dollars of burden on patent applicants and owners."

In a hopefully persuasive letter signed by David Boundy of Cantor Fitzgerald, along with a prominent cast of thousands:

The preamble [to the proposed IDS rule] asserts that the rule will generate savings to USPTO, but these savings are neither quantified nor reflected in USPTO’s FY 2008 budget submission. In support of these radical changes, USPTO has disclosed no supporting evidence.

The proposed IDS Rule has another fatal defect: it is fundamentally inconsistent with case law governing the conduct of patent applicants and their agents under federal patent law. The courts require applicants and agents to fully disclose all potentially relevant information to USPTO, and they will take away the property rights of patentees who fail to do so. Through the IDS Rule, USPTO is demanding that patent applicants break the law just to ease USPTO’s workload. It is worth remembering that patent applicants pay fees to USPTO that fully cover the cost of patent examination, and USPTO has specific authority to charge fees specific to the service at issue in this Rule, and currently does so. USPTO now wants to refuse to consider the prior art and eliminate the fee.

The problem with the IDS rules is that they can practically force an applicant into inequitable conduct when filing a patent in an area where the applicant is knowledgeable about the state of the art.

The law of inequitable conduct arises under long-standing Supreme Court precedent, which USPTO lacks authority to change. A patent applicant (i.e., any inventor, attorney, or other person substantively involved with the patent application) has a “duty of candor and good faith” to fully reveal to USPTO all information that may be “material to patentability.” What constitutes “material” is always judged after the fact.

There are two general kinds of “inequitable conduct”: (a) failure to disclose material information to USPTO, and (b) making misleading statements to USPTO. Both result in the “death penalty” of unenforceability for all claims of any affected patent and, in some cases, all related patents. “There is no reprieve from the duty of square dealing and full disclosure that rests on the patent practitioner in dealings with USPTO.”

While this duty might seem extreme, it is a well-recognized element of patent practice that everyone understands and knows how to follow. The courts and (until the IDS rulemaking) USPTO have each made clear that it is better to give the Office everything that might be argued to be relevant by future infringer’s counsel, than to neglect to report potentially material information. The law is extreme in part because the costs of full disclosure are quite low, while the costs to the public of wrongfully issued patents are very high. Furthermore, full disclosure enables competitors to cost-effectively ensure that they do not infringe, by using information in the patent’s file history as a template to design around the patent.

The proposed IDS Rule turns this long-standing policy on its head. In cases where an applicant is aware of more than 20 prior art references, it would direct applicants to do one of the following:

· Deliberately withhold information from USPTO because the Rule forces applicants to submit only the “most” material information; or

· Submit a “patentability justification document” describing each prior art reference in detail.

Choosing the first option unambiguously violates the failure-to-disclose prong of the law of inequitable conduct, and raises a very high risk of losing the property right conveyed by the patent if he dares to try to enforce these rights against infringers. Call this the Infringers’ Free Ride Option.

Choosing the second option creates a high risk of violating the misrepresentation prong of the law of inequitable conduct. Counsel to a future infringer can (and will) pore over the patentability justification document in search of any misstatement of fact. The more statements of fact the applicant must make about prior art, the greater is the likelihood that infringer’s counsel will find an error. Call this the Infringer’s Bounty Hunter Option.

The second option is also immensely burdensome even if future infringers’ counsel never find errors. Each patentability justification document would cost tens of thousands of dollars to research and prepare. Furthermore, there no way to indemnify the patent owner against the value of lost patents if a future court declines to accept the quality of the work. The accompanying letter of Philip Steiner, a patent attorney with experience in preparing analogous documents, estimates the aggregate cost of preparing minimum-case documents at $1.9 billion per year. Inexplicably, USPTO says that being deluged with patentability justification documents will make its job easier.

The mandate for Mom Dudley to shoulder:

What is obvious is that the proposed IDS Rule has no merit whatsoever, and it would cost patent applicants billions of dollars each year just to comply with onerous new paperwork burdens. We respectfully request that OMB put an end to USPTO’s flagrant disregard for proper procedure and the exorbitant costs it imposes on its customers, and return this draft rule to USPTO for further consideration.

Posted by Patent Hawk at October 18, 2007 11:53 AM | The Patent Office


ANOTHER Bush recess-appointment.


Posted by: anonymousAgent at October 18, 2007 4:18 PM

I must play devil's (USPTO's) advocate for a moment and at least mention the practice of some, generally large entity, applicants that in my opinion led to this latest overstep by the PTO. During my time as an examiner I received many IDS documents that were frankly unmanageable. Some applicants find it easier to generate one IDS that is then submitted with all of their applications rather than acknowledge the prior art that actually relates to a given invention. For instance, an applicant might file an invention for bed springs one day and then file an invention for box cars the next day. What if the IDS documents for both applications were identical, containing prior art for bed springs and box cars. Now imagine this process continuing for every application a law firm ever files for a given client. Sounds absurd, but it happens. I used to look through IDS documents with literally hundreds of prior art references wherein not a single one even remotely pertained to the disclosed invention. That being said, there are proper ways to fix problems, and then there is the PTO way, which consistently punishes the masses based on the actions of a few.

Posted by: Jordan at October 18, 2007 4:49 PM

Jordan, you don't use a sledge hammer to put in a finishing nail, do you? If you get sick 3 day a year, you don't drink cough syrup the other 362 days, do you? Sure it may be easier for the USPTO to require that everyone drinks cough syrup every day to make sure they don't have to deal with sickos, but that's not good for the country.

Posted by: NIPRA anonymous at October 18, 2007 8:35 PM

NIPRA, I agree completely. I was not attempting to condone the behavior of the PTO, but rather to at least partially explain it. You must always know your enemy when waging a war.

Posted by: Jordan at October 19, 2007 1:27 PM