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Patent Baristas

Responding to an article about robotic inventors (Science, April 3, 2009), which reports about a robot that actually developed and tested hypotheses regarding certain yeast and discovered new gene sequences, we ask whether robotic “inventions” will ultimately become free to the public without the possibility for patent protection.

American patent law (35 U.S.C. Section 102) says that “[a] person shall be entitled to a patent unless . . .” (emphasis added), and proceeds to set forth a number of exceptions to patentability. But that preamble to section 102 limits the ability to patent to a person, probably not to a machine. This conclusion is reinforced by section 101 that limits the invention to the discoverer: “[w]hoever invents . . . may obtain a patent . . . .” Section 101 uses “whoever” not “whatever.”  Thus, a person using a robot that might make an invention may face some serious statutory impediments to patent protection.

The situation is compounded by Section 102(f) that states that one cannot obtain a patent if “he did not himself invent the subject matter sought to be patented.” Thus Section 102(f) prevents one from obtaining valid patent protection if he gets the idea in question — even in private — from another source.

There is some existing U.S. patent practice to offer some hope. Existing DNA/amino acid sequencing machines provide inventors with information that inventors later patent, of course. There is a difference because such machines are automated and not capable of cognition, and much of the inputs into such machines are provided and selected by humans. And the resulting data and results are analyzed and verified later by humans.

Another case in point we deal with frequently involves high-throughput compound screening to identify promising compounds for pharmaceutical, agricultural and other purposes, but again, the inputs into screening machines are human, and the outputs are analyzed by humans. Still another example we see involves Monte Carlo analysis using Spice for electronic circuit design, again involving human inputs. There are numerous similar examples. However, unlike our examples, the robots discussed in your article seem to have an independent ability to generate and verify hypotheses, perhaps leading in patent parlance to independent “invention” by the robot, not the human.

There is the possibility that the programmer of the robot could be the inventor if the robot were given the hypotheses to test and parameters to evaluate, in which case the human would probably be the inventor on the theory that the robot was simply the “hands of the inventor.”

We use Europe to illustrate how things might be different in other countries. Article 58 of the European Patent Convention sets forth the “[e]ntitlement to file a European patent application thusly: “[a] European patent application may be filed by any natural or legal person, or any body equivalent to a legal person by virtue of the law governing it.” That language — never applied to the robot situation in your article to our knowledge — seems to provide some wiggle room for the possibility of the robot being an inventor in Europe. But one still has to name the inventor on European patent applications, which leads to an interesting question. Would the robot’s central processor be listed as the inventor? If so, it might need to be identified by serial number and where it resides. Interesting possibilities.

If a robot were to be or become an “inventor” under the laws of the U.S. or Europe it would seem that the owner or lessee of the robot would probably be the owner of the “invention” rather as employers are generally the owners of employees’ inventions. However, owners or lessees of such robots should do something akin to what employers do with employees: still get solid written contracts from the developers of the robots to make sure robot inventions are owned by the owner or lessee.

One final thought: we might someday ask whether a robot that gains true “cognition” or self awareness should be considered a “person.”  That day seems a long way off and perhaps a bit too much for any court to decide now. But that day may be coming sooner than we expect.

Today’s post is by Guest Baristas Robert Stevenson, Esq., Joseph Murphy, PhD, Esq., and Thomas Clare, Technical Advisor, all of Philadelphia intellectual property law firm Caesar, Rivise, Bernstein, Cohen & Pokotilow, Ltd.

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After seeing the Senate Judiciary Committee vote to approve Senate bill S.515, the Patent Reform Act of 2009 (Leahy, Hatch, Schumer, Whitehouse), you have to wonder why compromise couldn’t have arrived earlier — and with fewer campaign donations.

But, preliminary reactions seem hopeful:

Innovation Alliance

The Innovation Alliance, a coalition of companies seeking to enhance America’s innovation environment by improving the quality of patents and protecting the integrity of the U.S. patent system, gave mixed reviews to the Patent Reform Act of 2009 (S.515), as approved today by a divided Senate Judiciary Committee:

“We are encouraged that the Committee has expressed a desire to continue working to achieve a true consensus,” said Brian Pomper, Innovation Alliance executive director. “This is welcome news, as we believe the post-grant review provisions approved today threaten to diminish the value and enforceability of U.S. patent rights at a time when America’s economic recovery and future job creation are dependent upon promoting U.S. innovation.”

Pomper noted that the post-grant review provisions of S.515 would create multiple avenues for challenging a patent’s validity without any meaningful protections to prevent abusive or serial attacks.  As a result, U.S. patent holders will spend precious time and resources defending their innovations against challengers, including foreign competitors, with much reduced odds of succeeding.  Small innovators will find it particularly difficult to defend their rights against larger and better-financed challengers, who could mount post-grant challenges for purely competitive reasons against perfectly valid patents.

Coalition for 21st Century Patent Reform

The Coalition for 21st Century Patent Reform sent their letter to the Senate Judiciary Committee in support of compromise patent reform legislation introduced in today’s mark up.

Our Coalition appreciates and recognizes the focus and hard work by Senators and their staff over the past several weeks that led to the reporting of the bill by the Committee. The compromise package, together with the other critical provisions of the bill, should improve the U.S. patent system.

With today’s vote, the 111th Congress has set a course that will foster American innovation and employment by ensuring the patent system is fair, balanced and promotes research and innovation.”

Biotechnology Industry Organization

The Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood issued a statement regarding a consensus agreement on patent reform legislation which was approved by the U.S Senate Judiciary Committee:

“BIO commends the Senate Judiciary Committee for its success in developing a more consensus-oriented approach to patent reform legislation – one that makes encouraging progress toward reforms that will help strengthen and improve our nation’s patent system.  Thanks to the leadership of Chairman Patrick Leahy (D-VT) and Senators Dianne Feinstein (D-CA) and Arlen Specter (R-PA), we are optimistic that we will now see meaningful patent reform that preserves the incentives necessary to sustain America’s global leadership in innovation and spurs the creation of high-wage, high-value jobs in our nation’s innovation economy.

“We greatly appreciate the tireless efforts of Senators Leahy, Feinstein and Specter to craft careful compromises on several key issues, including damages and post-grant review.  While no compromise is ever perfect, we believe the Committee’s product breaks the logjam on the major issues that have held up patent reform for the past several Congresses and will clear the path for a bill to be completed without undue delay.

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The Senate Judiciary Committee voted to approve a patent reform bill, despite opposition from Sen. Orrin Hatch. This will send the bill to the Senate for a vote after including amendments. The Senate Judiciary Committee held an Executive Business Meeting to consider S.515, the Patent Reform Act of 2009 (Leahy, Hatch, Schumer, Whitehouse).  The legislation   is set to pick up where patent-reform efforts left off last year.

hatchHatch, a sponsor of the bill, said he could not support the amendment to the bill. Hatch and Sen. Patrick Leahy, chair of the committee and a chief sponsor of the bill, preferred the original language, which would have changed damages from total market value of the product to “a reasonable royalty.”

Hatch: I am afraid that the bill, as currently written, has the very real potential to undermine the stimulatory affects of not only our patent system but those abroad. As many of you know, I have been the strongest and longest advocate for reforming our patent system. We desperately need to streamline the process to spur growth in American innovation and keep our competitive edge. But, I cannot support a bill that I know does not improve the status quo.

Now, the way only Congress can punt on tough issues, the bill requires judges hearing patent infringement cases to play a “gatekeeper” role — sought by Senators Feinstein and Specter — to just figure out in some Kreskin-like way the appropriate damages by deciding if a patent that was infringed is crucial to the final product or bit player in the final scheme.

Other changes would tighten interlocutory appeals by requiring district courts to certify that specific standards have been met, and would create a pilot program to hire law clerks devoted to working on patent cases and provide funding for training in patent law. The agreement calls for the pilot program to run in at least six district courts from at least three different federal circuits.

Unfortunately, it may leave lots of people unsatisfied:

Feingold: Great strides toward a bill I can support have been made. Although it is difficult to tell how well drafted the new damages provision is since experts have not had much time to review and analyze it, the intent seems positive. I am pleased that the much more sweeping and untested damages provision from last year’s bill was abandoned. The modest changes in this bill are much less likely to severely undercompensate patent holders who prove their patents have been infringed, thus devaluing their intellectual property. Similarly, I am pleased that the venue provisions were modified to simply codify a recent Federal Circuit opinion that makes forum shopping more difficult while not preventing patent holders from having an infringement action heard in their own jurisdictions.

It is in the area of post-grant review that I remain deeply concerned about the impact of this bill. Simply put, even as amended, S. 515 still threatens to reduce the value and enforceability of U.S. patents. The reduction in value will most likely be felt by individual inventors, start-ups and small businesses, and research universities. These are the entities that don’t have the resources to mount a continual defense of their patents against repeated requests for inter partes reexamination that the bill allows. I hope that further work on these provisions can be done because as it stands the bill makes it too easy for would-be infringers to attack a patent, or make it too expensive to defend.

I was unable to pay attention for every minute of the Committee webcast but, if you really want a blow-by-blow account, see additional coverage at IP Watchdog.

Amendment to Damages Section:


(1) COMPENSATORY DAMAGES AUTHORIZED. Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

(2) USE OF EXPERTS PERMITTED. The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.


(1) IN GENERAL. The court shall identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination.

(2) DISCLOSURE OF CLAIMS. By no later than the entry of the final pretrial order, unless otherwise ordered by the court, the parties shall state, in writing and with particularity, the methodologies and factors the parties propose for instruction to the jury in determining damages under this section, specifying the relevant underlying legal and factual bases for their assertions.

(3) SUFFICIENCY OF EVIDENCE. Prior to the introduction of any evidence concerning the determination of damages, upon motion of either party or sua sponte, the court shall consider whether one or more of a party’s damages contentions lacks a legally sufficient evidentiary basis. After providing a nonmovant the opportunity to be heard, and after any further proffer of evidence, briefing, or argument that the court may deem appropriate, the court shall identify on the record those methodologies and factors as to which there is a legally sufficient evidentiary basis, and the court or jury shall consider only those methodologies and factors in making the determination of damages under this section. The court shall only permit the introduction of evidence relating to the determination of damages that is relevant to the methodologies and factors that the court determines may be considered in making the damages determination.

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commercedeptThe Senate has confirmed Former Washington Gov. Gary Locke as Commerce Secretary by unanimous consent. The United States Department of Commerce is the Cabinet department of the United States government concerned with promoting economic growth and operates the Patent and Trademark Office (PTO).

President Obama will now be looking to choose an Under Secretary of Commerce and PTO Director.  Secretary Locke’s responses to questions from Senator Sam Brownback (R-Kansas) on patent reform at his confirmation hearing may shed some light on what we can expect. The Commerce secretary nominee emphasized that patent laws should not benefit some industries over others and that their impact on jobs should be considered when evaluating new laws:

SEN. BROWNBACK: There has been legislation proposed in Congress over the past few years to change the patent laws, and it has become very contentious. The proponents are a group of high tech and financial services companies, and on the other side there is a larger group of companies from a variety of industries manufacturing, green tech, nanotech, biotech, pharmaceuticals, venture capitals. … Do you agree that we should not be changing our patent laws in a way that chooses one group of companies over another? If you are confirmed, do you feel you can consider this issue impartially and help guide the debate to a place where not choosing high tech over manufacturing, for example?

LOCKE: If confirmed, I would work with Congress on patent reform legislation that would enhance innovation by fairly balancing the interests of innovators across all industries and technologies. I agree that patent law reform should not favor one industry or any particular area of technology over another.

SEN. BROWNBACK: Many high-tech companies that oppose S. 515, the Patent Reform Act of 2009, rely on their ability to protect their patented innovations by receiving damage awards from proven patent infringers. The proposed legislation changes the way damages are calculated, making infringement far less costly. In your role overseeing the USPTO, would this concern you? Are you concerned that this well-meaning patent legislation will actually hamper U.S. innovation?

LOCKE: Innovation is critical to creating jobs and bringing us out of the current economic downturn. Any statutory proposal must be weighed in terms of its effect on job creation and promotion of innovation. If confirmed, I will review all patent reform proposals that perspective.

SEN. BROWNBACK: The high-tech sector is divided between those who primarily invent and those who primarily package and market inventions. It is understandable that, just as any business wants to cut its costs, some high-tech companies who pay for others’ patents would want to reduce the costs for the patents they purchase or license from other high-tech companies. The damages provisions of the Leahy patent bill, S. 515, would have the effect of devaluing patents. Are you concerned that degrading patent holders’ rights might be a tempting short-term response that could have serious long-term consequences for our economy?

LOCKE: If confirmed, I would not support any statutory reform that devalues patent holder’s rights.

SEN. BROWNBACK: In your questionnaire you indicate that you hold stock in Microsoft, a member of the Coalition for Patent Fairness, a group that has been lobbying in favor of the Leahy patent bill. Given your personal interest in this company, how can you guarantee that you will approach the patent reform debate objectively?

LOCKE: If confirmed I am confident that I can and will continue to exercise my best objective judgment in all policy matters and I commit to consult with Ethics officials to ensure that my involvement in this area is entirely consistent with Ethics rules.

SEN. BROWNBACK: If you are confirmed you will inherit a serious problem at the Patent and Trademark Office that was created by known as “fee diversion.” It occurs when the Administration or Congress redirects the patent and trademark application fees paid by inventors, research universities and innovation companies to other spending. Currently the backlog of patent applications is nearly 800,000 applications and it takes at least 31 months to issue the patent. …  Since PTO is not funded with taxpayer dollars but with user fees, do you support the permanent ending of fee diversion?

LOCKE: The mission is critical to American innovation and invention. If confirmed, I will maintain the threshold principal that all user fees paid for services should remain with the USPTO as it has for the last years. If confirmed, I will work to continue that the user fees stay with the Office to be spent on managing and improving USPTO operations.

SEN. BROWNBACK: I recently joined Senators Feingold, Kyl, Wyden, Grassley, and Bond in sending a letter to Judiciary Committee Chairman Leahy asking that the Committee not rush patent reform legislation and work with those voicing concerns about the bill. … I am very concerned that this bill is intentionally being rushed when there is no Commerce Secretary nor is there an Under Secretary of Commerce for Intellectual Property (PTO Director). Do you agree that this sweeping legislation that will greatly impact the economy should not be considered until the Administration has its Commerce Secretary and PTO Director confirmed?

LOCKE: The administration will be better able to participate in this critical legislative process when political leadership is nominated, confirmed and in place at USPTO. If confirmed, I will be actively involved in representing the Administration’s views with stakeholders and Members of Congress on this landmark legislation.

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The Japan Patent Office has just announced a new policy to help stimulate the economy.  It relates to the fees for filing a request for examination.  Apparently, the Japan Patent Office is not the only patent office to experience a large drop in the number of patent applications being filed.  The JPO’s annual report shows that the office received 396,291 applications in 2007 or about, 12,000 less than 2006.   This could have something to do with the fact that like the EPO and the USPTO, the JPO currently grants under 50% of the applications that it examines.

Specifically, starting April 1st and running for a period of two years, an applicant for a patent with the JPO can file a request for examination but delay payment of the fees for up to one year!  The payment will be due one year from filing the request, but if payment is not made at that time the JPO will issue an Order to Amend asking for the payment.  Failure to pay within a stipulated deadline will result in abandonment of the application. This delay can be taken anytime within the 3 year period for filing the request for examination.

This would seem to allow a client to delay a substantial outlay of funds at an early stage while still retaining a place in the queue for examination. This may be beneficial to many patent filers in these economically stressful times.  Note that this is not effective for expedited examination.

For those looking for a fast track to a patent, however, might want to make use of the JPO’s trial “super accelerated examination.”  According to the JPO, Keio University received a patent for a process for detecting toxic metals following a screening process that took just 17 days.

To make use of the system, the JPO requires the following:

  1. Applicants have already requested an examination, but for which the examination process has not yet started (i.e., Reasons for Refusal and other office actions have been taken)
  2. Working invention-related application, applications filed by an applicant or a licensee who has already commercialized the invention or plans to commercialize the invention within two years from the filing date
  3. Internationally filed Applications, that is, applications that were filed with both the JPO and at least one foreign IP Office
  4. Applicants file online

The JPO is planning to continue the test for at least six months and lead to the revision and official operation of the system after considering the opinions of the applicants who used the test system.

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There have been mutterings and papers for some time about the EPO restricting the filing of divisional applications. They were viewed by some at the EPO as a thorn in the side of 3rd party rights.

It is now official – the EPO Administrative Council met 26 March 2009 and considered the filing of divisional applications to be “abusive” so they have signed off on an EPC rule change to Rule 36 severely limiting the opportunities to file divisional applications.

Under present Rule 36 EPC, a divisional application can be filed at any time before grant, abandonment or withdrawal of the parent case.

The new rule will restrict this deadline in two ways:

1.  If the EPO do not raise an objection of unity of invention. Any divisional application(s) can only be filed within 2 years of the first communication from the examining division; and

2.  If the EPO do raise an objection of unity of invention. Any divisional application(s) can only be filed within 2 years of the first communication from the EPO (not when acting as the International Search Authority) which identifies that there is more than one invention.

Here are some examples of how the new rule will work:  An applicant can voluntarily file a first divisional from an original parent application, and a second divisional, from the first divisional.  However both divisionals must be filed in the 2 years after the first examining division communication on the original parent application.

If the EPO identifies 3 different inventions in a search report on an original application, then the applicant must file divisional applications to each of the 2 additional inventions within two years of that search report. However, if one of those divisionals provokes a new lack of unity objection, then the new objection starts a fresh 2 year term for filing divisional applications for the newly-identified inventions.

There will be clarification to this proposed system in the year before the new rule takes effect. In the meantime, if you have any specific questions on how the new system will operate, please let us know.

The new rule will come into force on April 1, 2010. There will be a 6 month grace period, until October 1, 2010, for filing divisional applications outside the new two year periods.

(via Forresters, London)

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In a game of one-upmanship,  Sen. Jon Kyl (R-AZ) introduced — and apparently with a straight face — Senate bill (S. 610) as an alternative to the earlier introduced bills, S. 515 and H.R. 1260.  While differing in the standard for showing  inequitable conduct, the bill still retains the dreaded applicant quality submissions (AQS) that has been removed from S. 515 and H.R. 1260.

Instead of requiring applicants to perform searches and submit the closest prior art with analysis with respect to the claims, S. 610 provides that the PTO may offer incentives to applicants to submit such search reports.  And we use the word “incentive” loosely here.  It also contains the DataTreasury “Check 21” provision for making use of the Check Imaging patents a noninfringment.

This is probably a non-starter but some pertinent sections are outlined below:


(a) In general:

(1) COMPENSATORY DAMAGES.—Upon finding for a claimant, the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as determined by the court.

(2) INCREASED DAMAGES.—When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to 3 times the amount found or assessed. Increased damages under this paragraph shall not apply to provisional rights under section 154(d) of this title.

(3) LIMITATION.—Subsections (b) through (h) of this section apply only to the determination of the amount of reasonable royalty and shall not apply to the determination of other types of damages.

(b) HYPOTHETICAL NEGOTIATION.—For purposes of this section, the term ‘reasonable royalty’ means the amount that the infringer would have agreed to pay and the claimant would have agreed to accept if the infringer and claimant had voluntarily negotiated a license for use of the invention at the time just prior to when the infringement began. The court or the jury, as the case may be, shall assume that the infringer and claimant would have agreed that the patent is valid, enforceable, and infringed.

(c) APPROPRIATE FACTORS.—The court or the jury, as the case may be, may consider any factors that are relevant to the determination of the amount of a reasonable royalty.


(1) IN GENERAL.—The amount of a reasonable royalty shall not be determined by comparison to royalties paid for patents other than the patent in suit unless—

(A) such other patents are used in the same or an analogous technological field;
(B) such other patents are found to be economically comparable to the patent in suit; and
(C) evidence of the value of such other patents is presented in conjunction with or as confirmation of other evidence for determining the amount of a reasonable royalty.

(2) FACTORS.—Factors that may be consid
ered to determine whether another patent is economically comparable to the patent in suit under paragraph (1)(A) include whether—

(A) the other patent is comparable to the patent in suit in terms of the overall significance of the other patent to the product or process licensed under such other patent; and
(B) the product or process that uses the other patent is comparable to the infringing product or process based upon its profitability or a like measure of value.

(e) FINANCIAL CONDITION.—The financial condition of the infringer as of the time of the trial shall not be relevant to the determination of the amount of a reasonable royalty.


(a) IN GENERAL.—Except as provided under this section, a patent shall not be held invalid or unenforceable on the basis of misconduct before the Office. Nothing in this section shall be construed to preclude the imposition of sanctions based upon criminal or antitrust laws (including section 1001(a) of title 18, the first section of the Clayton Act, and section 5 of the Federal Trade Commission Act to the extent that section relates to unfair methods of competition).

(b) INFORMATION RELATING TO POSSIBLE MISCONDUCT.—The Director shall provide by regulation procedures for receiving and reviewing information indicating that parties to a matter or proceeding before the Office may have engaged in misconduct in connection with such matter or proceeding.


(1) PROBABLE CAUSE.—The Director shall determine, based on information received and reviewed under subsection (b), if there is probable cause to believe that 1 or more individuals or parties engaged in misconduct consisting of intentionally deceptive conduct of a material nature in connection with a matter or proceeding before the Office. A determination of probable cause by the Director under this paragraph shall be final and shall not be reviewable on appeal or otherwise.

(2) DETERMINATION.—If the Director finds probable cause under paragraph (1), the Director shall, after notice and an opportunity for a hearing, and not later than 1 year after the date of such finding, determine whether misconduct consisting of intentionally deceptive conduct of a material nature in connection with the applicable matter or proceeding before the Office has occurred. The proceeding to determine whether such misconduct occurred shall be before an individual designated by the Director.


(A) IN GENERAL.—If the Director determines under paragraph (2) that misconduct has occurred, the Director may levy a civil penalty against the party that committed such misconduct.

(B) FACTORS.—In establishing the amount of any civil penalty to be levied under subparagraph (A), the Director shall consider—

(i) the materiality of the misconduct;

(ii) the impact of the misconduct on a decision of the Director regarding a patent, proceeding, or application; and

(iii) the impact of the misconduct on the integrity of matters or proceedings before the Office.

(C) SANCTIONS.—A civil penalty levied under subparagraph (A) may consist of—

(i) a penalty of up to $150,000 for each act of misconduct;

(ii) in the case of a finding of a pattern of misconduct, a penalty of up to $1,000,000; or

(iii) in the case of a finding of exceptional misconduct establishing that an application for a patent amounted to a fraud practiced by or at the behest of a real party in interest of the application— (I) a determination that 1 or more claims of the patent is unenforceable; or (II) a penalty of up to $10,000,000.

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Apparently, the U.S. Court of Appeals for the Federal Circuit could not bear to see an end to the drama between the U.S. Patent and Trademark Office and its customers over proposed patent application rules.  The CAFC set out a mixed opinion on the rules proposed by the USPTO saying that they are procedural but in conflict with law in part.  Tafas v. Doll, __ F.3d __ (Fed. Cir. 2009)(Prost, J.).

The result can be summed up in the courts statement that:

[W]e are mindful of the possibility that the USPTO may in some cases attempt to apply the rules in a way that makes compliance essentially impossible and substantively deprives applicants of their rights.  In such cases, judicial review will be available under 5 U.S.C. § 706. 

Thus, if the USPTO sticks it to you, you get to spend all your time and money trying to convince a court to overturn the result.  Nice.

To recap, the USPTO tried to issue new rules labeled Changes to Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications, 72 Fed. Reg. 46,716 (Aug. 21, 2007).

Two of the new rules, Final Rule 78 and Final Rule 114, pertain to continuation applications and requests for continued examination (“RCEs”) and were issued – according to the USPTO — to address the “large and growing backlog of unexamined patent applications.”

Rule 78 governs the availability of continuation and continuation-in-part applications.  Under the rule, an applicant is entitled to file two continuation applications as a matter of right.  An applicant wanting to file more than two continuation applications must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted during the prosecution of the prior-filed application.”

Rule 114 provides for similar treatment of RCEs.  Under the rule, an applicant is allowed one RCE as a matter of right.  For each additional RCE, the applicant must file a petition “showing that the amendment, argument, or evidence sought to be entered could not have been submitted prior to the close of prosecution in the application.”

Rule 75 requires an applicant who submits either more than five independent claims or twenty-five total claims to provide the examiner with information in an examination support document (“ESD”).

Rule 265, requires an applicant to conduct a preexamination prior art search, provide a list of the most relevant references, identify which limitations are disclosed by each reference, explain how each independent claim is patentable over the references, and show where in the specification each limitation is disclosed in accordance with 35 U.S.C. § 112, ¶ 1.

In the original case, the district court first determined that that the USPTO did not have substantive rule-making authority but does have procedural rule-making authority.  The district court then declared that the Final Rules were invalid after finding that they are “substantive rules that change existing law and alter the rights of applicants” under the Patent Act.”

The USPTO then appealed.

The CAFC agreed that the USPTO only had procedural authority but said that all four rules were procedural and that the USPTO had the authority to go ahead and make them.  But, it said that Rule 78, which limited continuations and CIPs, was in conflict with U.S. patent law and was not valid. While the CAFC found that the other rules were not in conflict with existing law, the court remanded the matter to the district court to determine if the USPTO followed the proper procedures in enacting those rules.

The USPTO argued that the crux of the matter is not whether the rules are substantive or procedural, but whether they fit within a reasonable interpretation of USPTO authority to “establish regulations, not inconsistent with law, which . . . shall govern the conduct of proceedings in the Office . . . [and] facilitate and expedite the processing of patent applications.”  Also, the USPTO argued that even if the substantive/procedural framework is applicable, the Final Rules are clearly procedural.

First, the CAFC set out that § 2(b)(2) “does not vest the USPTO with any general substantive rulemaking power,” rejecting the USPTO’s argument that the substantive/procedural distinction is immaterial in this case.

While the USPTO also argued that Chevron deference is required for the threshold question of whether § 2(b)(2) vests the USPTO with substantive rulemaking authority and that its interpretation of various sections of the Patent Act, and its accordant belief that the Final Rules are consistent therewith, is also entitled to deference, the CAFC disagreed:

We are not persuaded by the USPTO’s arguments in this case that Chevron deference should be extended to the issue of whether § 2(b)(2) provides substantive rulemaking authority.  …  Because we decline to accord deference with respect to the question of whether the USPTO has substantive rulemaking authority, our conclusion above that the USPTO does not have such authority is unaffected by Chevron.

[On] review of a procedural rule that has been issued by the USPTO, we will give Chevron deference to the USPTO’s interpretation of statutory provisions that relate to the exercise of delegated authority.

The parties agreed that the USPTO has authority to make procedural rules.  They disagree, however, as to how the boundary between “substantive” and “procedural” rules should be defined.

The CAFC set forth the only slightly helpful outline stating:

While we do not purport to set forth a definitive rule for distinguishing between substance and procedure in this case, we conclude that the Final Rules challenged in this case are procedural.  In essence, they govern the timing of and materials that must be submitted with patent applications.  The Final Rules may “alter the manner in which the parties present . . . their viewpoints” to the USPTO, but they do not, on their face, “foreclose effective opportunity” to present patent applications for examination.

We are of course aware that the impact of Final Rules 78 and 114 will be largely dependent on how the USPTO interprets when amendments, arguments, and evidence “could not have been submitted during the prosecution of the prior-filed application” or “prior to the close of prosecution.”

The district court looked at public comments to conclude that the USPTO “intends to deny additional applications in almost all circumstances” such that Final Rules 78 and 114 are in fact “hard limits” on continuation applications and RCEs.

The CAFC, living in a parallel universe where the Patent Office works to accommodate the needs of its customers [applicants] said that it is “not binding on the courts, which will be free to entertain challenges to the USPTO’s application of the Final Rules, including its view of when amendments, arguments, and evidence could not have been submitted earlier, under the standard set forth in 5 U.S.C. § 706.”

The district court found that Final Rule 78’s requirement for the third and subsequent continuation applications was inconsistent with the text of 35 U.S.C. § 120 and this court’s precedent.

The CAFC held that:

We agree with the district court that Final Rule 78 is inconsistent with § 120, although we rely on narrower grounds.  Section 120 unambiguously states that an application that meets four requirements “shall have the same effect, as to such invention, as though filed on the date of the prior application.”  …

The use of “shall” indicates that these are the exclusive requirements, and that all applications that meet these requirements must receive the benefit provided by § 120.  …

Thus, Rule 78 is invalid because it attempts to add an additional requirement—that the application not contain amendments, arguments, or evidence that could have been submitted earlier—that is foreclosed by the statute.  Because the statute is clear and unambiguous with respect to this issue, the USPTO’s reliance on Chevron and Brand X is unavailing.

Expect everyone to find something to dislike about this ruling.  Don’t expect an en banc hearing.  Will Congress ever step up and fix this mess?

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