The year 2009 was marked by a major change in the administration of the U.S. Patent Office, as a new director took over. New leadership heralded a new attitude toward the handling of patent prosecution within the PTO.

David Kappos, the former Vice President and General Patent Counsel of IBM, was named to the position of Director of the PTO and Assistant Secretary of Commerce in 2009 and has already made some significant changes. These changes should foster the cooperative working relationship between applicants and examiners, while at the same time reducing the backlog in the PTO. As Director Kappos expressed in a recent message to his staff, the role of patent examiners is not an adversarial one with the applicants. On the contrary, the purpose of the examiners is to help the applicant obtain a valid and quality patent covering his invention. Secretary of Commerce Gary Locke indicated his ultimate desire to reduce the period of time for pendency of applications in the PTO to 10 months. While it may take some time to achieve this goal, a number of improvements have already taken place.

Previous Proposed Rules

The previous administration of the PTO proposed rules: (i) limiting the number of claims; (ii) limiting the number of continuing applications; and (iii) limiting Information Disclosure Statement (IDS) submissions. An IDS is a submission of relevant background information to the PTO, by an applicant for a patent. There is a duty on all patent applicants to disclose background information that may be relevant to the patentability of the applicant’s invention. While the proposed rules (on all three limitations) were initially enjoined by the District Court, a panel of judges at the Court of Appeals for the Federal Circuit reversed the District Court in part, and voted to allow some of these rules to go into effect. The Court of Appeals for the Federal Circuit agreed to review these en banc.

The patent community expressed dissatisfaction with these proposed rules. Patent associations and industry groups also voiced opposition to the proposed rules. Of interest was that during the course of the legal challenges opposing these rules, two declarations had been submitted on the part of the patent community pointing out that these rules would restrict patent rights. One of these declarations was given by Director Kappos himself during the time he was with IBM. The other declaration was given by Katten partner Samson Helfgott.

The PTO recently announced that these proposed rules have been officially withdrawn and that they would not be put into effect. There was no indication that any substitute rules would replace these.

Some of the new and improved procedures now taking effect include the following:

Examiner Count System Revised

PTO examiners have goals that they must achieve based on a “count” system. The count system credits examiners with counts for various prosecution activities such as a first office action on the merits, a disposition, etc. The count system is tied into a number of hours allotted to the examiner to achieve the particular prosecution milestone.

Under the existing count system, examiners would get no credit for interviews. Furthermore, there was no incentive in the count system for an examiner to allow any cases after a final office action, but instead, the count system was geared to encourage the ongoing filing of Requests for Continuation (RCEs), thereby prolonging the prosecution and increasing the costs.

During the last quarter of 2009, Director Kappos revised the count system and obtained approval of the examiners’ union for such revisions. The new count system encourages and gives credit for examiner-initiated interviews and gives reduced credit for ongoing RCEs. The ultimate goal is to encourage examiners to put more time and effort into the initial examination by conducting interviews and working with the applicant to obtain allowable claims without the need for continued and ongoing RCEs.

First Action Interview Program

The first action interview pilot program that had previously existed has now been enhanced and launched as an ongoing program. This program will encourage patent applicants and attorneys to arrange an interview before any first action is even sent by the examiner. This will give the applicant and the examiner an opportunity to understand the invention better and to focus on any issues that have to be addressed as early as possible.

The changes made to the pilot program also eliminated punitive consequences in the event that the applicant fails to adhere to the restrictive timing requirements of this program, and now permits extensions of time for the applicant to respond.

The PTO will advise clients of those cases eligible for this program and it is suggested that, wherever possible, clients should make use of this program as it will expedite the prosecution, achieve a better quality patent and ultimately reduce costs of the prosecution phase.

Examiners Trained in Restriction Requirements

The United States has a different rule with respect to unity of invention than most other countries. While the rest of the countries have a “single inventive concept” rule, permitting within the same application all types of claims relating to a single inventive concept, this is not the case in the United States. In the United States we have what is called “restriction practice,” which is based upon the examiners’ opinion that a separate and distinct search would be required for the different sets of claims.

Over the years, examiners have provided continued ongoing restrictions, thereby requiring numerous divisionals and additional restrictions. This has frustrated applicants and has given rise to excessive costs in prosecuting multiple applications, often unnecessarily.

In order to avoid this result, during the new training program examiners were reminded that the rules have to be strictly applied and should not be abused in this manner. Examiners were also reminded that applicants may be able to rejoin some of the claims if a generic claim is allowed, a practice that was previously not encouraged by examiners.

Ombudsman Pilot Program

A new proposal was published by the PTO requesting public comment. The proposal would provide an Ombudsman in each Technical Art Unit who would provide assistance with application-specific issues that may arise during prosecution. The purpose of this program is to expedite the handling of procedural problems and expedite the prosecution process.

This program is meant to deal not with substantive issues, but procedural issues and difficulties encountered during the prosecution process.

The process will be one that will be initiated by an online link to the PTO website. A telephone call back from the Ombudsman’s office will occur within one day. There will be no written communications but simply the bibliographic data entered into the system. This should eliminate any prosecution history estoppel issues. The entire matter must be resolved within 10 days. The Ombudsman will follow up with an initial 5-day period to make sure that the matter is being addressed properly.

Work-Sharing Programs

In order to reduce the backlog in prosecuting patent applications to their issuance, Director Kappos plans to make increased use of the work product of other patent offices which are available to the U.S. patent examiners during the prosecution process. Currently there are available or under test, three systems that can make use of the work product of other patent offices. One is the existing Patent Cooperation Treaty (PCT) route, the other is the Patent Prosecution Highway (PPH), and the third is a new program that is first being tested, called SHARE (Strategic Handling of Rapid Examination).

The current PCT system continues to be used by applicants all over the world. About 50% of all foreign-filed applications make use of the PCT system. Currently in the PTO, when handling the national phase of an invention the examiners do not necessarily make use of the International Search Report and Written Opinion that took place during the international phase, even when that search and written opinion was conducted by the United States as the International Search Authority.

Director Kappos indicated that he wants to make the PCT system in the PTO a “world-class” system. He has announced a future PCT Task Force. He also indicated that he plans to adopt a roadmap, originally suggested by the World Intellectual Property Organization (WIPO). Under this roadmap, national patent offices would accept their own international search when the case enters the national phase in that same country. It also requires the Patent Office to make better use of the search results from other searching authorities in order to reduce duplication of efforts as much as possible.

The PPH, which is still little used, permits an Office of Second Filing (OSF) to make use of an allowance granted by an Office of First Filing (OFF) on the same invention and accelerate the handling of that application. The applicant is required to conform the claims in the OSF to those allowed in the OFF and submit the search and examination results from the OFF. The OSF will then accelerate the examination and use, as much as possible, the results of the search and examination of the OFF.

In the PTO, cases arriving from other countries using the PTO as an office of first filing, have found huge success. While the normal grant rate of cases filed in the United States is currently 44%, those under the Patent Prosecution Highway system have an allowance rate of 95%. Additionally, the time of pendency of such PPH cases is an average of 5 months to allowance, as compared to over 25 months for non-PPH cases.

It is suggested that wherever possible, applicants should take advantage of the PPH route, whether they have made foreign filings of the application and are coming into the U.S. PTO as an OSF, or whether the case has been allowed in the United States as an OFF and they are now making use of the results to obtain patent protection in foreign countries.

The SHARE concept is one where a patent office will give priority to examination of those cases in which its office serves as OFF and delay handling other cases until the respective OFF of that case sends the search and examination results to the U.S. PTO. At present, a trial program has been initiated between the U.S. PTO and the Korean Patent Office to see if this program can produce workable results.

Other PTO Initiatives

In addition to specific initiatives that have been produced or announced, Director Kappos indicated that he would be addressing a number of other areas. We expect that during the next year we will see other new initiatives as well.

Director Kappos established a Task Force to set up guidelines and procedures to improve the quality of the prosecution process within the PTO. He has made it clear that rejecting good inventions is as poor a measure of the quality of the system as allowing patents on bad inventions.

The PTO also indicated that it recognizes the difficulties being faced in connection with filing appeals to the Board of Appeals and Patent Interference. The current rules are such that errors can easily be made, and, in fact, appeal briefs are regularly returned for failure to comply with minor formalities. Currently there is a 40% non-compliance rate with those rules. Director Kappos indicated that the rules will be reviewed and simplified.

Likewise, the PTO recognizes that the current requirements for requesting Accelerated Examination are filled with hazards relating to inequitable conduct and fraud on the Patent Office issues, as the applicant is required to disclose a significant amount of information before Accelerated Examination will be granted. Furthermore, the rules for such request are so complex that at least 50% of those requests are denied, simply because of procedural matters. Director Kappos indicated that he would be reviewing the rules for requesting Accelerated Examination, and we anticipate new rules to be introduced next year.

Duty to Disclose Information from Related Applicants

Currently, the PTO requires patent applicants to disclose material information that is known to the applicant in order to assist the examiners in the prosecution of the application. Failure to disclose material information can be considered fraud on the Patent Office, if an intent to deceive is found on the part of the applicant. As a result, applicants are always cautious to submit all relative information.

As a result of the 2009 Federal Circuit decision Larson Mfg. Co. of South Dakota, Inc. v. Alumin Art Products, Ltd., 559 F.3d 1317, Fed. Cir. 2009, more information may be required to be submitted. It is now strongly recommended to submit to the PTO the Examiner’s Office Actions as well as references from one related case to another, whether it is a continuing application or not, as long as the claims are related.

Although not covered by this case, it is also recommended to submit copies and translations of relevant parts of foreign office actions along with the submission of any new material references. This will satisfy the requirement for the “statement of relevance” of the reference as well as any potential issue relating to material information.  

Business Method Patents

The issue of what constitutes subject matter eligible for patent protection continues to dominate the patent arena. For many years, the PTO was granting business method patents. However, during the past year the Court of Appeals for the Federal Circuit (CAFC) tightened up on defining patentable subject matter. In the CAFC decision In re Bilski, a new standard for patent-eligible subject matter referred to as “machine or transformation” was established. Under this new standard, in order for a business method—or for that matter any method claimed—to be allowable it must include structure, such as a machine or a computer, in a substantive way, not merely as a peripheral part of the claim. Alternately, the method claim must demonstrate a transformation of a physical object.

The U.S. Supreme Court has granted certiorari in this case, and oral arguments were presented in November. It is anticipated that the Supreme Court will issue a decision on what constitutes patent-eligible subject matter somewhere in the middle of 2010. The status of whether business method patents are allowable or not will then probably be decided. It is anticipated that the PTO will promptly issue new guidelines consistent with whatever decision the Supreme Court decides.

Anticipated Increase in Patent Office Fees

Around the world, patent offices have already indicated that there will be increases in fees in 2010. By way of example, the Korean Patent Office, which serves as one of the International Searching Authorities for U.S. applicants under the Patent Cooperation Treaty, has indicated an increase of at least 50% from their current fees. For a considerable period of time, the Korean Patent Office was the most favored International Searching Authority by U.S. applicants because of its promptness and low cost. This increase in fees will place the Korean Patent Office more in line with some of the other patent offices, although still less than U.S. and European costs for the same service.

The European Patent Office also has indicated substantial increases in the beginning of 2010. These increases will relate to increased fees for the number of claims filed, which are being introduced almost as a “punitive fee” to try and limit the number of claims that are filed within the European Patent Office. It would therefore be advisable for applicants to revise their claims before entering into the European Patent Office to be sure that their costs will not be excessive as a result of unnecessary claims. It should be remembered that in the European Patent System, multiple dependent claims are allowed and that these should be used as much as possible to reduce the need for excessive claims.

Patent Law Reform

There is currently pending legislation before Congress to reform our patent laws. While these bills have been pending for a number of years, they currently have the backing of the Obama administration, and it is anticipated that we will see patent law reform in the coming year.

Some major changes in our patent system may take place. By way of example, we may ultimately join the rest of the world in changing from a first-to-invent system to a first-inventor-to-file system. This will eliminate the interference procedure in the United States and force everyone to file as soon as possible, as a patent will belong to the first one to win the “race to the patent office door.”

Patent law reform may introduce an opposition system giving third parties an opportunity to oppose granted patents. It could also introduce the ability for third parties to submit references to the patent examiner during the course of the patent prosecution process.

The definition of “prior art” may also be changed, making it into a harmonized system with the rest of the world. Absolute novelty may be introduced whereby any prior art, written or oral, anywhere in the world, will be considered as prior art through a patent application.

Numerous other changes are also being discussed, and currently it is too early to know which, if any of these, may find its way into a final bill. However, it is clear that over the next year, should patent law reform legislation pass Congress, it will dramatically change both prosecution and litigation of patent rights in the United States.