IP Law Bulletin

May 17, 2011

The recent federal budget compromise will cut approximately $100,000,000 from the fees collected by the United States Patent and Trademark Office (USPTO) and divert that money to other federal programs. The cuts result from a budget provision that limits USPTO spending to $2.09 billion for the 2011 fiscal year, despite expected fee collections of about $2.19 billion for the same period.  

In response to the funding cuts, USPTO Director David Kappos announced that the expedited patent examination program and the opening of the Detroit satellite office would be indefinitely postponed. The cuts will also directly affect the examination corps as Director Kappos also instituted a hiring freeze and announced cuts to overtime, training, and expenses. Funding for the outsourcing of Patent Cooperation Treaty (PCT) searches will also be substantially reduced.  

The budget cuts are also likely to have some effect on USPTO Patent Commissioner Robert Stoll’s goal to issue an Office Action within 10 months of patent application filing and the interim goal that every application filed on or before June 7, 2009 should at least have received an initial Office Action by September 30, 2011. In February, Stoll announced an initiative called “Clearing the Oldest Patent Applications” (COPA) to achieve these goals. COPA is designed to address the backlog of the oldest unexamined applications, i.e, those that have been waiting at least 16 months for a first Office Action. COPA allows Examiner workloads to be rebalanced by sharing resources both within and across Technology Centers by identifying technological overlaps between art units and allowing Technology Centers to match backlog applications to available resources. Despite the funding cuts, the COPA initiative remains in place and has apparently had an impact on these older applications. For example, at the end of February 2011, there were 233,780 applications that fell within the scope of COPA. By the end of March 2011, that number had been reduced by 36,197 applications to 197,583.   

Although COPA is helpful to address the backlog of older applications by refocusing attention on unexamined cases, the short term effect is to direct attention away from other in-process applications. As a result, the Patent Office may be slower in responding to an Request for Continued Examination (RCE) or other submissions in pending applications. These slower response times for pending applications may also be further exacerbated by $100,000,000 diverted from the USPTO’s fee collections.  

The current patent reform legislation pending in the U.S. House of Representatives would effectively put an end to fee diversion. The House Judiciary Committee voted in favor of the House bill (H.R. 1249) on April 14, 2011, and it may be up for a full vote when Congress returns in May. If this legislation becomes law, the USPTO will be in a better position to meet its strategic objectives.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

The U.S. Senate recently passed the America Invents Act (AIA) by an overwhelming margin.  Though this is the fourth consecutive Congress in which comprehensive patent reform legislation has been introduced, the AIA appears to have significant traction and may end up being the first substantial Congressional overhaul of the U.S. patent system in nearly 60 years if approved by the U.S. House of Representatives.

On January 25, 2011, Senator Patrick Leahy (D-VT) introduced the Patent Reform Act of 2011 to the Senate Judiciary Committee.  As introduced, the Patent Reform Act of 2011 proposed numerous changes to the patent system.  Notable provisions included transitioning to a first-inventor-to-file system, establishing a post-grant review process, granting the United States Patent and Trademark Office (USPTO) the authority to set its own fees, and providing a formula for calculating damages.

After receiving approval by the Senate Judiciary Committee, the full Senate began debating the bill, which was renamed the AIA.  The version ultimately adopted by the Senate additionally includes a provision to end fee diversion from the USPTO.  Further, the final version of the AIA removes provisions from the Patent Reform Act of 2011 that would have allowed judges to oversee jury damage awards, raised the threshold to claim certain types of damages, and required transfer of certain cases to more convenient venues.  The Senate passed the AIA by a vote of 95-5 on March 8, 2011.  The remainder of this article highlights several important provisions of the AIA that could substantially affect practice before the USPTO.    

Enactment of the AIA would eliminate a major philosophical cornerstone of the U.S. patent system—that the first inventor is generally entitled to the patent rights, regardless of the timing of the filing of an application in relation to other applicants.  This is in stark contrast to the remainder of the world, which uses a “first-to-file” system in which priority of invention is established by the earliest effective filing date of a patent application disclosing the invention.  Though Senator Diane Feinstein (D-CA) proposed an amendment to the AIA that would have removed the first-to-file provisions (arguing that the transition would be “severely harmful to innovation and especially burdensome on small inventors, start-ups, and small businesses”), proponents of the first-to-file paradigm ultimately voted down the amendment by a vote of 87-13.  The proponents of the first-to-file system stressed the continuing availability of provisional applications, which would allow small entities to secure priority rights without expending significant resources.  

The AIA additionally includes provisions with the goal of increasing patent quality while expediting examination.  For example, the AIA would increase third party involvement through new processes such as pre-issuance third-party submissions and third-party requested post-grant review.  Further, the AIA would establish prioritized examination of patent applications “important to the national economy competitiveness,” such as those applications involving clean energy.  Additionally, in an effort to increase inventor outreach, enhance examiner recruitment and retention, decrease the backlog of unexamined applications, and improve the quality of patent examination, the AIA would authorize the USPTO Director to establish additional USPTO satellite offices in the next three years.

Enactment of the AIA could significantly impact U.S. patent law.  Although the bill has moved rapidly through the Senate, a parallel patent reform bill has yet to be introduced in the House.  Nutter attorneys will continue to monitor progress of this legislation and provide updates in future issues.   

This advisory was prepared by Nutter's Intellectual Property practice.  For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances.  Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

The United States Patent and Trademark Office (USPTO) recently published supplementary examination guidelines for determining compliance with 35 U.S.C. § 112 (“the § 112 Guidelines”).  Similar to the 2010 KSR Guidelines Update released last year, the § 112 Guidelines provide best practices for examiners as well as examples of compliant and non-compliant claims from recent case law.  USPTO Director David Kappos noted that “[o]ptimizing patent quality by providing clear notice to the public of the boundaries of the inventive subject matter protected by a patent grant fosters innovation and competitiveness.”  

The § 112 Guidelines broadly provide a three step framework for examining claims with respect to § 112, and in particular with respect to § 112, second paragraph.  In the first step, claims should be interpreted in order to “fully understand the subject matter of the invention,” and “ascertain the boundaries of that subject matter.”  The § 112 Guidelines remind examiners that claims pending in an application should be given their “broadest reasonable interpretation consistent with the specification as it would be interpreted by one of ordinary skill in the art.”  The Guidelines stress that addressing definiteness during prosecution, when the claims can be amended and no presumption of validity exists, is far superior to addressing the issue later in the life of the patent.

The second step is determining whether the broadly interpreted claim language is definite.  This involves an inquiry as to whether one of ordinary skill in the art “would understand what is claimed when the claim is read in light of the specification.”  Further consideration, complete with examples, is given to the use of functional claim elements, terms of degree, subjective terms, Markush groups, and dependent claims.  The § 112 Guidelines also provide information on the requirement of 37 C.F.R. § 1.75(d)(1) that claim terms have clear support and antecedent basis.  Finally, the Guidelines lay out the framework for examining claims under § 112, paragraph six, including the interaction between paragraphs two and six, and implications for computer-implemented means-plus-function claim limitations.

The third step in the § 112 analysis is resolving indefinite claim language.  Here, the § 112 Guidelines stress best practices for examiners including establishing a clear record through explanation of adopted claim interpretations.  Principles of compact prosecution are also encouraged.  These include opening “lines of communication” with applicants by conducting an interview before resorting to an indefiniteness rejection.  The Guidelines also recommend that examiners review “each claim for compliance with every statutory requirement for patentability in the initial review of the application and identify all of the applicable grounds of rejection in the first Office Action to avoid unnecessary delays.”  Finally, examiners are reminded to include claim interpretations in their reasons for allowance if the record is at all unclear on the issue.

The § 112 Guidelines published in the Federal Register on February 9, 2011, and the USPTO will accept public commentary on the guidelines for 60 days.  While the USPTO is quick to note that these guidelines do not represent substantive rulemaking, they do provide an insight into the practices that the USPTO wants examiners to adopt during prosecution.  Much like the 2010 KSR Guidelines Update, the § 112 Guidelines should prove to be a useful aid to applicants and practitioners when drafting claims or arguing § 112 rejections.

This advisory was prepared by Nutter's Intellectual Property practice.  For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances.  Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

The White House’s recent launch of its “Startup America” initiative formally introduced the flexible “Three-Track” patent examination program.  This program is intended to give applicants more control over the processing of their patent applications, while simultaneously providing a more efficient process for getting innovation to market.  

Under the Three-Track program, applicants can choose whether to request prioritized examination of an original non-provisional application (Track I), obtain standard processing under the current procedure (Track II), or request a delay lasting up to 30 months (Track III).  Accordingly, inventions that are closer to being “market-ready” (e.g., those seeking capital or accelerated market penetration) might benefit from the “fast track” option, while more nascent inventions might benefit from the extended timeframe of Track III.  

Although the details of the Three-Track program are still being finalized, Director Kappos of the United States Patent and Trademark Office (USPTO) indicated that the “fast track” option will be implemented immediately due to the public’s overwhelming support following the initial publication for comment of the Three-Track program in June 2010.  A notice of proposed rulemaking on Track I was published in the Federal Register on February 4, 2011.

Under Track I, applicants will have the opportunity to have an original U.S. non-provisional application fully examined within 12 months of its filing date for a proposed fee of $4000 (though a reduced fee is being proposed for small entities).  Additionally, applicants claiming priority to a foreign application that has not yet received a first office action in the priority country can also request prioritized examination.

Track I applications will be limited to four independent claims and 30 total claims and must be filed through the USPTO’s electronic filing system.  Though applicants will not be prohibited from requesting extensions of time, such extensions will terminate the prioritized examination with no refund of the Track I fee.

In the first year, the USPTO will be limiting the program to 10,000 Track I applications to ensure that each of the expedited applications are examined within the 12 months.  Refunds are not available if the 12 month goal is not met, as the applicant still will have received “advancement of examination.”

This advisory was prepared by Nutter's Intellectual Property practice.  For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances.  Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

As many patent practitioners are aware, substantial redundancy exists in the worldwide prosecution of patent applications.  The Patent Prosecution Highway (PPH) is intended to reduce this redundancy by allowing the patent office in a country of second filing to take advantage of the work of the patent office in the country of first filing.  When a PPH alliance is in place, an office of second filing (OSF) can use the search results from the office of first filing (OFF) to accelerate their examination.  Additionally, because only allowed claims from the OFF are eligible for examination in the OSF, claim amendments have usually already been made to distinguish over the relevant prior art, further accelerating prosecution of PPH applications.

Over the past several years, PPH programs have increased allowance rates and reduced the number of office actions in the OSF.  For example, the United States Patent and Trademark Office (USPTO) has reported a PPH application allowance rate of about 94% (more than double the usual allowance rate), while the average number of office actions for PPH applications has been halved.  Similarly, the Canadian Intellectual Property Office (CIPO) has reported that approximately 35% of PPH applications were deemed allowable without an examiner’s report, and many of the remaining PPH applications resulted in an examiner’s report that merely required correction of informalities.  In light of the benefits to the patent offices and applicants alike, the trial PPH program established between the USPTO and CIPO in January 2008 was made permanent as of January 29, 2011.  

While relying on the PPH program can lead to clear advantages such as expedited prosecution and early enforcement (which may be critical in rapidly evolving technologies), the PPH program is not without its drawbacks.  For example, there is only a narrow window of opportunity for entry into a PPH program such that applicants must keep abreast of the prosecution status of their cases in both the OFF and OSF.  Additionally, there is a risk that none of the claims allowed under the patent laws of the OFF will be allowable under the patent laws of the OSF, for example, due to differences in the jurisdiction’s determination of patent eligible subject matter.  Moreover, amendments made during prosecution in the OFF might narrow the claims more than would be required in the OSF.

Accordingly, while PPH programs may offer important benefits such as accelerated patent issuance, higher allowance rates, and significant cost savings, an applicant should contact qualified patent counsel who can review their portfolio to help identify strategies to maximize the benefits of PPH programs.  

This advisory was prepared by Nutter's Intellectual Property practice.  For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances.  Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

In Invention Pathways, the Australian Patent Office denied the protection of business method claims because the use of a computer was considered merely incidental or peripheral. In this perfectly meta-aware scenario, the applicants attempted to claim a computer-aided process to ensure that all commercialization activities are completed within the time constraints during the lifecycle of a patent application, in accordance with various international treaties and legal jurisdictions. The specification disclosed one embodiment as a planning software package using a computer implemented checklist without any specific technical details.

In the decision, a Delegate of the Commissioner of Patents confirmed that a patentable method must produce “a concrete, tangible, physical, or observable effect.” The Delegate further required that the “concrete effect” must be one that is central to the purpose or operation of the claimed process or otherwise arises from the combination of steps of the method in a substantial way.  

The Delegate viewed the computer implemented checklist as one that provided “no substantive effect produced through the operation of the computer…and such an effect does not arise from a synergistic interaction in the operation of the method on the computer or other physical elements,” and so it was, therefore, not patentable subject matter.

In doing so, the Delegate has imported considerations which are normally reserved for novelty or inventive step into a threshold, patentable subject matter inquiry. The Delegate also concluded that “the authorities make it clear that in many circumstances a method including the processing of information and the production of a substantive effect in or through a computer or peripheral, if novel and not obvious, will result in patentable subject matter.”  

Therefore, what is “incidental” or “peripheral” and what is not, for the patentable subject matter inquiry, will have to be clarified in future Australian Patent Office decisions or by the Australian Federal Court.

In Canada’s Amazon, Inc. v. Canada, the Commissioner of Patents rejected Amazon's one-click patent application—pejoratively calling the invention a “business method.” The Commissioner's legal hook for rejection was that business methods do not fit within the legal definition of “invention” required by s. 2 of the Canadian Patent Act. The text of that provision was derived from United States law and closely follows the language of 35 U.S.C. § 101.

On October 15, 2010, the Federal Court of Canada reversed the Commissioner’s rejection and held that business methods “can be patented in appropriate circumstances.”

In particular, the Court held that Amazon’s one-click online purchase processing system qualified as patentable subject matter because the system claims require a machine as an essential element of the invention, the method claims result in a “physical effect” “through the use of cookies, computers, the internet and the customer’s own action,” which moved the one-click system beyond a “mere business scheme” or “disembodied idea” having no “practical embodiment.”

Instead of granting a patent outright, however, the Court remanded the decision for an “expedited re-examination.” Here, though the Court appears to have followed the U.S. Supreme Court’s recent decision in Bilski v. Kappos, it fails to clearly signal as to whether a shift from Canada's long standing denial of business method patents is afoot.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617.439.2000.

On November 29, 2010, the Supreme Court granted certiorari to the third patent law case in the current term by accepting Microsoft’s petition in Microsoft Corp. v. i4i L.P. Microsoft is appealing a $290 million verdict from the Eastern District of Texas concerning infringement of i4i’s U.S. Patent No. 5,787,449 by Microsoft’s Word 2003 and 2007 software programs. Microsoft is challenging the clear and convincing evidence standard that has been associated with the invalidity defense under 35 U.S.C. § 282 since the Federal Circuit’s 1984 decision in American Hoist & Derrick Co. v. Sowa & Sons, Inc. Microsoft contends that the correct evidentiary standard should be “preponderance of the evidence” when an invalidity defense relies on prior art that was not originally before the USPTO. The Court’s decision in this case could significantly impact the strength of any patent owner’s case if the burden to prove invalidity is lowered.

To read Microsoft’s petition, i4i’s opposition, and the certiorari amicus briefs, click here.

To read the Federal Circuit’s 2010 decision, click here.

The March and July, 2010 issues of Nutter’s IP Bulletin reported on the USPTO’s Patent Application Backlog Reduction Stimulus Plan, more colloquially known as the “Bump and Dump” program. On November 22, 2010, the USPTO announced that the program is being extended through December 31, 2011, or until 10,000 petitions have been granted, whichever occurs earlier. The program provides an applicant the opportunity to “bump” one application up in the examination queue if they agree to “dump” (i.e., abandon) another pending unexamined application. Applicants should consider reviewing their portfolios and determining if any applications awaiting a first Office Action, or any future filings, are appropriate for this expedited process.

For more details on the extension of the “Bump and Dump” program, click here.

For more details on the “Bump and Dump” program, click here.

The USPTO recently announced that it will be cooperating with New York Law School to expand its Peer-to-Patent review program. The Peer-to-Patent program seeks to improve the quality of issued patents by providing an opportunity for volunteer experts in the applicable field to review new applications, suggest prior art, and provide comments on points of novelty in view of the art. The review process occurs online using social media software that allows and encourages discussion among the volunteers. Once the review process is complete, Peer-to-Patent applications are moved to the head of an examiner’s queue, along with the ten highest rated prior art submissions from the Peer-to-Patent volunteers. The written comments and discussion provided by the volunteers during the review process are not sent to the examiner, but he or she is able to read the comments on the Peer-to-Patent website during examination of the application. The expanded program will accept an additional 1000 new applications for peer review and will include additional art units.

Additional information about the Peer-to-Patent program can be found at the following link.

The United States Patent and Trademark Office (USPTO) recently adopted a new procedure for measuring the quality of patent examination. At the heart of the new procedure is a composite, seven-feature quality metric aimed to reveal quality issues during examination and to identify their sources so that effective quality procedures may be identified and encouraged. The new seven-feature composite quality metric is composed of old metrics from previous USPTO quality procedures and new metrics formulated based upon surveys, internal review, and data related to quality measurement purposes (the data was previously collected, but had never really been used). Knowledge of these metrics will allow practitioners to better manage the expectations of their clients, and may also help practitioners take actions to help expedite the prosecution process to allowance.

Two metrics carried over from the old metrics to the new metrics are the Final Disposition Compliance Rate and the In-Progress Compliance Rate. These rates are random samplings of “clear errors” identified during the examination process of an application. For example, a clear error by an examiner in the allowance of a claim is an unreasonable failure to make a rejection of the claim for one or more reasons provided in the patent laws. Likewise, a clear error by an examiner in making a rejection or objection in a final rejection is the making of an unreasonable rejection or objection. However, if an action preferred by the examiner’s Supervisory Patent Examiner differs from the action taken by the examiner, it is considered a difference of opinion and not a clear error as long as the action taken by the examiner is reasonable. The USPTO’s Office of Patent Quality Assurance (OPQA) is responsible for making these determinations of reasonableness.

Two new metrics that are now being introduced use multi-factor reviews. These two metrics are the First Action on the Merits (FAOM) Search Review and the Complete FAOM review. These metrics attempt to apply a multiple factor scoring process to measure a degree of compliance to best practices of the USPTO. For the Complete FAOM review, each omitted rejection, and the reasonableness and clarity of the rejections made, are reviewed on a per-claim basis. The Complete FAOM review further includes a set of per-action attributes, such as the clarity of the interview record, that addresses the overall quality of the examination.

A third new metric being introduced is the Quality Index Report (QIR). The QIR is produced from statistical data collected by the USPTO Patent Application Locating and Monitoring (PALM) database. The QIR is by itself an algorithmic composite of five measurements collected on a per-disposal basis: (1) the number of actions; (2) the number RCEs; (3) the number of re-openings after a final action; (4) the number of first non-final actions; and (5) the number of restrictions after a first action. All of these statistics are collected for every application filed with the USPTO and are statically examined in aggregate to detect outlier examination processes that may, or may not, indicate quality issues. Each of these five metrics, including the QIR, are compiled by the OPQA with sampling sizes designed to reveal Examination Corps-level or technology discipline-level quality estimates. Only aggregate data, however, will be publicly disseminated.

Finally, the last two new metrics are generated from an internal survey and an external survey performed by an independent survey designer/conductor. The external survey aims to measure the perceived quality of the patent process of applicants and practitioners, and the internal survey aims to measure the perceptions of the examination corps.

The seven metrics are combined into a composite quality metric—a single score. The composite quality metric will be publicly disseminated monthly and conveniently visualized via a graphical dashboard widget. Publication, however, is not set to begin until the end of the 2011 fiscal year, which is on September 30, 2011. The first year’s score will be used as a base score, which will be used to set a Stretch Goal for the reminder of the five-year strategic planning period, to allow a relative comparison with subsequent scores.

We will monitor these new metrics once they become publicly available to bring you practical tips for improving your practice in light of this new information. We anticipate that knowledge of these metrics will allow practitioners to better manage the expectations of their clients, and may also help practitioners take actions to help expedite the prosecution process to allowance.

To see a detailed listing of the metrics, the surveys, and their composite weighting, please click here.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617.439.2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.