I. Introduction

For the fourth time in six years, the United States Congress has begun an attempt at crafting comprehensive patent reform legislation.1 On February 3, 2011, the Senate Judiciary Committee approved, in a 15-0 vote, a bill2 designed to overhaul and reform the U.S. patent system,3 and Senate Majority Leader Harry Reid has indicated that he plans to bring the bill to the Senate floor for a full vote after the President’s Day recess ends on February 28, 2011.4

Further, although the U.S. House of Representatives has yet to propose its own patent reform bill during the current term, the House Judiciary Subcommittee on intellectual property has begun holding hearings to address patent reform, including a hearing held on February 11, 2011, focusing on the issues surrounding the pending Senate bill and the previous patent reform bill5 proposed by the House.6 The current Congressional efforts to reform the U.S. patent law are focused on addressing funding concerns at the U.S. Patent and Trademark Office (“PTO”), changing the U.S. patent law to grant patents to the “first to file” rather than the “first to invent,” and determining an acceptable framework for challenging the validity and scope of patents both before and after issuance by the PTO.

II. Funding Concerns At The U.S. Patent And Trademark Office

Currently, the PTO is facing a backlog of over 1.2 million patent applications.7 Due to limited funding at the PTO and a hiring freeze on patent Examiners during the peak of the recession, only 500,000 of these applications have been given a preliminary evaluation by the PTO, with an even smaller number being assigned to and actively examined by a patent Examiner.8 As a result, the average time that a patent remains pending in the PTO is approximately three years.9 Such delays can stifle innovation and development.

Many attribute the problems at the PTO to its federal funding structure. Under current federal law, the PTO does not set the fees required for the patent application process.10 Further, the fees collected by the PTO do not directly fund the PTO — Congress determines the PTO’s annual funding, which, historically, has been merely a fraction of the fees collected by the PTO.11 Thus, the PTO often brings in considerably more money in fees than it is allowed to use in its budget.12 As a result, the number of applications pending in the PTO has increased, but the PTO has not received a respective increase in funding to hire new Examiners or invest in more efficient examination technology.

The pending Senate bill would partially address the current problems by vesting the Director of the PTO with the power to set or adjust by rule any fee charged by the PTO.13 Nevertheless, many have expressed concern that fee setting authority will not be enough unless the PTO is also permitted to keep all of the fees that it collects from patent applicants.14 Further, there is still considerable debate over how the PTO should best allocate any additional funds.15

III. Patent Harmonization And “First to File”

The current U.S. patent law, which is the basis for the U.S. “first to invent” system, states that:

[a] person shall be entitled to a patent unless . . .

(e) the invention was described in – (1) an application for patent . . . by another filed in the United States before the invention by the applicant for patent or (2) a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent. . .

(f) he did not himself invent the subject matter taught to be patented, or

(g)(1) during the course of an interference . . . another inventor . . . establishes . . . that before such person’s invention thereof the invention was made by such other inventor and not abandoned, suppressed, or concealed.16

Accordingly, the first inventor has the ultimate right to a patent under current U.S. law. Nevertheless, the bulk of the international community follows a “first to file system.”17

Under a “first to file” system, a first inventor’s right to a patent will be extinguished if another person applies for a patent on the same invention before the first inventor. Thus, this system creates a “race to the patent office” scenario in which the first inventor to file a patent application wins even if another inventor first conceived of the invention and reduced the invention to practice.

Proponents of the “first to file” system in the U.S. argue that a “first to file” system would eliminate unnecessary complexity in the current U.S. patent system and would reduce the burden on inventors planning to protect their inventions internationally by harmonizing U.S. patent law with that of the international community.18 Specifically, proponents argue that a “first to file” system eliminates the costly and time consuming interference process by creating a bright-line rule that grants the right to the first applicant to file a patent application at the PTO.19 Further, proponents argue that having a uniform law internationally will reduce costs and complexity by making it easier for those inventors planning to protect their inventions internationally by establishing one date — the filing date — that governs patentability globally. Accordingly, the current Senate bill would shift the U.S. patent system to a “first to file” system.20

Opponents of the “first to file” system argue that it is unfair to small inventors and that it will force larger companies to flood the PTO with new applications unless provisions for prior use rights are included in reform legislation.21 Specifically, opponents argue that large companies will rush to file patent applications as soon as possible in the development process in order to avoid extinguishment of their patent rights or, more generally, to prevent a competitor from acquiring a blocking patent.22 Thus, shifting to a “first to file” system may cause many larger companies to move at a faster pace than potential first inventors who may need to secure investment capital before filing an application, and to move at a faster pace than the PTO can handle, adding to the current backlog of applications at the PTO and further burdening the patent system.23

IV. Post-Grant Opposition, Pre-Grant Opposition, The PTO And The Federal Courts

Another major issue under debate is the role of third party opposition during patent examination, after patent issuance and during litigation. Currently, under 37 C.F.R. § 1.99, third parties may submit relevant prior art during the initial examination period in the PTO.24 Further, federal law allows several mechanisms for the PTO to review a patent post-issuance: reissue,25 ex parte reexamination26 and inter partes reexamination.27 Additionally, the validity and scope of a patent may be reviewed by a district court.

Opponents of the current system argue that the present reexamination process creates too much uncertainty and needlessly delays litigation.28 Further, these opponents argue that the U.S. patent system could be enhanced by restricting reexamination proceedings to a time-limited period post-grant and by further expanding the third party submission process during initial examination at the PTO.29 Such changes, argue these opponents, will also benefit the PTO by reducing the Examiners’ workloads and help to reduce the Examination backlog.30

Conversely, supporters of the current system argue that the financial constraints placed on the PTO necessitate an indefinite period for reexamination filings and other post-grant proceedings.31 Specifically, they argue that, because the PTO is overburdened, it may be necessary to contemplate that a significant number of “bad” patents will continue to issue.32 As a result, interested parties will need to take advantage of the reexamination process to avoid the tremendous costs of litigating against these “bad” patents.33 Further, these supporters argue that reexamination proceedings reduce the burden on the overburdened federal court system by weeding out the “bad” patents without district court invalidity litigation.34

The pending Senate bill would change the reexamination process by limiting the initiation of inter partes reexamination to the first nine months after the PTO issues a patent.35 Further, the Senate bill would create a post-grant review process, whereby a third party could request that the PTO cancel one or more claims of a patent as unpatentable based on an available ground for invalidity.36 Under the proposed post-grant review and reexamination proceedings, the Director must find that “it is more likely than not that at least one of the claims challenged is unpatentable,” rather than the less restrictive determination that “a substantial new question of patentability affecting any claim of the patent concerned is raised by the request,” as currently required.37 The proposed Senate bill would also create a new supplemental examination procedure for correcting issued patents38 and expand the time period for third party submission of prior art until the later of the issuance of a notice of allowance, six months after publication, or the date of a first rejection of any claim.39

V. Conclusion

The road to patent reform is long and exhausting, and has been filled with many unavoidable roadblocks in the past. Many of these roadblocks remain in place, and there is still much work to be done, as Congress slowly crafts a compromise reform bill. Nevertheless, it is apparent that action must be taken to improve the efficiency and effectiveness of the PTO. At this time, it appears that the current Congress has made considerably more progress than those of years past and is well on its way to enacting meaningful patent reform. If a patent reform bill resembling the current Senate bill survives Congressional scrutiny, it will have a dramatic impact on the U.S. patent system and will change the intellectual property landscape for years to come.