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February 5, 2008

Patent Office on Patent Reform

USPTO management posted on its internal agency website a position statement concerning changes in pending patent law. The patent office strongly opposes damages apportionment, while supporting the new post-grant opposition regime.

The posting -

Understanding Patent Modernization Legislation - ( 02/04/2008) What Does it All Mean?

A Brief Summary

Legislation has been introduced in both houses of Congress that proposes significant changes to the U.S. patent system. These provisions, if enacted, would arguably present the most significant changes to the patent system since the 19th century.

On April 18, 2007, Congressman Howard Berman (D-CA) introduced H.R. 1908, the Patent Reform Act of 2007 in the House of Representatives. A companion bill was introduced in the Senate (S. 1145) by Senator Patrick Leahy (D-VT).

The House-version passed by a vote of 220-175 on September 7, 2007. The Senate-version was reported out of the Judiciary Committee on July 19, 2007, and is likely to come to the Senate floor for consideration sometime in February.

Although the bills were similarly worded upon their introduction, they have since been subject to amendments on the House floor and in the Senate Judiciary Committee that have somewhat differed in substance. If passed by the Senate, these bills will have to go to a conference committee to resolve differences in competing language before being presented to the President for consideration.

Proposed Changes in U.S. Patent Law

U.S. intellectual property is now valued at more than $5 trillion. So, careful improvements of our nation's IP system are vital. The USPTO strongly supports the passage of patent modernization legislation that fairly balances the interests of innovators, across all industries and technologies, by improving patent quality and reducing patent litigation costs.

The USPTO agrees with many of the Senate bill's provisions - particularly applicant quality submissions and USPTO fee-setting authority - because they will help USPTO to improve operationally. However, the USPTO opposes the provisions limiting an inventor's rights to obtain damages. In fact, we oppose S. 1145 in its entirety, unless this section is significantly revised, because we believe the resulting harm to the overall U.S. intellectual property system would undercut all the bill's useful changes.

The USPTO hopes to continue working with the Congress to improve the U.S. IP system, while maintaining the balance of interests among innovators across all industries, the American public at large, and the operational needs of the USPTO.

Pending patent reform proposals would create significant changes to the patent system. As a result, we wanted to highlight the more notable of these proposed changes. The USTPO's views are as follows:

Strong Opposition to Damages Provisions

The USPTO opposes current provisions in both bills limiting an inventor's rights to obtain damages. These damages provisions would currently limit the discretion of the federal courts in determining how damages are calculated to compensate a patent holder for patent infringement. Such a dramatic change from jurisprudence will reduce the rewards of innovation in many cases and encourage patent infringement. Given the vast IP-based economy at stake, we must make sure that patents maintain their appropriate market value. The U.S. patent system must continue to offer innovators the opportunity to be adequately rewarded and to recover their investments, so they will continue to innovate.

Three Major Areas of Agreement:

The USPTO supports many provisions of the House and Senate bills, with some qualifications:

Quality Patent Applicant Submissions

It is critical to the success of our patent system that patent applications contain basic high quality information as a requirement, not an option. Fundamentally, the quality of a patent begins with the patent application. Additionally, the efficiency of patent examination depends on quality patent applicant submissions. The Senate and House bills support these imperatives with provisions for basic information requirements.

Meanwhile, in recognition of the status of certain small businesses and independent inventors (micro-entities), we also have proposed and support the bill's provisions to exempt them from the basic information requirements.

Fee-Setting Authority for the USPTO

The USPTO also supports the Senate bill's provisions giving our agency the authority to adjust (eliminate, lower, consolidate, or raise) patent and trademark fees as needed to accurately recover our costs of providing services to innovators. Because the USPTO is a fee-funded agency, this ability would allow us to plan and respond appropriately to changing market needs.The ability to adjust fees will also contribute to the operational stability of the USPTO, enabling the agency to take critical actions as needed.

Establishment of Post-Grant Patent Review Procedures

Finally, the USPTO supports S. 1145's establishment of an effective, efficient post-grant patent review process as a lower-cost alternative than litigation for those who want to challenge a patent's validity.

Further, we generally support the bill's approach, including having a first window of opportunity to challenge a patent within one year of grant, and having a second window throughout the patent life, triggered by a timely notice of infringement and threat of significant economic harm. However, we believe that improvements are needed to make the bill's post-grant procedures more effective, efficient, and manageable. For example, clarification is needed on the threshold standards for access to both the first and second-window challenges, and to differentiate between the associated estoppel effects.

Additional Provisions:

End of Inter partes Reexamination (optional, depending on audience)

The USPTO supports this bill's provisions to end inter partes reexamination in favor of the new post-grant review procedures.

First-Inventor-to-File System

The USPTO supports the bill's efforts to transition the United States to a first-inventor-to-file patent system, but we would like to work with the Senate Judiciary Committee to address technical issues regarding the scope and application of prior art and the grace period. Further, we believe that the effective date of the first-to-file provisions should be tied to a formal determination that specific progress and agreements have been reached in relevant international negotiations.

Check Collection

The USPTO opposes the bill's provisions to limit remedies against financial institutions that use patented check collection systems, when their use would otherwise be patent infringement. Limiting patent holders' rights and remedies in this instance will have a broadly chilling effect on innovation in this technology area. As a general matter, the USPTO does not support exceptions to patent protection.

Late-Filing Acceptance Authority

Regarding the bill's grant of authority to the USPTO Director to accept late patent and trademark filings in certain cases of unintentional delay, we have not identified a need for such a provision. However, if this provision is adopted, it would be critical to the USPTO's ability to administer it that the authority be limited in scope and applied prospectively.

Willful Patent Infringement

With respect to the bill's provisions on willful patent infringement, we were pleased that the Court of Appeals for the Federal Circuit, in re Seagate Technology, raised the standard for willfulness determinations. The Federal Circuit eliminated the "duty of care" and held that enhanced damages are only appropriate when the infringer acts with reckless disregard for the patent holder's rights. This decision is consistent with the bill's intent and our views on the issue, making the proposed statutory revisions in the Senate bill no longer necessary.

Stay tuned into USPTO Weekly for the latest updates on the Patent Reform Act of 2007. To read the full text of each bill, visit the Library of Congress' website site to learn more about the House bill H.R. 1908, or the Senate bill S. 1145. Also, visit the USPTO homepage to read the Administration's views letter on this patent legislation.

Posted by Patent Hawk at February 5, 2008 8:14 PM | The Patent System

Comments

USPTO supports FTF but wants discussions on "technical issues" surrounding the grace period. "Technical" issues they call it. That's a good laugh. I'm not surprised they need to flag it up as a problem area, seeing as how a grace period is incompatible with FTF, esp. in a common law jurisdiction. The US patent machine might be broken, but replacing component parts of the machine with incompatible spare parts isn't the answer. It will just make the machine run even worse.

Posted by: MaxDrei at February 6, 2008 4:52 AM

That the USPTO opposes the damage apportionment provision in S. 1145 is a "smoke screen." That the USPTO supports AQSs, fee setting authority, post-grant oppositions, etc., is the leopard showing its true, ugly spots.

Posted by: EG at February 6, 2008 6:20 AM