Recent Developments in Patent Administration: Implications for Innovation Policy

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Recent Developments in Patent

Administration: Implications for

Innovation Policy

-name redactedVisiting Scholar

July 28, 2011

Congressional Research Service

7-....

www.crs.gov

R41995

CRS Report for Congress

Prepared for Members and Committees of Congress

Recent Developments in Patent Administration: Implications for Innovation Policy

Summary

Congressional interest in the operation of the U.S. Patent and Trademark Office (USPTO) has

been demonstrated by extensive discussion of patent reform proposals that would impact that

agency. An increasing number of patent applications filed each year, the growing complexity of

cutting edge technology, and heightened user demands for prompt and accurate patent services

are among the challenges faced by the USPTO. Stakeholders have expressed concern over the

agency’s large backlog of patent applications that have been filed but have yet to receive

examiner review. Others have expressed concerns about the agency’s accuracy in approving

applications only on those inventions that fulfill the statutory requirements to receive a patent.

Even as discussion of patent reform has continued in Congress, the USPTO has actively engaged

in efforts to address its application backlog, maintain high levels of patent quality, and more

generally improve contemporary patent administration. The agency has launched a number of

initiatives in recent years to address perceived concerns over the patent-granting process,

including

•

The Patent Application Backlog Stimulus Reduction Plan, which allows an

individual who has filed multiple applications to receive expedited review of one

patent application when he agrees to withdraw another, unexamined application.

•

The Patent Prosecution Highway, which allows certain inventors who have

received a favorable ruling from the USPTO to receive expedited review from

foreign patent offices.

•

The Enhanced First Action Interview Pilot Program, which allows applicants to

conduct an interview with patent examiners early in the review process.

•

The “Three-Track Initiative,” under which an application would be placed into

one of three queues: prioritized examination, traditional examination, or delayed

examination.

•

The Adoption of Metrics for the Enhancement of Patent Quality, which

endeavors to improve USPTO mechanisms for measuring the quality of patent

examination.

A number of patent reform issues under consideration by the 112th Congress would potentially

impact upon the ability of the USPTO to respond to changing circumstances in the intellectual

property environment. In particular, two bills before the 112th Congress, H.R. 1249 and S. 23,

would grant the USPTO the ability to set its own fees, potentially allowing the agency to act in a

more flexible manner. In addition, discussion persists over whether the USPTO should have

greater ability to engage in substantive rulemaking.

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Recent Developments in Patent Administration: Implications for Innovation Policy

Contents

Introduction...................................................................................................................................... 1

Fundamentals of Patent Acquisition ................................................................................................ 2

Contemporary Challenges for the USPTO ...................................................................................... 4

Backlog of Applications ............................................................................................................ 4

Patent Quality ............................................................................................................................ 5

Previous Initiatives .................................................................................................................... 6

Patent Application Backlog Reduction Stimulus Plan ..................................................................... 7

Patent Prosecution Highway ............................................................................................................ 8

Enhanced First Action Interview Pilot Program .............................................................................. 9

Three-Track Initiative .................................................................................................................... 10

Patent Quality Metrics ................................................................................................................... 13

Congressional Issues and Options ................................................................................................. 14

Contacts

Author Contact Information........................................................................................................... 15

Acknowledgments ......................................................................................................................... 15

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Recent Developments in Patent Administration: Implications for Innovation Policy

Introduction

Growing recognition of the crucial role that technological innovation plays in the U.S economy

has led to increased congressional activity with respect to the intellectual property laws. As

evidenced by patent reform proposals currently before the 112th Congress,1 the operation of the

U.S. Patent and Trademark Office (USPTO) is among the subjects of legislative interest.

Stakeholders have expressed concerns over a number of issues, including the USPTO’s backlog

of filed but unexamined applications, as well as the quality of the patents issued by the agency.

Some knowledgeable observers have expressed concern that the USPTO does not possess the

capability to process the large number of patent applications that it receives.2 The growing

backlog of applications awaiting examiner review could potentially lead to long delays in the time

the USPTO requires to grant patents.3 Extended USPTO delays in reviewing applications may

increase industrial uncertainty about whether a patent will cover a particular technology or not.

Lengthy approval delays may also decrease the usefulness of the patent system for industries

subject to a brisk pace of technological change, as a patent on an invention that is rapidly

becoming obsolete has limited value.4

The USPTO has long strived to approve only those patent applications that meet the statutory

requirements for obtaining a patent. Because they meet all the requirements imposed by the

Patent Act, quality patents may be dependably enforced in court and employed as a technology

transfer tool.5 In contrast, improvidently granted patents may require firms to spend considerable

resources either obtaining a license or mounting a legal challenge to the patent.6 Some

commentators believe that within an era of increasingly complex, fast-moving technology, the

task of issuing quality patents on a consistent basis presents a considerable challenge to the

USPTO.7

The USPTO has actively engaged in efforts to address its application backlog and concerns over

patent quality, and more generally to improve contemporary patent administration. A number of

USPTO initiatives have responded to perceived concerns about the patenting process. Among

them are

•

The Patent Application Backlog Reduction Stimulus Plan, which allows an

individual who has filed multiple pending applications to receive expedited

See Patent Reform in the 112th Congress: Innovation Issues, CRS Report for Congress, by (name redacted) and

(name redacted).

See, e.g., Michael J. Meurer, “Patent Examination Priorities,” 51 William and Mary Law Review (Nov. 2009), 675.

See Patrick A. Doody, “How to Eliminate the Backlog at the Patent Office,” 37 American Intellectual Property Law

Association Quarterly Journal (2009), 395.

See Sharon Barner, “Strategies for the USPTO: Ensuring America’s Innovation Future,” 8 Northwestern Journal of

Technology & Intellectual Property (2010), 440.

See R. Polk Wagner, “Understanding Patent-Quality Mechanisms,” 157 University of Pennsylvania Law Review

(2009), 2135.

See James E. Malackowski & Jonathan A. Barney, “What is Patent Quality? A Merchant Banc’s Perspective,” 43 les

Nouvelles (June 2008), 123.

See Chris J. Katopis, “Perfect Happiness?: Game Theory as a Tool for Enhancing Patent Quality,” 10 Yale Journal of

Law and Technology (2007-08), 360.

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Recent Developments in Patent Administration: Implications for Innovation Policy

review of one patent application when he agrees to withdraw another,

unexamined application.8

•

The Patent Prosecution Highway (PPH), which potentially applies to inventors

who have filed patent applications in multiple countries. If the inventor receives a

favorable ruling from the patent office of the country where he filed first, he may

request expedited review in other patent offices participating in the PPH.9

•

The Enhanced First Action Interview Pilot Program, which allows participants to

conduct an interview with the patent examiner early in the application review

process.10

•

The “Three-Track Initiative,” under which applications would be placed into one

of three queues: prioritized examination, traditional examination, or delayed

examination.11

The Adoption of Metrics for the Enhancement of Patent Quality, which endeavors to improve

USPTO mechanisms for measuring the quality of patent examination.12

This report reviews a number of recent USPTO initiatives designed to enhance the patent

application review process. It begins by offering a brief review of patent acquisition proceedings

as well as challenges faced by the USPTO. This report then reviews the innovation policy issues

that are implicated by patent administration policies. Recent USPTO initiatives are then

discussed. The report closes by reviewing possible congressional options.

Fundamentals of Patent Acquisition

The U.S. Constitution provides Congress with the power “To promote the Progress of Science

and useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their ...

Discoveries....”13 In accordance with the Patent Act of 1952 (the “Patent Act”),14 an inventor may

seek the grant of a patent by preparing and submitting an application to the USPTO.15 Under

current law, each application is then placed into queue for eventual review by officials known as

examiners.16

Department of Commerce, USPTO, “Patent Application Backlog Reduction Stimulus Plan,” 74 Federal Register

(Nov. 27, 2009), 62285.

See, e.g., Department of Commerce, USPTO, “Patent Prosecution Highway (PPH) Program,” 73 Federal Register

(June 24, 2008), 35661.

Department of Commerce, USPTO, “Enhanced First Action Interview Pilot Program,” 1347 Official Gazette of the

USPTO 173 (Oct. 20, 2009).

Department of Commerce, USPTO, “Enhanced Examination Timing Control Initiative: Notice of Public Meeting,”

75 Federal Register (June 4, 2010), 31763.

Department of Commerce, USPTO,” Adoption of Metrics for the Enhancement of Patent Quality, Fiscal Year 2011,”

available at http://www.upsto.gov/patents/init_events/qual_comp_metric.pdf.

Article I, Section 8, Clause 8.

P.L. 82-593, 66 Stat. 792 (codified at Title 35 United States Code).

35 U.S.C. §111.

35 U.S.C. §131.

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The USPTO publishes most, but not all, pending patent applications “promptly after the

expiration of a period of 18 months” from the filing date.17 Among the applications that are not

published prior to grant are those that the applicant represents will not be the subject of patent

protection abroad. In particular, if an applicant certifies that the invention disclosed in the U.S.

application will not be the subject of a patent application in another country that requires

publication of applications 18 months after filing, then the USPTO will not publish the

application.

USPTO officials known as examiners then determine whether the invention disclosed in the

application merits the award of a patent. The USPTO examiner will consider a number of legal

requirements, including whether the submitted application fully discloses and distinctly claims

the invention.18 In particular, the application must enable persons skilled in the art to make and

use the invention without undue experimentation.19 In addition, the application must disclose the

“best mode,” or preferred way, that the applicant knows to practice the invention.20

The examiner will also determine whether the invention itself fulfills certain substantive

standards set by the patent statute. To be patentable, an invention must meet four primary

requirements. First, the invention must fall within at least one category of patentable subject

matter.21 According to the Patent Act, an invention that is a “process, machine, manufacture, or

composition of matter” is eligible for patenting.22 Second, the invention must be useful,23 a

requirement that is satisfied if the invention is operable and provides a tangible benefit.24 Third,

the invention must be novel, or different, from subject matter disclosed by an earlier patent,

publication, or other state-of-the-art knowledge.25 Finally, an invention is not patentable if “the

subject matter as a whole would have been obvious at the time the invention was made to a

person having ordinary skill in the art to which said subject matter pertains.”26 This requirement

of “nonobviousness” prevents the issuance of patents claiming subject matter that a skilled artisan

would have been able to implement in view of the knowledge of the state of the art.27

If the USPTO allows the patent to issue, its owner obtains the right to exclude others from

making, using, selling, offering to sell or importing into the United States the patented

invention.28 Those who engage in those acts without the permission of the patentee during the

term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined

from further infringing acts.29 The patent statute also provides for an award of damages “adequate

35 U.S.C. §122(b).

35 U.S.C. §112.

See Martek Biosciences Corp. v. Nutrinova, Inc., 579 F.3d 1363 (Fed. Cir. 2009).

35 U.S.C. §112.

See Bilski v. Kappos, ___ U.S. ___, 130 S.Ct. 3218 (2010).

35 U.S.C. §101.

Id.

See In re ‘318 Patent Infringement Litigation, 583 F.3d 1317 (Fed. Cir. 2009).

35 U.S.C. §102.

35 U.S.C. §103.

See KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007).

35 U.S.C. §271.

35 U.S.C. §283.

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to compensate for the infringement, but in no event less than a reasonable royalty for the use

made of the invention by the infringer.”30

The maximum term of patent protection is ordinarily set at 20 years from the date the application

is filed.31 At the end of that period, others may employ that invention without regard to the

expired patent. Although patent term is based upon the filing date, the patentee gains no

enforceable legal rights until the USPTO allows the application to issue as a granted patent. A

number of Patent Act provisions may modify the basic 20-year term, including examination

delays at the USPTO32 and delays in obtaining marketing approval for the patented invention

from other federal agencies.33

Like most rights, those provided by a patent are not self-enforcing. Patent owners who wish to

compel others to respect their proprietary interests must commence enforcement proceedings,

which most commonly consist of litigation in the federal courts.34 Although issued patents enjoy a

presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on

a number of grounds.35 The Court of Appeals for the Federal Circuit (Federal Circuit) possesses

nationwide jurisdiction over most patent appeals from the district courts.36 The Supreme Court

enjoys discretionary authority to review cases decided by the Federal Circuit.37

Contemporary Challenges for the USPTO

Backlog of Applications

The growing popularity of the patent system has placed strains upon the resources of the USPTO.

During 2010,38 the USPTO received 520,277 applications—an increase of 7.8% from the 482,871

applications it received during the 2009 fiscal year. The increase in filings is substantial when

viewed over a longer time frame. For example, the number of applications filed in 2005 was

417,508; and 293,244 applications were filed at the USPTO in 2000.39

The USPTO has candidly admitted that “the volume of patent applications continues to outpace

our capacity to examine them.”40 As a consequence, the USPTO reportedly holds an inventory in

35 U.S.C. §284.

35 U.S.C. §154(a)(2).

35 U.S.C. §154(b).

35 U.S.C. §156.

35 U.S.C. §281.

35 U.S.C. §282.

28 U.S.C. §1295(a)(1).

28 U.S.C. §1254(1).

References to particular years in this discussion refer to the USPTO fiscal year, which extends from October 1st to

September 30th of each calendar year.

USPTO, A New Organization for a New Millennium: Performance and Accountability Report Fiscal Year 2000,

available at http://www.uspto.gov/about/stratplan/ar.

USPTO, 2007–2012 Strategic Plan, at 6; http://patents.uspto.gov/web/offices/com/strat2007/ stratplan20072012.pdf.

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excess of 1.2 million patent applications that have yet to be reviewed by an examiner.41 In

addition, a USPTO examiner in 2009 would not review a patent application until, on average,

25.8 months after it was filed.42 The “first action pendency” during 2000 was 13.6 months.43

Many observers believe that if current conditions continue, the backlog and delay are likely to

grow at the USPTO in coming years.44

Long delays for patent approvals may negatively impact high technology industries by increasing

uncertainty about the availability and scope of patent rights. For market segments that feature a

rapid pace of innovation and short product cycles, such as consumer electronics, lengthy USPTO

delays may also significantly devalue the patent right. Put simply, by the time a patent issues, the

entire industry might have moved on to more advanced technologies.45 Commerce Secretary Gary

Locke reportedly described the length of time the USPTO requires to issue patents as

“unacceptable,” explaining that “[t]his delay causes uncertainty for inventors and entrepreneurs

and impedes our economic recovery.”46 USPTO Director David Kappos recently opined that

“[e]very quality patent application that sits on the shelf represents jobs not created.”47

In addition, under current law, USPTO delays may qualify certain patents for an extension of

term.48 For example, if the UPSTO does not respond to an application within 14 months of the

day it is filed, the term of a patent that results from that application is extended by one day for

each day of delay. Given that the average first action pendency is now almost 26 months, this rule

of “Patent Term Adjustment” may cause many U.S. patents to have a term that exceeds 20

years.49 A patent with a longer term may be of greater value to its proprietor, but also may impact

the ability of others to develop competing products.50

Patent Quality

Many observers believe that the USPTO should only issue patents on inventions that meet each of

the statutory criteria.51 Quality patents are said to enhance predictability within the marketplace

by clarifying the ownership and scope of private rights associated with particular inventions.

See John Schmid & Ben Poston, “Patent Delays Harmful to U.S. Economy, Commerce Secretary Says,” Milwaukee

Journal Sentinel (Aug. 23, 2009), available at http://www.jsonline.com/business/54199852.html. Other sources report

that the backlog is smaller. See, e.g.,

USPTO, Performance and Accountability Report Fiscal Year 2009; http://www.uspto.gov/web/ offices/com/

annual/2009/mda_02_02.html.

USPTO, 2003 Performance and Accountability Report, available at http://www.uspto.gov/about/

stratplan/ar/2003/040201_patentperform.jsp.

See, e.g., Jon Dudas et al., “Let the PTO Pay Its Own Way,” 198 New Jersey Law Journal no. 12 (Dec. 21, 2009),

975; Steven Andersen, “Out of Balance,” Inside Counsel (Nov. 1, 2009).

See Goldman, supra.

Schmid & Poston, supra.

Intellectual Property Office (UK), UK and US Announce Action Plan to Reduce Global Patent Backlogs (March 10,

2010); http://www.ipo.gov.uk/about/press/press-release/press-release-2010/press-release-20100310.htm.

35 U.S.C. §154(b).

See Patently O, Patent Term Adjustment Statistics (Jan. 13, 2010), available at http://www.patentlyo.com/

patent/2010/01/patent-term-adjustment-statistics.html.

See generally Scott E. Kamholz, “Patent Term Adjustment for Fun and Profit,” Intellectual Property Today (Aug.

2006), 24.

See Wagner, supra.

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When inventors, investors, managers, and other stakeholders possess confidence that patents are

reliably enforceable, they are said to have increased incentives to innovate, to finance research

and development, and to bring new technologies into the marketplace.52

In contrast, poor patent quality may encourage activity that is not socially productive. Private

parties may be required to engage in extensive due diligence efforts in order to determine whether

individual issued patents would be enforced by a court or not.53 Entrepreneurial speculators may

find it easy to obtain patents that can then be enforced against manufacturers and service

providers.54 Patent owners and investors may also be negatively impacted. A patentee may make

managerial decisions, such as building production facilities or hiring workers, based upon their

expectation of exclusive rights in a particular invention. If a patent is declared invalid by a court,

the patent owner—along with his financial backers—is stripped of this intellectual property right

without compensation.55

The goal of consistently high levels of patent quality may pose a considerable challenge for the

USPTO. Increasingly complex technologies appear to have resulted in patent applications that are

both lengthy and potentially more difficult for examiners to parse.56 In addition, technological

innovation is today a global phenomenon that is occurring at an increasingly rapid pace. As

compared to previous years, USPTO examiners may face more difficulty in locating the most

pertinent documents that describe the state of the art.57 Of course, the increasing number of patent

applications—along with a large backlog of unexamined applications—also potentially impacts

the ability of the USPTO to maintain high levels of patent quality.58

Previous Initiatives

The USPTO has developed a number of initiatives in order to address modern challenges of

patent administration. The agency has hired many new examiners, including 1,193 in 2006; 1,215

in 2007; and 1,211 in 2008.59 The significance of this hiring rate should be assessed in view of the

fact that in 2009, the total size of the patent examining corps was 6,242.60 The recent economic

downturn has caused the USPTO to limit new hiring, however.61 As the title of recent

congressional testimony of the Government Accountability Office indicates—“Hiring Efforts Are

Not Sufficient to Reduce the Patent Application”62—many observers are of the view that “[d]ue

Id.

See Lee Petherbridge, “On Addressing Patent Quality,” 158 University of Pennsylvania Law Review PENNumbra

(2009), 13.

See Susan Walmsley Graf, “Improving Patent Quality Through Identification of Relevant Prior Art: Approaches to

Increase Information Flow to the Patent Office,” 11 Lewis & Clark Law Review (2007), 495.

See Craig Allen Nard, “Certainty, Fence Building, and the Useful Arts,” 74 Indiana Law Journal (1999), 759.

See John R. Allison & Mark A. Lemley, “The Growing Complexity of the United States Patent System,” 82 Boston

University Law Review (2002), 77.

Id.

See Katopis, supra.

USPTO, A New Organization for a New Millennium: Performance and Accountability Report Fiscal Year 2008,

available at http://www.uspto.gov/web/offices/com/annual/2008/mda_02_02.html.

USPTO, A New Organization for a New Millennium: Performance and Accountability Report Fiscal Year 2009,

available at http://www.uspto.gov/about/stratplan/ar/2009/2009annualreport.pdf.

Id.

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to both monetary and infrastructure constraints, the USPTO cannot simply hire examiners to stem

the tide of applications.”63

The USPTO also proposed rules with respect to claims and so-called continuing applications that

were designed to reduce its examination burdens. These rules would have limited the number of

claims that could be filed in a particular patent application, unless the applicant supplied the

USPTO with an “Examination Support Document” in furtherance of that application.64 They

would have also limited the ability of applicants to re-file their applications—an opportunity

more technically termed a “continuing application”—absent a petition and showing by the patent

applicant of the need for such an application.65 These rules never came into effect due to a

temporary court ruling enjoining their implementation.66 In the face of considerable opposition to

these rules by many members of the patent bar and innovative firms, the USPTO announced on

October 8, 2009, that it was rescinding the rules package entirely.67

The USPTO has continued to press forward with a number of additional initiatives. The

remainder of this report reviews several of these programs.

Patent Application Backlog Reduction

Stimulus Plan

In November, 2009, the USPTO announced a “Patent Application Backlog Reduction Stimulus

Plan.”68 Under that program, an applicant may choose to abandon a previously filed application

that the USPTO has not yet reviewed. If the applicant does so, he may select another application

to be examined on an expedited basis. According to the agency, the Plan “allows applicants

having multiple applications currently pending before the USPTO to have greater control over the

priority with which their applications are examined while also stimulating a reduction of the

backlog of unexamined patent applications pending before the USPTO.”69

For its supporters, the advantage to the USPTO of the Patent Application Backlog Reduction

Stimulus Plan is straightforward—the voluntary removal of unexamined applications from its

backlog. Inventors might also benefit from obtaining more prompt review of a particular patent

(...continued)

Government Accountability Office, U.S. Patent and Trademark Office: Hiring Efforts Are Not Sufficient to Reduce

the Patent Application Backlog (Feb. 27, 2008), available at http://www.gao.gov/new.items/d08527t.pdf.

See Kevin Myhre, “Tafas v. Dudas and Tafas v. Doll: The Problem of Efficient Innovation,” 16 Boston University

Journal of Science and Technology Law (2010), 157.

See Depart. of Commerce, USPTO, Final Rule, “Change to Practice for Continued Examination Filings, Patent

Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent Applications,” 72 Federal

Id.

See Tafas v. Doll, 559 F.3d 1345 (Fed. Cir.), vacated, 328 Fed. Appx. 658 (Fed. Cir. 2009).

USPTO, Press Release, USPTO Rescinds Controversial Patent Regulations Package Proposed by Previous

Administration (Oct. 8, 2009), available at http://www.uspto.gov/news/09_21.jsp.

Department of Commerce, USTPO, “Patent Application Backlog Reduction Stimulus Plan,” 74 Federal Register

(Nov. 27, 2009), 62285.

Department of Commerce, USPTO, “Extension of the Patent Application Backlog Reduction Stimulus Plan,” 75

Federal Register (Nov. 22, 2010), 71072.

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application. For example, an inventor may believe that one application relates to a technology that

is particularly significant to his business plans, while the marketplace outlook of the invention

claimed in another application is poor. In that circumstance, he may be well-served by expediting

consideration of the former application while abandoning the latter.70

The Patent Application Backlog Reduction Stimulus Plan was originally restricted to applicants

that qualified as “small entities”—a category that generally consists of individuals, small business

concerns, and nonprofit organizations.71 The USPTO subsequently allowed any applicant to

participate in the Plan.72 All applicants are limited to 15 individual uses of the Plan—that is to

say, the abandonment of 15 unexamined applications in exchange for expedited review of 15

other applications.73

The USPTO will continue to operate the Patent Application Backlog Reduction Stimulus Plan

until December 31, 2011, or until 10,000 applications have received expedited review. The

USPTO retains the option of further extending the Plan, however. In view of applicant use of the

Plan, the limitation of 10,000 applications may not be significant. Reportedly the Plan has thus far

been the subject of only limited participation.74 It should be appreciated, however, that the Plan

remains a relatively recent initiative and that innovative industry may make greater use of it in the

future.

Patent Prosecution Highway

There is no uniform, global patent system. Patents issued by the USPTO have no effect in other

countries. Conversely, patents issued by foreign patent offices are not legally operative in the

United States. For the most part, patents must be obtained on a nation-by-nation basis.75 An

individual or firm that develops a new technology, and that seeks protection in more than one

country, must therefore file multiple patent applications claiming the same invention. In turn, the

patent offices of different nations must commit significant effort towards examining applications

that are identical or similar to those filed elsewhere.

The Patent Prosecution Highway (PPH) is an initiative intended to rationalize and expedite

multinational patent acquisition in light of these legal realities. The PPH consists of a series of

bilateral arrangements between the patent offices of a number of nations. In broad outline, the

PPH designates one national office as the Office of First Filing (OFF) and the other as the Office

of Second Filing (OSF). If the OFF approves of at least one claim, then the applicant may request

See Warren K. Mabey, Jr., “Deconstructing the Patent Application Backlog ... A Story of Prolonged Pendency, PCT

Pandemonium & Patent Pending Pirates,” 92 Journal of the Patent and Trademark Office Society (2010), 208.

37 C.F.R. §1.27.

Department of Commerce, USPTO, “Expansion and Extension of the Patent Application Backlog Reduction

Stimulus Plan,” 75 Federal Register (June 24, 2010), 36063.

Id.

See Perry E. Van Over, “A New Pilot Program: Patent Application Backlog Reduction Stimulus Plan,” Orthopreneur

(March/April 2010), 36.

See Robert R. Willis, “International Patent Law: Should United States and Foreign Patent Law Be Uniform? An

Analysis of the Benefits, Problems, and Barriers,” 10 North Carolina Journal of Law & Technology (Spring 2009),

283.

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that the OSF “fast track” the examination of corresponding claims in an application filed before

that agency.76

Consider, for example, the PPH arrangement between the USPTO and Canadian Intellectual

Property Office (CIPO). Suppose that a pharmaceutical firm initially files an application at the

USPTO, and then subsequently files at the CIPO, claiming the same chemical compound. The

USPTO subsequently issues an “Office Action” approving the U.S. application. The firm may

then contact the CIPO and request expedited review of the Canadian application.

The PPH potentially allows inventors to obtain patents more promptly and efficiently. Each

participating patent office may also potentially benefit from the work previously done by another

office. For example, examiners in the OSF may be able to take advantage of work done by

examiners in the OFF—including searches of the relative technical literature and analysis of the

applicant’s invention—when conducting their own review of the application.77

Although this worksharing benefit is potentially substantial, the various PPH initiatives by no

means guarantee that a favorable result at the USPTO will be followed elsewhere. Differences in

the patent laws of different nations, or simply a differing assessment of the merits of the case by a

foreign patent examiner, may potentially lead to rejections overseas even though a U.S. patent

was granted. Nonetheless, the allowance rate of some foreign applications that have been

previously approved in the United States is reportedly higher than average.78

The USPTO has currently entered into PPH arrangements with over a dozen foreign patent

offices, including the European Patent Office and the patent offices of Australia, Canada,

Germany, Japan, Korea, and the United Kingdom. A number of bilateral PPH arrangements exist

between two foreign patent offices as well. For example, the European and Japanese Patent

Offices currently operate a PPH between them. Certain of these programs have been established

as pilot programs and could potentially be discontinued in the future.79

Enhanced First Action Interview Pilot Program

Patent applicants generally interact with the USPTO through the exchange of formal

correspondence with an examiner. At times, applicants may wish to discuss their application with

the examiner in person, telephonically, or even through the exchange of email. In patent parlance,

each of these less formal exchanges is termed an “interview.” Agency policy stipulates that an

interview will generally not be held prior to the initial written communication by the examiner to

the applicant (the “First Office Action”).80

See Todd Mattingly, et al., “Still Under Construction: The Patent Prosecution Highway and the Triway: Are These

the Roads to a World Patent Office?,” 20 Intellectual Property & Technology Law Journal (Nov. 2008), no. 11 at 23.

See Mabey, supra.

See, e.g., Shoichi Okuyama et al., “A Comparative View of Nanotechnology Patents in Japan and the U.S.: A Case

Study of Two Patents,” 5 Nanotechnology Law & Business (Winter 2008), 455 (“The authors have found that, under

the PPH Japanese Examiners seem to be biased to give weight to the results of the U.S. prosecution, and thus more

likely to give allowance based on the examination results in the United States.”)

See J. Scott Larson, “Excessive Harmonization of International Patent Prosecution May Strike Discord in Patent

Litigation,” 22 Intellectual Property & Technology Law Journal no. 7 at 6 (July 2010).

Department of Commerce, USPTO, Manual of Patent Examining Procedure, Section 713.02.

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The USPTO has explored an alternative to this longstanding procedure though an “Enhanced

First Action Interview Pilot Program.” Applicants that choose to participate receive a PreInterview Communication providing the results of a technical literature search conducted by the

examiner. The applicant may then conduct an interview with the examiner with the hope of

expediting approval of the application.81 This program originally applied only to certain divisions

of the USPTO, but was recently extended to cover the entire agency under the title “Full First

Action Interview Pilot Program.”82

The USPTO reports that this pilot program has yielded several benefits to participants, including

the ability to advance prosecution of an application, resolve issues one-on-one with the examiner,

and potentially facilitate early allowance.83 The program has been operated on a provisional basis,

and was recently extended through May 16, 2012, with future extensions possible.84

Three-Track Initiative

The USPTO recently announced a “Three-Track Initiative” that would place each patent

application into one of three separate queues.85 Through this mechanism, inventors could pay a

surcharge to obtain more prompt review of their applications; or alternatively delay examination

and the payment of corresponding fees for those services. According to the White House report

“A Strategy for American Innovation: Securing Our Economic Growth and Prosperity,” the

Three-Track Initiative “will allow applicants to prioritize applications, enabling the most valuable

patents to come to market within 12 months.”86

Under current procedures, the USTPO dockets each patent application in the order it was

received.87 Some regulatory exceptions to this general practice allow inventors to both expedite

and delay review of their applications, however. Inventors must ordinarily petition the USPTO to

obtain this distinct treatment.88

An inventor may currently expedite USPTO review of his application by filing a “petition to

make special” under the agency’s accelerated examination program. This program aspires to

complete examination of applications within 12 months of the filing date. A patent application

must have no more than 20 claims to participate in the program. In addition, applicants must

submit a “support document” reporting the results of a preexamination search for prior art

references and explaining why their invention is patentable over these references. A fee of $130

applies, although the USPTO waives the fee if the invention will enhance the quality of the

Department of Commerce, USPTO, “Enhanced First Office Action Interview Pilot Program,” 1347 Official Gazette

of the USPTO (Oct. 20, 2009), 173.

Department of Commerce, USPTO, “Full First Action Interview Pilot Program,” available at http://www.uspto.gov/

patents/init_events/faipp_full_preog.pdf.

Id.

Department of Commerce, USPTO, “Enhanced Examination Timing Control Initiative; Notice of Public Meeting,”

75 Federal Register (June 4, 2010), 31763 (“Three-Track Notice”).

The report is available at http://www.whitehouse.gov/innovation/strategy.

Department of Commerce, USPTO, Manual of Patent Examining Procedure, Section 708.

See Bernard P. Codd, “USPTO to Introduce New Fast Track Examination Program,” 23 Intellectual Property &

Technology Law Journal (June 2011) no. 6 at 19.

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Recent Developments in Patent Administration: Implications for Innovation Policy

environment, relates to the development or conservation of energy resources, or contributes to

counterterrorism.89

The USPTO will also expedite review of the application for applicants 65 years or older, or for

those in poor health such that they might not be able to assist in the prosecution of their

applications if that procedure ran its normal course. The USPTO also operates a “Green

Technology Pilot Program” that allows applications relating to clean technologies, such as

environmental quality, energy conservation, development of renewable energy resources, and

greenhouse gas emission reductions. This program is set to expire on December 31, 2011,

although it may be extended further in the future. No fee or support document is required under

either of these programs.90

The USPTO also allows inventors to delay review of their applications. In order to defer, the

applicant must pay an additional $130 processing fee and, at the outset, choose the number of

months of deferral. The maximum period of deferral is 36 months.91 Applicants have reportedly

used this procedure infrequently.92

As noted, the USPTO is contemplating a Three-Track Initiative that would provide additional

mechanisms for governing the review of patent applications. Under this system, the USPTO

would place all applications into one of three distinct separate queues: an accelerated Track One;

traditional examination in Track Two; and a deferral of examination in Track Three. Entering

Track One would require a prioritized examination fee of $4,000. The application would then be

placed within a docket designed to provide a final disposition of the application within twelve

months of the prioritized status grant. A Track One application must have no more than four

independent claims and thirty claims total. Prioritized status is forfeited if the applicant ever

requests an extension of time to respond to a USPTO communication.93

In contrast, if an inventor requests that a particular application be deferred, it is placed in Track

Three. The inventor must request that the application be examined within 30 months from the

filing date. Upon receipt of such a request, the USPTO will place the application into queue for

review by an examiner.94

The remaining option, Track Two, includes applications that have been neither prioritized nor

deferred. Track Two applications would be docketed immediately and will be reviewed by an

examiner in the order in which they are received.95

The Three-Track Initiative would also significantly change USPTO procedures with respect to

applications that were first filed outside the United States—for example, at the European Patent

Office or the Japanese Patent Office. The USPTO currently does not consider the national origin

of the application when it is placed into queue for examination. Under the proposal, an

Id. at §708.02.

Id.

37 C.F.R. §1.103(d).

See Department of Commerce, USPTO, “Request for Comments and Notice of Roundtable on Deferred Examination

of Patent Applications,” 74 Federal Register (Jan. 28, 2009), 4946.

Three-Track Notice, supra, at 31765-66.

Id. at 31766.

Id.

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application will only be placed into one of the three tracks if it was originally filed in the United

States. Applications that were originally filed abroad would not be docketed for examination at

all. The USPTO would take no action on a foreign-origin application until it received copies of

(1) the prior art search conducted by the foreign office, (2) the initial communication of the

foreign office to the USPTO, and (3) the applicant’s reply to that communication.96

An example illustrates the working of this procedure. Suppose that a German inventor filed an

application at the European Patent Office on December 1, 2011. On December 1, 2012, the

inventor then files the same application at the USPTO. Under the Three-Track Initiative, the

USPTO would not consider the application until the European Patent Office had conducted a

search of the literature, communicated its initial review of the European application to the

applicant, and received a reply from the applicant. In contrast, an application that was first filed in

the USPTO—by a U.S. or foreign citizen—would be placed on one of the three tracks

immediately.

The USPTO initially planned to implement Track One of the Three-Track Initiative as of May 4,

2011.97 However, on April 29, 2011, the USPTO announced that it would delay implementation

of the program due to reduced spending authority in the Full-Year Continuing Appropriations Act

of 2011. According to USPTO Director David Kappos, “[w]ithout the resources to hire a

sufficient number of examiners to implement Track One, we must postpone the effective date of

the program until we are in a position to implement it successfully while ensuring there will be no

adverse impact on non-prioritized examination applications.”98

According to the USPTO, the Three-Track Initiative “recognizes that the traditional ‘one-sizefits-all’ examination timing may not provide applicants much opportunity to choose the

examination timing they need.”99 The Three-Track Initiative has nonetheless attracted

controversy. Some observers believed that the program might favor larger or wealthier firms over

start-ups or smaller enterprises.100 Others were concerned that if industry made significant use of

Track One, the ability of the USPTO to review Track Two applications might be diminished.101

The disparate treatment of applications based on the office of first filing has also aroused

controversy. According to the USPTO, this “proposal would increase the efficiency of

examination of [foreign] applications by avoiding or reducing duplication of efforts by the office

of first filing and the USPTO.”102 The USPTO also noted that “major patent filing jurisdictions

like the Japanese and European patent office[s] have already adopted office-drive systems in

which they address the applications for which they are the office of first filing.”103

Id. at 31766-67.

Department of Commerce, USPTO, “Changes to Implement the Prioritized Examination Track (Track I) of the

Enhanced Examination Timing Control Procedures,” 76 Federal Register (April 4, 2011), 18399.

Department of Commerce, USPTO, “Changes to Implement the Prioritized Examination Track (Track I) of the

Enhanced Examination Timing Control Procedures,” 76 Federal Register (April 29, 2011), 23876.

USPTO, Three-Track Notice at 31765.

100

See Angus Loten, “Expediting U.S. Innovation Comes at a Cost,” The Wall Street Journal (Feb. 3, 2011), B7.

101

American Intellectual Property Law Association, “Comments on ‘Enhanced Examination Timing Control

Initiative’,” (Aug. 20, 2010), available at http://www.aipla.org (“AIPLA Comments”).

102

USPTO, Three-Track Notice at 31764.

103

Id.

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The United States is a signatory to the Paris Convention for the Protection of Industrial Property

and also a member state of the World Trade Organization. Article 2 of the Paris Convention and

Article 3 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights

(TRIPS Agreement) requires that nationals of foreign signatory states be treated as well as U.S.

citizens. Even if the Three-Track Initiative may be justified under these measures, some observers

have expressed concerns that “placing foreign nationals at a distinct disadvantage in their pursuit

of patent rights in the U.S. ... could trigger, among other things, the imposition of new barriers for

U.S. inventors to obtain patent rights in foreign jurisdictions.”104

Patent Quality Metrics

The USPTO has for many years maintained an internal quality control group that monitors the

quality of the patent examination process by reviewing a sample of approved patents.105 In 2011,

the USPTO endeavored to increase the effectiveness and transparency of its quality review

procedure through the implementation of new metrics that measure patent quality.106 These

metrics were designed to “reveal the presence of quality issues during examination” and “aid in

identification of their sources so that problems may be remedied by training....”107

The USPTO identified seven individual metrics that are then tallied to produce a composite score.

The seven metrics are: (1) the correctness of the final decision on the application (i.e., whether

the examiner properly allowed or rejected the application), (2) the propriety of the examiner’s

actions taken during the course of the examination, (3) the degree to which the examiner’s initial

search of the technical literature comports with best agency practices, (4) the extent to which the

examiner’s initial review of the application follows best agency practices, (5) whether global

USPTO data indicates compact, robust prosecution, (6) an external survey of patent applicants

and practitioners, and (7) an internal survey of patent examiners.108 The USPTO displays the

seven individual metrics, as well as the calculated composite metric, on the “Data Visualization

Center” or “dashboard” portion of its website.109

The new USPTO metrics have, for the most part, been positively received by the patent bar. As

explained by Douglas K. Norman, President of the Intellectual Property Owners Association,

“metrics for measurement of appropriate indicia of patent quality, as well as their collection,

reporting, review and analysis, are fundamental to evaluating the success of patent systems in

issuing quality patents.”110 However, some commentators believe that certain of the metrics may

104

AIPLA Comments, supra, at 3.

See Eric B. Chen, “Conflicting Objectives: The Patent Office’s Quality Review Initiative and the Examiner Count

System,” 10 North Carolina Journal of Law and Technology Online Edition (2008), 28.

106

Department of Commerce, USPTO, “Requests for Comments on Enhancement in the Quality of Patents,” 74

Federal Register (Dec. 9, 2009), 65093.

107

Department of Commerce, USPTO, “Adoption of Metrics for the Enhancement of Patent Quality, Fiscal Year

2011,” available at http://www.uspto.gov/patents/init_events/qual_comp_metric.pdf.

108

Id. at 3-4.

109

The “Data Visualization Center” is available at http://www.uspto.gov/dashboards.

110

Statement of Douglas K. Norman, President, Intellectual Property Owners Association, Before the House

Committee on the Judiciary, Subcommittee on Intellectual Property, Competition, and the Internet (Jan. 25, 2011)

(Appendix at 2).

105

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Recent Developments in Patent Administration: Implications for Innovation Policy

not always reflect an accurate and efficient review of a patent application and have suggested that

other metrics—such as the outcomes of patent litigation—might also be introduced.111

Congressional Issues and Options

At the same time the USPTO has engaged in changes to its administrative practices in order to

address concerns over its backlog of unexamined applications and to improve patent quality, the

112th Congress is engaged in extensive patent reform discussions. Two bills, H.R. 1249 and S. 23,

each titled the American Invents Act, would make a number of changes to current patent law.

Reform proposals within these bills bear upon the ability of the USPTO to develop and

implement new initiatives.

In particular, both H.R. 1249 and S. 23 propose that the USPTO be given the authority to “set or

adjust by rule any fee established or charged by the Office.”112 Any fees set must, in the

aggregate, cover the estimated costs of the agency’s services. Under H.R. 1249, USPTO authority

to set fees terminates six years following the enactment of the statute; S. 23 does not include a

sunset provision. This proposal would provide the USPTO with greater flexibility to adjust its fee

schedule absent congressional intervention. This capacity may provide the agency with

heightened capability to develop new initiatives without need for congressional activity.

The statutory authority of the USPTO to promulgate regulations pertaining to patent law

procedures and substantive law also bears upon current patent administration reform efforts.

Current law provides the USPTO with the ability, among others, to establish regulations that

“govern the conduct of proceedings” before it.113 However, it should be appreciated that

“Congress has not vested the [USPTO] with any general substantive rulemaking power....”114

Certain of the predecessor versions of the America Invents Act would have enhanced the

USPTO’s regulatory authority. For example, in the 110th Congress, H.R. 1908 would have

allowed the USPTO to “promulgate regulations to ensure the quality and timeliness of

applications and their examination....”115 However, in the 112th Congress, neither H.R. 1249 nor

S. 23 includes such a provision. USPTO experience with current and future initiatives may

provide Congress with guidance over the most appropriate scope of that agency’s regulatory

authority.

New realities within the intellectual property environment, including a growing number of patent

applications, increasingly complex technologies, and heightened user demand for prompt and

accurate patent services have encouraged the USPTO to innovate in recent years. Reforms to

longstanding patent examination practices were introduced in an effort to maintain high levels of

patent quality and to reduce the backlog of applications awaiting review by the examiner corps.

Along with judicial opinions and potential legislative reforms, the recent USPTO initiatives form

a notable part of the changing patent landscape within the United States.

111

Elysium Digital’s Response to the U.S. Patent Office’s Request for Comments on Enhancement in the Quality of

Patents of Dec. 9, 2009, available at http://www.uspto.gov.

112

H.R. 1249 at §9; S. 23 at §9.

113

35 U.S.C. §2(b)(2).

114

Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1479 (Fed. Cir. 1998) (en banc) (Newman, J., additional views).

115

H.R. 1908, §12(a).

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Recent Developments in Patent Administration: Implications for Innovation Policy

Author Contact Information

(name redacted)

Visiting Scholar

[redacted]@crs.loc.gov, 7-....

Acknowledgments

This report was funded in part by a grant from the John T. and Catherine D. MacArthur Foundation.

Congressional Research Service

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