Intellectual Property Bulletin - Summer 2012

[authors: Stuart P. Meyer, Ewa M. Davison, Ph.D. and Melanie L. Mayer, Ph.D.]

In mid-July, the United States Patent and Trademark Office began rolling out final versions of patent rules to implement the America Invents Act (AIA). In the last edition of the IP Bulletin, we reported on the PTO's proposed rules and the various public comments that were received on the proposed rules. It appears that the PTO seriously considered the public comments, and made some changes from the proposed rules accordingly. However, for the most part, the proposed rules were left intact, notwithstanding significant concerns about how they would apply in practice.

Among the most dramatic of the rules are those addressing procedures to be used by the new Patent Trial and Appeal Board (PTAB). Pursuant to the AIA, the PTAB will replace the existing Board of Patent Appeals and Interferences. The PTO's rules governing trial practice before the PTAB, to be enacted under 37 C.F.R. § 42, apply to inter partes review, post-grant review, the transitional program for covered business method patents, and derivation proceedings.

Section 42 in its final form mandates that the default standard in contested cases is to be a "preponderance of the evidence" standard. Some of the proposed procedural constraints, such as page limitations on petitions and responses, have been loosened in the final rulemaking, and the PTO has granted the PTAB greater discretion regarding trial management. This is both good and bad; while it allows parties to argue for case-specific modifications, it also leaves them with less initial guidance on how a trial is likely to play out.

The PTO's proposed fees for inter partes review, post-grant review, and covered business method patent review were widely criticized as being unworkably high, but the PTO made only a minor concession in this area. Specifically, the PTO kept the final cost of the inter partes procedure at a base level of $27,200 (about three times the cost of the inter partes reexamination it replaces), but allowed an incremental increase of $600 per claim where over 20 claims are contested. The proposed rulemaking had applied a tiered system based on groups of ten additional claims. The final rules also require that if any contested claim is dependent upon an uncontested independent claim, a further charge is made for the independent claim, as it will need to be analyzed as well. Nor was the PTO deterred from implementing its proposed fees increase for post-grant review and business method patent review — $35,800 for up to 20 claims and $800 for each additional claim. Thus, these procedures are unlikely to be used very often by smaller companies or individuals that cannot afford these fees.

The PTO also took a fairly strict stance regarding who can participate in such proceedings. The PTO is requiring that parties be represented by a PTO-registered practitioner as lead counsel, and will only allow pro hac vice representation by unregistered counsel upon a showing of good cause. This will be a significant limitation for those litigation firms that do not have patent attorneys/agents on staff, and we expect a scramble over the next months as such firms seek to develop relationships with registered practitioners.

The PTO has also published a Trial Practice Guide that "is intended to advise the public on the general framework of the rules, including the structure and times for taking action in each of the new proceedings." The guide provides a plain English explanation of the AIA requirements relating to the proceedings, an overview of the rules and how they work together, as well as some commentary regarding issues that the PTO expects to arise under this new forum. Because the PTAB has been given significant discretion to run these proceedings, such guidance is likely to be heavily relied upon. For example, with regard to the PTO's requirement that lead counsel be a registered practitioner, the guide states, "The Office expects that lead counsel will, and back-up counsel may, participate in all hearings and conference calls with the Board and will sign all papers submitted in the proceeding. . . . . Actions not conducted before the Office (e.g., taking of deposition) may be conducted by lead or back-up counsel."

For those interested in a general overview of the new AIA contested cases framework, the guide is an excellent starting point. The guide can be found at http://www.gpo.gov/fdsys/pkg/FR-2012-08-14/pdf/2012-17908.pdf.

Effective September 16, 2012, the PTO's new rules regarding who can file and prosecute an application, and how and when inventor documentation gets submitted come into play. Although this might seem at first glance a fairly mundane procedural issue, the new rules significantly streamline common practice and should help to make patent prosecution more cost effective for many companies. For instance, applicants can now postpone filing certain inventor documentation until an application is in condition for allowance, and if an inventor cannot be found or refuses to sign, the rules allow for filing of a substitute statement instead. Since a significant percentage of patent applications never actually issue, and since amendments sometimes change the claims enough that the original listing of inventors is no longer correct at the time of allowance, these changes meaningfully reduce the paperwork that will need to be filed as a routine manner. Many companies may still choose to obtain and file such documentation at the time that an application is first submitted (for instance to avoid the $130 surcharge for later filing), but that is now optional rather than a required step in seeking patent protection.

The PTO originally interpreted the AIA to prohibit an assignee from being treated as the actual applicant for the patent (as is common in other countries), but after considering public comments on the proposed rules the PTO has revised its position, and now recognizes that an assignee may be considered the applicant. This is significant for numerous reasons, one of which is that previously, some employee inventors may have considered patent counsel to be representing them personally even when such counsel expressly stated that they were representing the employer and merely acting as attorney for the "applicant" as a necessary step in seeking a patent on the employer's behalf. Under the new rules, the "applicant" may expressly be the company, even though at some point each inventor will be called upon to execute an oath or declaration. One by-product of this change is that at the time of replying to a notice of allowance, the PTO is requiring applicants who are assignees to notify the PTO of any change in the real party in interest. The PTO has commented that notwithstanding the change in focus, it will still refer to patents by inventor names, as they "tend to provide a more distinct identification than assignee names." In a related area, the PTO will no longer require inventors to identify country of citizenship in their oaths or declarations.

Under the AIA, a patent owner may request supplemental examination of a patent based on certain relevant information; if the information is found to raise a substantial new question of patentability, the PTO will order ex parte reexamination of the patent. The purpose of the supplemental examination is to insulate the patent owner from certain defenses that might be brought by accused infringers, such as allegations of unenforceability of a patent due to failure to apprise the PTO of prior art that the patent owner may have been aware of during the pendency of the application.

The PTO's final rules list how a patent owner requests such supplemental examination and what information must be provided. Specifically, after identifying each item of information, the patent owner is required to identify each claim of the patent for which supplemental examination is requested, provide an explanation of the relevance and manner of applying the information to each claim, and summarize relevant portions of any submitted document that is more than 50 pages in length. The PTO final rules set base fees of $5,140 for the supplemental examination request, $16,120 for any ex parte reexamination that results, as well as additional fees for processing documents over 20 pages in length. A patent owner may submit up to a dozen items of information for supplemental examination under a single request.

Because the AIA requires the PTO to conclude the supplemental examination within three months of the request, the PTO included various rules that prevent a request from getting a filing date unless it is in a complete form. Also driven by this tight timeframe is the PTO's approach that an "item of information" will be narrowly construed such that one document such as a declaration relating to both a § 101 issue and § 103 issue will be treated as two items of information. In general, the PTO in its rulemaking has imposed stricter burdens on the patent owner in these rules than in other areas of AIA-related rulemaking, expressly in order for the PTO to be able to stay within the three-month statutory requirement.

Various related issues, such as reexamination fees in general, and how the PTO addresses misconduct and material fraud that it becomes aware of in connection with such proceedings, are also addressed in the final rules. As to the reexamination fees, notwithstanding numerous public comments, the PTO has held fast to a significant fee increase based on the statutory requirement that the PTO set fees at an amount that recovers the estimated average cost to the PTO. In the case of ex parte reexaminations, the new fees come close to being an order of magnitude (i.e., ten times) higher than existing fees, particularly when coupled with the supplemental...