Patent Docs

Congressman Berman Is on the Case

    By Kevin E. Noonan --

One of the frustrations of those opposed to actions taken by the Administration over the past eight years has been the lack of Congressional oversight, in view of the congruency of the party in power of the legislative and executive branches.  Although in theory this left the judicial branch to supply a check (or a balance) on public policy, the courts are a blunt and slow tool (and are not above their own type of partisan bias; see Bush v. Gore ).  However, this trend began to turn with the election of the members of the 110th Congress, where the opposition party came to power and, although lacking a sufficient majority to impose its will, maintains the power to police.

One part of the Administration that has suffered mightily as a result of this lack of oversight is the Patent Office, where the current Director and his minions have presided over one of the great adventures in mismanagement in U.S. history.  But it appears that at least some of the Members of Congress are beginning to notice:  at the end of April, Howard Berman (D-CA), Chairman of the Subcommittee on Courts, the Internet, and Intellectual Property of the House Judiciary Committee sent Jon Dudas, Director of the U.S. Patent and Trademark Office, a letter requesting information to supplement Director Dudas' February 27, 2008 testimony before the subcommittee at an oversight hearing (see "House Subcommittee Holds USPTO Oversight Hearing").  Although on its face the letter was a cordial request for additional information, even the most casual perusal of the contents of the letter indicates that Congressman Berman (at right) has something on his mind.

The letter contains eighteen numbered paragraphs covering a wide range of topics.  And the questions are specific, asking Director Dudas (at left) to reconcile or justify his testimony with either Patent Office behavior, statements, or actions.  These topics include:

• Projections as to the number of applications expected to be filed over the next five years.  The Congressman wants to know what methods (including computer programs) the Office uses to make these projections and what considerations are included in its calculations.  The letter specifically references the enjoined continuation and claims rules, and asks to what extent the projections were based on anticipation that the new rules would be implemented.  It also points out that the FY2008 budget projected an 8% per year increase, while the FY2009 budget projects a 5% per year increase.

• In view of the status of the enjoined new rules, the Congressman asks what actions the Office and/or Congress could take to address the pendency backlog, either at a 5% per year or 8% per year patent application increase level.  The letter also cites the GAO Report that claimed the Office could hire 2,000 new examiners per year for the next five years and still not decrease the backlog (the GAO report estimates the backlog would continue to grow, under this scenario, from 260,000 in FY2007 to 953,643 at the end of FY2011).  The letter notes that the source of the GAO's estimates was the PTO, and thus requests Director Dudas to provide all information supporting these estimates.

• Turning to the corps of patent examiners, the letter cites statements in the GAO report alluding to internal Office review of production goals for examiners.  The letter then cites Director Dudas' testimony before the subcommittee that the Office was beginning to review production goals.  Congressman Berman asks Director Dudas to provide a description of the methods being used to perform this review, the personnel involved in the review, and a timetable for its completion.  In this regard, the letter also asks for an accounting of the discrepancy between the GAO report's statements, that most examiners who leave the Office do so in response to management (including the production goals), and Patent Office statements that most examiners leave the Office for "personal reasons."  The letter specifically asks questions regarding putative exit interviews given to departing examiners that Director Dudas used to support his testimony, including the percentage of departing examiners who had participated in said interviews.

• Patent allowance statistics, specifically the decline in allowance rate from 70% in 2000 to 44% in 2007. The letter asks whether the Office included Requests for Continued Examination in its statistics, and if so how.

• The letter requests further information on the progress of plans for regional patent offices, and asks what resources have been used, particularly in view of the failure of the program to be included in the FY2009 budget.

The letter turns more frank with regard to two issues:  the statutory requirements for making changes in the Office's internal management structure, and the behavior of "senior PTO officials" in the RIM v. NTP reexamination.

• The letter also asks for information regarding whether the Office violated Acts of Congress as well as Commerce Department rules when implementing the creation of the Office of Enforcement.  Specifically, the letter reminds Director Dudas that the 2006 Science, Justice, Commerce Appropriations Act requires that, before the Office can "reprogram" funds it must notify Congress fifteen days prior to reprogramming, and that Departmental Administrative Order (DAO) 203-13 defines reorganization ("establishment, consolidation, abolition or 'other significant change'") as "generally considered a reprogramming that triggers the disclosure requirement."  Director Dudas had testified to the subcommittee that elimination of the Office of Enrollment was a "realignment," and the letter requests the Director to inform the subcommittee of the criteria used to distinguish between the two.  In this regard, Congressman Berman asks the Director for an accounting of all other actions taken by the Office that were deemed a "realignment" (and putatively outside the rule requiring Congressional notification) and a "detailed description" of the basis for so doing in each instance.

• The letter cites an article in Time magazine from 2006 and an e-mail from James Toupin that "senior Administration officials" met with RIM's CEO Jim Balsillie during the pendency of the NTP reexamination.  Calling it "ex parte activity," the letter asks Director Dudas to identify all senior Patent Office personnel involved in such meetings, and for the Office's policy regarding these contacts.

The answers to these questions should be interesting indeed.  Also included in the letter are even more pointed questions posed by Congressman Darrell Issa (R-CA), a subcommitee member:

• Congressman Issa (at right) wants to know the policy basis for the Office to eschew implementing a "request for examination" requirement, as a way to reduce the backlog based on the experience in other countries that "10% to 40%" of all applications are allowed to lapse for failure to request examination.

The letter gives Director Dudas until May 19, 2008 to provide answers to these questions, pointedly including the subcommitee's address (B-352 Rayburn House Office Building, Washington, D.C. 20515).

While these actions are to be applauded, they carry with them the feeling of being too little, too late.  The same "senior Patent Office officials" responsible for the ineffectiveness of the Office to address its problems will be leaving in less than twelve months, and those who willingly and enthusiastically fell into step behind their misguided proposals may be expected to leave as well.  The legacy of these officials, like so much of the rest of the current administration, will be of opportunities lost, squandered by an appeal to authoritarian rulemaking rather than consensus building with Patent Office stakeholders.  In view of the current parlous state of the USPTO, Inauguration Day 2009 (fittingly, a PTO holiday) can't get here soon enough.

ADDENDUM:  For a chilling set of allegations of misconduct in the NTP patent reexaminations (the subject of one of Congressman Berman'’s inquiries to Director Dudas), we direct our readers to the last twenty pages or so of NTP'’s response, filed April 24, 2006 in Re-examination Control No. 90/007,731, 90/006,675, and 90/006,533 (consolidated) (see Patently-O link).  NTP alleges multiple acts of misconduct against senior administration officials (including Director Dudas and Commissioner Doll), based on e-mail correspondence and other documents obtained under a Freedom of Information Act request.  (Thanks for Peter Zura's 271 Patent Blog for alerting us to these allegations.)

Senate Patent Reform Bill: R.I.P.?

    By Donald Zuhn --

Earlier today, the technology website Ars Technica posted a report that the Senate patent reform bill (S. 1145) "has been taken off the [Senate] schedule."  Because Ars Technica did not provide any additional information, we sought confirmation that the bill was indeed dead -- at least as far as the 110th Congress is concerned.  For patent practitioners who have been paying close attention to developments in the Senate, the Ars Technica report is likely to be not too surprising, especially since S. 1145 was supposed to come to a floor vote in mid-April (see "BIO Commends Senator Specter for Patent Reform Stance").  However, confirmation of the Senate bill's demise would certainly give patent practitioners more good news to focus on while awaiting word from the U.S. Patent and Trademark Office as to whether it will appeal the decision in Tafas/GSK v. Dudas (the Patent Office has until May 31st to file for appeal).

Seeking confirmation of S. 1145's passing, we first checked THOMAS, but found that the latest information about the Senate patent reform bill was its placement on Senate legislative calendar on January 24th.  Next, we checked the Senate calendar of business at the U.S. Government Printing Office (GPO) website (GPO Access), but noticed that the calendar for May 6, 2008 still lists S. 1145.

A Senate staff member later confirmed that S. 1145 was still on the Senate calendar.  However, that same staff member (who works for a Senator on the U.S. Judiciary Committee) noted that the time that was being reserved for S. 1145 had come and gone, and that barring a compromise on the damages, post-grant review, inequitable conduct, and AQS provisions, it was very unlikely that the Senate would find another place on its schedule for "a lengthy patent debate."  In checking out Ars Technica's story, we also heard that Senator Patrick Leahy's chief of staff, Susan Davies, has moved the patent reform bill files out of her office.  Of course, we also heard that Ms. Davies is not actively working on the patent reform bill at the moment and is not involved in compromise negotiations regarding the bill (these negtiations are reportedly being spearheaded by Senators Orrin Hatch and Arlen Specter), and so it may not be all that surprising that the S. 1145 files have been moved from her office.

Abbott's First Quarter Lobbying Tab Hits $880,000

    By Donald Zuhn --

In March, we reported on the lobbying expenditures for a number of biotech and pharmaceutical companies in 2007.  For example, we noted that Millennium Pharmaceuticals had spent $1.28 million, Genentech $1.8 million, and AstraZeneca $4.1 million in 2007.  Topping each of these companies, however, was Abbott Laboratories, based in Chicago's northern suburbs, which spent $4.4 million on lobbying in 2007.  Most of these funds presumably went to lobby on the patent reform and follow-on biologics bills that were being considered by Congress last year.

On Wednesday, Forbes.com reported that Abbott spent $880,000 on lobbying in the first quarter of 2008.  Abbott's first quarter expenditures are probably not too surprising considering that patent reform legislation only recently stalled in the Senate.  With follow-on biologics legislation on the backburner and the economy struggling, it will be interesting to see if biotech and pharmaceutical companies begin to cut back on lobbying in the second quarter.

For additional information regarding this topic, please see:

• "Abbott Spent $4.4 Million on 2007 Lobbying Effort," March 17, 2008
• "Biotech and Pharma Companies Spent Millions on Lobbying in 2007," March 5, 2008
• "Millennium Pharmaceuticals Spent $1.28 Million on Lobbying in 2007," February 8, 2008

New York Times to Innovation: Drop Dead

    By Kevin E. Noonan --

The penchant for The New York Times' anti-innovation editorial policies to seamlessly blend into its "news" coverage (particularly on the Business page) has been noted by Patent Docs before.  Whether the latest example is more egregious than in the past is a matter of debate, but with apologies to President Reagan, "There they go again" in a piece published today under Robert Pear's byline on page 1 of the Business section (see "Patent Law Battle a Boon to Lobbyists").

The article goes wrong from the first sentence.  In writing about the fate of S. 1145, a bill with seventeen sections that proposes to modify U.S. patent law extensively (as previously reported by Patent Docs), Mr. Pear chose to bias the piece against patent stakeholders objecting to the bill:

A fight has erupted in Congress over whether drug makers and other companies should be allowed to keep patents they obtained by misrepresentation or cheating.

As Patent Docs readers know, this is not the issue, and "drug makers and other companies" are not trying to keep patents "obtained by misrepresentation or cheating."  Even ignoring that the issues with S. 1145 are more complicated than Mr. Pear recognizes, a fair statement of the inequitable conduct provisions of the bill is that they address the way courts determine if a patent was "obtained by misrepresentation or cheating."

Later in the piece, Mr. Pear acknowledges that the problem the bill proposes to address, inequitable conduct, has become "a plague on the patent system," pled in almost every patent case and arguably subject to abuse through ex post facto argument and occasional fanciful reconstruction of events.  Mr. Pear cited Robert Armitage (at left) of Eli Lilly and Company, that a finding of inequitable conduct is "like imposing the death penalty for relatively minor acts of misconduct."  He then misstates the position of innovator companies by asserting that "[b]rand-name drug companies are urging Congress to eliminate the penalty," which is not the case at all.

Of course, generics companies are more than happy to put their own spin, unquestioned, into the article.  Debra S. Barrett, a vice president of Teva Pharmaceuticals USA, is quoted as saying the changes supported by U.S. innovator companies "would make it easier for them to cheat and get away with it, easier for them to defend their patents and more difficult for us to get generic products onto the market in a timely way."  And the economics of the current drug regime are invoked, Mr. Pear citing the desire of AARP and other "consumer groups" to obtain generic drugs at prices "30 percent to 80 percent less than the equivalent brand-name drugs."  (There is nothing in the piece, of course, regarding the relative development costs between innovator and generic drug companies.)

Even then, Mr. Pear misses the point.  He states that "[i]n the last 15 years, the United States Court of Appeals for the Federal Circuit, which handles patent cases, has affirmed findings of inequitable conduct in at least 40 cases, including 14 that involved pharmaceutical or health care products."  But in view of the frequency with which inequitable conduct is alleged, the real story here is how infrequently inequitable conduct is found.  Showing an inability or unwillingness to do the necessary research (or, to be fair, the limitations of tight deadlines), Mr. Pear gins up his numbers by stating "[s]imilar findings have been issued by federal district judges in an unknown number of cases that were not appealed."

Unknown to Mr. Pear, perhaps, but not unknowable.  (A review of the Times list of Mr. Pear's recent articles reveals he is a reporter on general subjects, without any particular slant to business or technology stories.)  A Lexis search reveals that while inequitable conduct was alleged in over 2,100 patent cases between 1993 and 2008, accused infringers asserting inequitable conduct rarely prevailed.  And to complete the picture, while the Federal Circuit has affirmed inequitable conduct in 40 cases since 1993, it has not upheld inequitable conduct findings in 379 other cases.  These statistics bear our Judge Nichols' admonition twenty years ago in Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988), and recounted in the article as Congressional testimony from the Biotechnology Industry Organization, that the charge of inequitable conduct is a "plague on the patent system" that needs rectifying.  And ironically, the position advocated in the article is contrary to the results of a study done by Robert Shapiro, who concluded that the inequitable conduct provisions of S. 1145 would increase the frequency of inequitable conduct challenges (see "BIO CEO Provides Update on Patent Reform and Follow-on Biologics Legislation - Part I").

Balance, to the extent there is any, can be found in the middle of the article, where James C. Greenwood (at left) from the Biotechnology Industry Organization; Robert Armitage; and Harry F. Manbeck Jr., Commissioner of Patents and Trademarks under President George H.W. Bush explain the competing influences between disclosing relevant information and trying to avoid inequitable conduct allegations by submitting to the Patent Office all the information that might be considered relevant to patentability.  Quoting Mr. Greenwood, "[t]he poor patent examiner gets a dump truck full of information that he has to pore over without any assistance from the applicant" under the current scheme, which would be modified under S. 1145 to try to avoid this situation.

All evidence of balance rapidly disappears, however, when Mr. Pear reports the contribution of Jon Dudas (at right), Undersecretary of Commerce for Intellectual Property.  Ostensibly tying the propensity to overdisclose less-than-relevant information to the backlog of unexamined patents, Mr. Dudas ignores the inequitable conduct issue entirely, alleging instead that "[w]e [the Patent Office] are getting more and more unpatentable ideas, worse and worse quality applications."  His "evidence":  falling allowance rates, which the cognoscenti will recognize are the result of changing examination standards (i.e., recalcitrance to patent allowances under the Dudas administration compared with cooperation with patent applicants under the Lehman administration).  Even if Mr. Dudas were correct, his evidence is the solution:  don't grant patents to applicants submitting unpatentable ideas or poor quality applications.

Only towards the end of the article does Mr. Pear discuss the purported subject of the piece:  how interest groups have spent millions lobbying Congress for or against S. 1145 (and the companion House bill, H.R. 1908, which passed last September).  At least Mr. Pear properly identifies the players:  the so-called Coalition for Patent Fairness, comprised of "high technology" companies like Intel and Cisco (not mentioned are the activities of Cisco's own Patent Troll tracker blogger, who tried to influence the debate more cost-effectively), and on the other side, the Coalition for 21st Century Patent Reform, whose members include several pharmaceutical and biotechnology companies.  Even in identifying these groups, Mr. Pear (and the Times) bias shines through:  while the motivations of "Patent Fairness" group are said to be to avoid "disputes [that] drain resources that could be better spent on research and innovation," the pharmaceutical companies "zealously guard their intellectual property and are more likely to file suit to protect their patents."  Mr. Pear either doesn't understand, or won't admit, that the reasons for the groups' different positions on patents and their value are directly linked to differences in development costs and obsolescence horizons between "high" tech companies (who can be tripped up by a clever teenager with a computer, a modem, and a good idea for a new Internet applet for social networking) and biotech/pharma companies, who face development and regulatory costs in the several hundreds of millions of dollars to get a new drug to market.  These differences have real consequences to the companies on either side of the debate.

What the Times doesn't consider, or refuses to mention, is that there will be consequences for the rest of us as well.  Will the American public be happy with an outcome that increases the number and decreases the costs of the newest electronic gadget, while at the same time decreasing the number of new drugs, especially biologic drugs that promise to address, for the first time, heretofore untreatable diseases?  It would be refreshing if the Times honestly set out what's really at stake in the debate over S. 1145.

No End to Fee Diversion?

    By Donald Zuhn --

On April 1st, we reported on a press release issued by the Biotechnology Industry Organization (BIO) concerning a report from the Coalition for Patent Fairness that the Senate patent reform bill (S. 1145) would soon be coming to a vote.  BIO disputed this report, stating that the organization was unaware of any "deal" or consensus that would result in the bill coming to a vote.  Now, almost three weeks later, it would appear the Senate patent reform bill has hit a snag and that BIO -- and not the Coalition for Patent Fairness –- may have been right.

Even more intriguing was an e-mail we received last Friday from a Patent Docs reader, who informed us that based on information the reader had received from a lobbyist, Senator Patrick Leahy (D-VT) may be scrambling to save the bill.  According to the reader, Senator Leahy (at left) may be deleting Section 15 from the bill at the possible request of Senator Robert Byrd (D-WV).  Section 15, which is entitled "Patent and Trademark Office Funding," would put a permanent end to fee diversion.  While fee diversion has not been a problem for the past five years (a point that John White made when he visited with MBHB attorneys in February, and which the Senate Judiciary Committee noted in its Draft Report on the bill in January), it could readily become a problem once again.  The reader is curious to know whether any other readers have heard about the deletion of Section 15 or of Senator Leahy's push to save the bill.

BIO Commends Senator Specter for Patent Reform Stance

    By Donald Zuhn --

On April 1st, we reported on a statement issued by Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood (at right) disputing a report from the Coalition for Patent Fairness that the Senate patent reform bill (S. 1145) would be coming to a vote in the next few weeks.  Earlier today, Mr. Greenwood issued a new statement on the patent reform bill, "applaud[ing] the continuing efforts of Senator Arlen Specter (R-PA) [at left] to improve and strengthen the Patent Reform Act (S. 1145) to ensure that this legislation promotes continued U.S. leadership in innovation and treats all industries fairly."  Mr. Greenwood criticized the Senate bill for continuing to include "key provisions that would jeopardize many economic sectors, such as biotechnology, that rely on strong patent protection to help fuel American economic growth," and commended Senator Specter for rejecting these provisions.  As to whether the Senate bill in its present form should come to a vote, Mr. Greenwood argued that "[t]his is not a risk that the Senate should take at a time when we need to do all we can to support innovative, growth-oriented American industries and a fragile U.S. economy."  Mr. Greenwood continued to offer BIO's support "to improve the existing bill to preserve the underlying strength of our nation’s patent system."

Commerce Secretary "Entirely Wrong" on Inequitable Conduct Reform

    By Donald Zuhn --

Last week, we reported on a letter sent by Secretary of Commerce Carlos Gutierrez to Senators Patrick Leahy and Arlen Specter, in which the Secretary reaffirmed the Bush Administration's support for the Applicant Quality Submission (AQS) provision of the Senate patent reform bill (S. 1145).  In addition, Secretary Gutierrez linked the AQS provision with inequitable conduct reform, stating that the Administration "strongly opposes any statutory changes to the doctrine of inequitable conduct in the absence of a strong provision requiring Applicant Quality Submissions."  According to Secretary Gutierrez, if Congress were to tackle inequitable conduct without also implementing AQSs, this "would merely invite fraud on the patent system."

The Intellectual Property Owners Association (IPO), which we have noted has been encouraging its members to contact their Senators and voice their opposition to the AQS provision, has released a statement concerning Secretary Gutierrez' comments on inequitable conduct.  In particular, the IPO has called the Secretary's comments on inequitable conduct "entirely wrong."  According to the IPO:

Inequitable conduct reform seeks to eliminate frivolous charges of fraud.  AQSs without inequitable conduct reform would create a fertile new ground for frivolous charges of fraud, but inequitable conduct reform without AQSs would not invite “fraud on the patent system.”  The benefits of inequitable conduct reform do not depend on AQSs.

The IPO reasserted its strong opposition to the AQS provision and its strong support for inequitable conduct reform.

Last Call to Voice Your Opposition to AQS Provision

    By Donald Zuhn --

Yesterday, we reported on a letter sent by Secretary of Commerce Carlos Gutierrez to Senators Patrick Leahy and Arlen Specter, in which the Secretary reaffirmed the Bush Administration's support for Section 11 of the Senate patent reform bill (S. 1145).  Section 11 would require that applicants submit Applicant Quality Submissions (AQSs), which would consist of search reports, patentability analyses, and "any other information relevant to patentability that the Director, in his discretion, determines necessary."  In his letter to Senators Leahy and Specter, Secretary Gutierrez noted that the Administration "strongly supports the AQS provision in the bill," calling it one of the "key elements" of S. 1145.

We also reported yesterday on the continuing efforts by the Intellectual Property Owners Association (IPO) to encourage its members to contact their U.S. Senators and voice their opposition to section 11 of S. 1145.  It is a call to arms that has been sounded on Patent Docs for the past few months (see "U.S. Senate Mailbox Filling with Letters against Passage of Patent 'Reform' Bill").

To make it even easier to write your Senator and lobby for the removal of the AQS provision, we are posting copies of letters that were sent to Illinois Senators Richard Durbin and Barack Obama by a number of attorneys at McDonnell Boehnen Hulbert & Berghoff LLP (including all of the Patent Docs authors).  The letters were prepared by MBHB attorney Larry Aaronson with the help of IPO Director of Government Relations Dana Colarulli.  We strongly encourage our readers to use these letters as templates, and let their voices be heard.  Before it's too late.

• Download letter to Senator Richard Durbin here.

• Download letter to Senator Barack Obama here.

Department of Commerce Sends Senators Second Letter on Patent Reform Bill

    By Donald Zuhn --

In February, we reported on a letter sent by Nathaniel Wienecke, the Assistant Secretary for Legislative and Intergovernmental Affairs of the U.S. Department of Commerce, to Senator Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee, expressing the Bush Administration’s views on the Senate patent reform bill (S. 1145).  In that letter, Mr. Wienecke noted that the Administration opposed provisions of the Senate bill concerning damages and Patent Office funding, but had no quarrel with those portions of the bill that require Applicant Quality Submissions (AQSs), provide the Patent Office with fee setting authority, and replace inter partes reexamination with post-grant review.

Earlier today, the Commerce Department sent a second letter to Senator Leahy, again expressing the Bush Administration's views regarding the Senate patent reform bill.  The Commerce Department also sent the letter to Senator Arlen Specter (R-PA), the Ranking Member of the Judiciary Committee.  The letters were signed by Secretary of Commerce Carlos Gutierrez (at left).

In the new letter, the Administration reaffirms, inter alia, its dissatisfaction with the bill's damages and Patent Office funding provisions and its support for provisions that would require AQSs, provide the Patent Office with fee setting authority, and replace inter partes reexamination with post-grant review.  However, what truly "distinguishes" the Administration's second letter from its earlier correspondence is the discussion of Applicant Quality Submissions.

Where the Administration began its first letter by discussing the provision that it found most troublesome (i.e., Section 4 on damages), going so far as to declare that the Administration would "continue to oppose S. 1145 - in its entirety - unless Section 4 is significantly revised," the Administration begins its second letter by discussing the bill's "key elements."  And the provision that apparently heads the Administration's list of key elements?  Applicant Quality Submissions.

Unfortunately, after reading the Administration's new letter, one fears that those responsible for drafting the letter focused on the section's title at the expense of the new requirements this section would create.  (Interestingly, in an e-mail sent out earlier today on the Administration's letter, Professor Harold Wegner (at right) noted that "[i]f ever there were a reason for the next president – whichever the party – to pick a patent-savvy Director, the [Administration's] letter could be 'Exhibit A.'")

Before addressing the letter's discussion of Applicant Quality Submissions, it might be best to begin with the relevant text of the Senate bill:

SEC. 11. APPLICANT QUALITY SUBMISSIONS.

Chapter 11 of title 35, United States Code, is amended by adding at the end the following new section:

Sec. 123. Additional information; micro-entity exception

(a) In General-- The Director shall, by regulation, require that an applicant for a patent under this title submit to the Director--

(1) a search report and analysis relevant to patentability; and
(2) any other information relevant to patentability that the Director, in his discretion, determines necessary.

(b) Failure To Comply-- If an applicant fails to submit the search report, analysis, or information required under subsection (a) in the manner and within the time period prescribed by the Director, such application shall be regarded as abandoned.
(c) Exception-- Any application for a patent submitted by a micro-entity shall not be subject to the requirements of this section.
(d) Micro-Entity Defined--

(1) IN GENERAL-- For purposes of this section, the term "micro-entity" means an applicant who makes a certification under either paragraph (2) or (3).
(2) UNASSIGNED APPLICATION-- For an unassigned application, each applicant shall certify that the applicant--

(A) qualifies as a small entity, as defined in regulations issued by the Director;
(B) has not been named on 5 or more previously filed patent applications;
(C) has not assigned, granted, or conveyed, and is not under an obligation by contract or law to assign, grant, or convey, a license or any other ownership interest in the particular application; and
(D) does not have a gross income, as defined in section 61(a) of the Internal Revenue Code (26 U.S.C. 61(a)), exceeding 2.5 times the average gross income, as reported by the Department of Labor, in the calendar year immediately preceding the calendar year in which the examination fee is being paid.

(3) ASSIGNED APPLICATION-- For an assigned application, each applicant shall certify that the applicant--

(A) qualifies as a small entity, as defined in regulations issued by the Director, and meets the requirements of paragraph (2)(D);
(B) has not been named on 5 or more previously filed patent applications; and
(C) has assigned, granted, conveyed, or is under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the particular application to an entity that has 5 or fewer employees and that such entity has a gross income, as defined in section 61(a) of the Internal Revenue Code (26 U.S.C. 61(a)), that does not exceed 2.5 times the average gross income, as reported by the Department of Labor, in the calendar year immediately preceding the calendar year in which the examination fee is being paid.

(4) INCOME LEVEL ADJUSTMENT-- The gross income levels established under paragraphs (2) and (3) shall be adjusted by the Director on October 1, 2009, and every year thereafter, to reflect any fluctuations occurring during the previous 12 months in the Consumer Price Index, as determined by the Secretary of Labor.

So what does the Administration have to say about Section 11?  Well, with respect to the Judiciary Committee's goal of "improving patent quality and the patent application process," the Administration "emphasize[s] the importance of section 11 of the bill," noting that it "strongly supports the AQS provision . . . in its current form and believes that enactment [of the provision] will prove to be the strongest step toward improved patent quality."  And how will the AQS provision accomplish this?  According to the Administration: "[b]y reducing the number of poor quality and imprecise applications."

It's probably not surprising, in view of the recently voided continuation and claims rules, to learn that the Administration believes there is a serious problem with patent quality, that this problem has been created by applicants' submission of "poor quality and imprecise applications," and even worse, that the problem will be remedied by forcing applicants to submit AQSs.  However, when the Administration contends that "[w]hether an application is approved as a patent is a function of the merits and quality of the application" (emphasis added), and argues that "the USPTO is now applying more than 55 percent of its examination resources to examining applications that do not warrant a patent," it is clear that the Administration blames patent applicants and practitioners for the Patent Office's current woes.  This message is hammered home when the Administration explains that the "sharp decline in the percentage of patents allowed" has resulted, in part, from "comprehensive internal quality improvements" (presumably made by the Patent Office with respect to the manner in which it handles the "patent application process").

The Administration concludes its discussion on AQSs by stating that:

In order for additional quality and efficiency gains to accrue, the system must focus on the quality of applications.  Stated simply, our innovation system can no longer afford the time and the cost of heavily subsidizing poor quality patent applications, which crowd out our most important innovations.  Applicant quality standards are essential to improving and expediting the process by which new and innovative ideas become reality.

However, since Section 11 doesn't directly address the "quality of applications," eliminating "poor quality patent applications," or "[a]pplicant quality standards" (if there is indeed a problem), it's almost as if the Administration stopped reading Section 11 two words into its title.

On the "bright" side, the Administration also "recognizes and supports statutory changes to the doctrine of inequitable conduct," arguing that "[t]he inequitable conduct standard should more clearly target actual fraud affecting the examination process."  Unfortunately, the Administration links the AQS provision with inequitable conduct reforms, stating that it "strongly opposes any statutory changes to the doctrine of inequitable conduct in the absence of a strong provision requiring Applicant Quality Submissions."  The Administration concludes its discussion of the AQS and inequitable conduct provisions by asserting that:

Diminishing the penalties for misrepresenting facts before the United States Patent and Trademark Office (USPTO) without also increasing the robustness of the process for eliciting quality information from applicants may lead to poorer quality applications, in tum increasing the difficulty of conducting accurate examinations.  Inequitable conduct reform alone, without Applicant Quality Submissions, would merely invite fraud on the patent system.

With letters like this one making their way to members of the Senate, it is not surprising that the Intellectual Property Owners Association (IPO) continues to encourage its members to contact their U.S. Senators and voice their opposition to section 11 of S. 1145.  The IPO contends that:

Mandatory AQSs would add unjustifiable expense to the filing of many patent applications, embroil applicants in disputes over what constitutes an adequate search or analysis of the prior art, and discriminate in favor of certain applicants who would be exempt from the AQS requirement.

The IPO has also stated that it opposes the AQS provision with or without inequitable conduct reform.

On Friday, we will post copies of letters that were sent to Illinois Senators Richard Durbin and Barack Obama by a number of attorneys at McDonnell Boehnen Hulbert & Berghoff LLP (including all of the Patent Docs authors).  We strongly encourage our readers to use these letters as templates and send their own letters to members of the Senate.

BIO Responds to Events of the Day

    By Kevin E. Noonan --

The Biotechnology Industry Organization (BIO) issued two press releases today, concerning the "patent reform" bill pending in the Senate (S. 1145) and District Court Judge Cacheris' decision in Tafas/GSK v. Dudas.

In the first press release, BIO President and CEO Jim Greenwood (at left) responded to the claims by the so-called Coalition for Patent Fairness that S. 1145 is coming to a vote on the Senate floor in the next few weeks.  Mr. Greenwood challenged this assertion, saying that BIO has been working on the bill with several Senators and other stakeholders, and was unaware of any "deal" or consensus that would make the bill ready for passage.  "A wide range of industries, labor unions and universities continue to have serious concerns about key provisions" of the bill, according to BIO, specifically reciting provisions regarding damages, post-grant review, and inequitable conduct.  BIO also cautioned that "[t]he potential negative impact of a poorly crafted bill on the U.S. economy and global competitiveness is too great" for the Senate to rush the bill for a floor vote until and unless the bill "will truly enhance" the U.S. patent system.

BIO pledged to continue to work with the Senate to try to reach a compromise on the bill.

The second press release concerned the Tafas/GSK decision, granting summary judgment against the Patent Office and the "new rules" regarding limitations on continuation applications and the number of claims the Office would consider.  BIO called for a "balanced solution" to the Office's pendency backlog, while hailing the ruling as a "sound decision."  BIO asserted that the rules would have "inhibited the ability of biotechnology innovators to obtain adequate patent protection on their technologies, significantly decreasing their ability to attract the financing necessary to bring innovative, life-enhancing and life-saving products to market."

Even so, BIO stressed that there remained a need to "develop a viable and workable solution to the legitimate workload challenge at the PTO," and pledged to "stand ready to work with the PTO to develop an approach that fairly allocates responsibility for patent quality between patent applicants and patent examiners and enhances the strength and integrity of the American patent system, while not stifling innovation or placing a disproportionate burden on any one industry."

BIO's amicus brief for the Tafas/GSK case is available here.

IPO Distributes "Urgent" Legislative Alert on Applicant Quality Submissions

    By Donald Zuhn --

Last Friday, Herbert Wamsley, the Executive Director of the Intellectual Property Owners Association (IPO), sent out an "Urgent IPO Legislative Alert" to IPO members, urging them to contact their Senators to oppose the Applicant Quality Submission (AQS) provision of the Senate patent reform bill (S. 1145).  According to the e-mail alert, the Senate bill "may be considered for a vote within the next few weeks," and therefore, the "time to speak out against this proposal" was growing short.

Calling the proposed changes in the Senate bill "the most significant in more than 50 years," the IPO noted that while it supports some provisions, it continues to seek amendments to other provisions.  Among the provisions that the IPO would like to see amended is the AQS provision, which the IPO "flatly oppose[s]."  The IPO contends that if the "little-understood" AQS provision were to be passed in its present form, it would:

(a) impose substantial new costs on applicants without meaningful benefits to the USPTO;
(b) create additional opportunities for inequitable conduct claims to be raised at trial;
(c) open up opportunities for litigation claims related to the adequacy of the mandatory search; and
(d) subject applicants to different standards by exempting micro-entities from the requirement.

Stating that "[w]e know of no group other than the USPTO that supports this proposal," the IPO mailing contends that "Senators have not heard enough arguments against the proposal."

While the IPO has voiced its opposition to certain provisions of the Senate bill before, and in fact, sent a letter opposing the provision to the Chairman of the Judiciary Committee last November (as noted in its e-mail alert and discussed in a previous Patent Docs report), the timing of last Friday's mailing was somewhat perplexing.  In particular, why would the IPO wait until the end of March to rally the troops against the AQS provision?  Especially when opponents of the provision (like the authors and contributors of Patent Docs) have been encouraging patent practitioners, assignees, and inventors to write their Senators for months.  One troubling possibility is that the IPO has finally realized that its opposition has fallen on deaf ears, and that Senator Leahy intends to push ahead with a version of the bill retaining the AQS provision.  Assuming that the IPO may know something that the rest of the patent community does not, it might be a good idea to heed the organization's warning and write your Senators -- soon.

Alnylam CEO Forecasts "Perfect Storm" for Biomedical Patents

    By Donald Zuhn --

In an Op-Ed piece appearing in last Saturday's edition of The Boston Globe, Alnylam Pharmaceuticals Inc. Chief Executive Officer Dr. John Maraganore (at right) wrote about a "perfect storm" that is building against biomedical patent protection.  In an article entitled, "Good for iPods, but bad for patients," Dr. Maraganore asserted that "[p]ending decisions by the Supreme Court, the patent office, and Congress could fundamentally change the ground rules for patent protection within the life sciences industry to such a degree that in a decade we may not have an industry remaining."

Alluding to KSR Int'l Co. v. Teleflex Inc. and MedImmune, Inc. v. Genentech, Inc., Dr. Maraganore contended that the Supreme Court had "significantly shifted the 'goal line' for inventiveness standards in patents, making it much harder for patents to be awarded," and had "destabilized patent licensing."  With respect to the U.S. Patent and Trademark Office's attempt last year to promulgate its draconian continuation and claims rules, the Alnylam CEO argued that the Office was "seeking to change its review process for patent applications by placing shorter limitations on the needed time it takes to invent biotechnological innovations."  Finally, Dr. Maraganore pointed to the efforts in the House and Senate to enact legislation that would "introduce new ways to challenge issued patents after their issuance, resulting in prolonged periods of patent uncertainty," as well as "limit the scope of damages to those who violate patents, encouraging a lackadaisical attitude among infringers."

Dr. Maraganore places the blame for the patent reform bills squarely at the feet of the information technology industry, which he asserts has a view of patents (i.e., they are little more than a nuisance) that is fundamentally at odds with the view held by the biotech industry.  He argues that "the patent changes sought by information technology firms would be nothing short of disastrous for the millions of patients around the world that have benefited from biomedical breakthroughs in diagnosing, treating, and curing disease."

Noting that biotech companies spend about $750 million over a decade to generate a single drug, Dr. Maraganore contends that the development of new medicines is only possible because of the availability of substantial capital investments, which in turn are only possible because of the financial incentives that patents provide to investors.  Dr. Maraganore concludes by encouraging the Senate to "reject or substantially alter the pending bill in light of its potentially devastating impact upon biomedical research," and take the time needed to evaluate the consequences of recent Supreme Court rulings on patent protection.

While Dr. Maraganore may be the first to describe the actions of the three branches of government as constituting components of a biomedical patent perfect storm, he is not the first to point out this three-pronged attack on the U.S. patent system.  For example, last spring we reported on a white paper issued by the California Health Institute which concludes that a handful of Supreme Court decisions, Congress' attempt to enact patent reform legislation, and the Patent Office's push for new patent rules would combine to reduce the value of life sciences patents and thereby have a "chilling effect on biomedical investment and innovation."  Nevertheless, Dr. Maraganore should be commended for adding his voice to the debate, as well as for providing us with such an apt metaphor.

Amendments to S. 1145

    By Kevin E. Noonan --

Senator Leahy (at right), reportedly determined to bring S. 1145, the Senate's patent "reform" bill to the Senate floor for a vote after the spring recess, on Friday released a number of proposed amendments to the bill.  Rather than evincing an appreciation of the seriousness of the opposition building against the bill or a willingness to address the sound objections to it, these amendments seem either to be merely cosmetic, or to illustrate again how deeply committed (or indebted) to certain special interests Senator Leahy has become.

The cosmetic aspects include the following amendments:

• To Section 6 relating to the new Patent Trial and Appeal Board:

(b) Duties -- The Patent Trial and Appeal Board shall --
    (1) on written appeal of an applicant, review adverse decisions of examiners upon application for patents;
    (2) on written appeal of a patent owner, review adverse decisions of examiners upon patents in reexamination proceedings under chapter 30;
    (3) determine priority and patentability of invention in conduct derivation proceedings under subsection 135(a); and
    (4) conduct post-grant opposition proceedings under chapter 32.

Each appeal and derivation proceeding shall be heard by at least 3 members of the Patent Trial and Appeal Board, who shall be designated by the Secretary of Commerce, in consultation with the Director.  Only the Patent Trial and Appeal Board may grant rehearings.  The Director shall assign each post-grant review proceeding to a panel of 3 administrative patent judges.  Once assigned, each such panel of administrative patent judges shall have the responsibilities under chapter 32 in connection with post-grant review proceedings.

(c) AUTHORITY OF THE SECRETARY. -- The Secretary of Commerce may, in his or her discretion, deem the appointment of an administrative patent judge who prior to the date of enactment of this subsection held office pursuant to an appointment by the Director to take effect on the date that the Director initially appointed the administration patent judge.

(d) DEFENSES TO CHALLENGE OF AN APPOINTMENT. – It shall be a defense to a challenge to the appointment of an administrative patent judge originally appointed by the Director that the administrative patent judge was acting as a de facto officer.

(There is a parallel provision relating to the Secretary's capacity to appoint members of the Trademark Trial and Appeal Board);

• To Section 2, Right of the First Inventor to File:

(i) Action for Claim to Patent on Derived Invention -- Section 135(a) of title 35, United States Code, is amended to read as follows:

(b) SETTLEMENT. -- Parties to a derivation proceeding may terminate the proceeding by filing a written statement reflecting the agreement of the parties as to the correct inventors of the claimed invention in dispute.  Unless the Patent Trial and Appeal Board finds the agreement to be inconsistent with the evidence of record, it shall take action consistent with the agreement.  Any written settlement or understanding of the parties shall be filed with the Director.  At the request of a party to the proceeding, the agreement or understanding shall be treated as business confidential information, shall be kept separate from the file of the involved patents or applications, and shall be made available only to Government agencies on written request, or to any person on a showing of good cause.

(c) ARBITRATION. -- Parties to a derivation proceeding, within such time as may be specified by the Director by regulation, may determine such contest or any aspect thereof by arbitration.  Such arbitration shall be governed by the provisions of title 9 to the extent such title is not inconsistent with this section.  The parties shall give notice of any arbitration award to the Director, and such award shall, as between the parties to the arbitration, be dispositive of the issues to which it relates.  The arbitration award shall be unenforceable until such notice is given.  Nothing in this subsection shall preclude the Director from determining patentability of the invention involved in the derivation proceeding.

(j) Elimination of References to Interferences --

(10) Certain Appeals- Section 1295(a)(4)(A) of title 28, United States Code, is amended to read as follows:

(A) the Patent Trial and Appeal Board of the United States Patent and Trademark Office with respect to patent applications, interference proceedings (commenced before the date of enactment of the Patent Reform Act of 2008), derivation proceedings, and post-grant review proceedings, at the instance of an applicant for a patent or any party to a patent interference (commenced before the effective date of the Patent Reform Act of 2007), derivation proceeding, or post-grant review proceeding, and any such appeal shall waive any right of such applicant or party to proceed under section 145 or 146 of title 35;

• To Section 5, Post-grant Procedures and Other Quality Enhancements:

Sec. 337.  Effect of decisions rendered in civil action on future post-grant review proceedings
If a final (a) IN GENERAL. -- If a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28 establishing that the party has not sustained its burden of proving the invalidity of any patent claim --
    (1) that party to the civil action and the privies of that party may not thereafter request a post-grant review proceeding on that patent claim on the basis of any grounds under section 322; and
    (2) the Director may not thereafter maintain a post-grant review proceeding on that patent claim previously requested by that party or the real parties in interest of that party.
(b) FINAL DECISION DEFINED. -- For purposes of this section, the term "final decision" means a final decision issued by a United States district court or by the United States International Trade Commission.

On the other hand, amendments to other sections continue the pattern of favoring the same special interests that have supported "reform" (and, according to some reports, Senator Leahy)

• To Section 8, Venue and Jurisdiction:

(b) Interlocutory Appeals -- Subsection (c)(2) of section 1292 of title 28, United States Code, is amended by adding at the end the following:

(3) of an appeal from an interlocutory order or decree determining construction of claims in a civil action for patent infringement under section 271 of title 35.  Application for an appeal under paragraph (3) shall be made to the court within 10 days after entry of the order or decree.  The district court shall have discretion whether to approve the application and, if so, whether to stay proceedings in the district court during the pendency of such appeal.  The district court, in its discretion, can approve an interlocutory appeal of a claim construction order if (i) there was a reasonable ground for difference of opinion and (ii) such an appeal may advance the ultimate termination of the litigation.  For the first interlocutory appeal of a claim construction order in a given case, the United States Court of Appeals for the Federal Circuit shall accept the appeal if so ordered by the district court.  After the first interlocutory appeal, the United States Court of Appeals for the Federal Circuit has the discretion as to whether or not to accept the appeal of a subsequent claim construction order in the same case.

This provision not only establishes a right to interlocutory appeal of claim construction issues, but makes the gatekeeper the district court, not the Federal Circuit, which appears to turn on its head the jurisdictional prerogatives of the two courts.

• To Section 4, Right of Inventor to Obtain Damages:

(c) Limitation on Damages and Other Remedies; Marking and Notice -- Section 287(a) of title 35, United States Code, is amended to read as follows:

(a)(1) Patentees, and persons making, offering for sale, or selling within the United States any patented article for or under them, or importing any patented article into the United States, may give notice to the public that the same is patented, either by fixing thereon the word 'patent' or the abbreviation 'pat.', together with the number of the patent, or when, from the character of the article, this cannot be done, by fixing to it, or to the package wherein 1 or more of them is contained, a label containing a like notice.  In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice.  Filing of an action for infringement shall constitute such notice.
    (2) In the case of a patented invention not covered under paragraph (1), no recovery shall be had for any infringement committed more than 2 years prior to the filing of the complaint or counterclaim for infringement in the action, except upon proof that the infringer was notified of the infringement by the patentee.  Upon such proof, the patentee may recover damages for infringement for up to 2 years prior to such notice, as well as for infringement after such notice.  In no event may damages be recovered for more than 6 years prior to the filing of the complaint or counterclaim for infringement in the action.

(e) Willful Infringement --
(1) INCREASED DAMAGES -- A court that has determined that an infringer has willfully infringed a patent or patents may increase damages up to 3 times the amount of the damages found or assessed under subsection (a), except that increased damages under this paragraph shall not apply to provisional rights under section 154(d).
(2) PERMITTED GROUNDS FOR WILLFULNESS -- A court may find that an infringer has willfully infringed a patent only if the patent owner presents clear and convincing evidence that acting with objective recklessness --

(A) after receiving written notice from the patentee --
    (i) alleging acts of infringement in a manner sufficient to give the infringer an objectively reasonable apprehension of suit on such patent, and
    (ii) identifying with particularity each claim of the patent, each product or process that the patent owner alleges infringes the patent, and the relationship of such product or process to such claim, the infringer, after a reasonable opportunity to investigate, thereafter performed 1 or more of the alleged acts of infringement;
(B) the infringer intentionally copied the patented invention with knowledge that it was patented; or
(C) after having been found by a court to have infringed that patent, the infringer engaged in conduct that was not colorably different from the conduct previously found to have infringed the patent, and which resulted in a separate finding of infringement of the same patent.

(3) LIMITATIONS ON WILLFULNESS --

(A) IN GENERAL -- A court may not find that an infringer has willfully infringed a patent under paragraph (2) for any period of time during which the infringer had an informed good faith belief that the patent was invalid or unenforceable, or would not be infringed by the conduct later shown to constitute infringement of the patent.
(B) GOOD FAITH ESTABLISHED- An informed good faith belief within the meaning of subparagraph (A) may be established by --
    (i) reasonable reliance on advice of counsel;
    (ii) evidence that the infringer sought to modify its conduct to avoid infringement once it had discovered the patent; or
    (iii) other evidence a court may find sufficient to establish such good faith belief.
(C) RELEVANCE OF NOT PRESENTING CERTAIN EVIDENCE -- The decision of the infringer not to present evidence of advice of counsel is not relevant to a determination of willful infringement under paragraph (2).

(4) LIMITATION ON PLEADING -- Before the date on which a court determines that the patent in suit is not invalid, is enforceable, and has been infringed by the infringer, a patentee may not plead and a court may not determine that an infringer has willfully infringed a patent.  The court's determination of an infringer's willfulness shall be made without a jury.

These provisions eliminate changes in the marking requirement and codify the Federal Circuit's recent In re Seagate decision requiring "objective recklessness" for a finding of willful infringement.

In addition, third party-initiated re-examination proceedings, deleted in the original version of the bill in favor of the new derivation proceedings, have been reinstated.  This action seems to be a direct response to a letter from Dan Ravetcher and the Public Patent Foundation who complained that the public needed to be able to challenge a patent throughout its term rather than being limited to the twelve months after grant.  While there is some substance to Mr. Ravetcher's position, these amendments illustrate which side of the patent "reform" debate continues to have the Senator's ear.

• New Section 18 is added, modifying the best mode requirement:

Section 282(b) (as designated by section 16(f) of this Act) is amended by striking paragraph (3) and inserting the following:

(3) Invalidity of the patent or any claim in suit for failure to comply with --
(A) any requirement of section 112 of this title, other than the requirement that the specification shall set forth the best mode contemplated by the inventor of carrying out his invention; or
(B) any requirement of section 251 of this title.

These provisions paradoxically retain the best mode requirement of 35 U.S.C. § 112, first paragraph, for patentability, but eliminate the requirement as a basis for finding invalidity.  This amendment has been described as incorporating a similar provision of the bill passed last September by the House of Representatives (H.R. 1908).  However, it is hard to see how the best mode requirement survives without the capacity to use its violation to invalidate a patent.

The final provision may indicate that the Senator is aware of efforts by patent stakeholders to resist the ill-advised "new rules" currently enjoined by Judge Cacheris of the District Court for the Eastern District of Virginia:

SEC. 18.  Severability.

If any provisions of this Act or of any amendment or repeals made by this Act, or the application of such a provision to any person or circumstance, is held to be invalid or unenforceable, the remainder of this Act and the amendments and repeals made by this Act, and the applications of this Act and such amendments and repeals to any other person or circumstance, shall not be affected by such holding.

No doubt the Senator believes it will be too burdensome for the Act to be invalidated in a piecemeal fashion.

Glaringly missing from these amendments are any that address the legitimate concerns of those patent stakeholders -- universities, sole inventors and other small entities, and biotechnology and pharmaceutical patentees and patent applicants -- with regard to the damages provisions, venue restrictions, and imposition of Applicant Quality Submissions.  Also untouched are the "get out of jail free" card provisions (Sections 13 and 14) introduced by special interests to transfer patent infringement liability from the banking industry onto the American taxpayer, and to permit patent term extension in instances where the statutory deadline has been inadvertently missed.

It remains to be seen whether Senator Leahy will be able to garner the votes needed to close debate and bring the bill a floor vote.  The oxymoronically- named Coalition for Patent Fairness has renewed its publicity campaign in support of the bill, saying on Friday that this "package of bipartisan amendments represents yet another major step for the Patent Reform Act" and "clears the way for final negotiations on the few remaining issues and builds critical momentum that will bring the bill to the Senate floor."  While it seems that the the patent "reform" crowd have the only voices Senator Leahy is hearing (or listening to), time remains to ensure that voices in opposition to the bill are heard by the rest of the Senate.

Abbott Spent $4.4 Million on 2007 Lobbying Effort

    By Donald Zuhn --

In 2007, patent reform and biologics legislation became front burner issues.  Not surprisingly, this did not escape the notice of many biotech and pharmaceutical companies, and for the past few months we have been paying close attention to reports concerning the lobbying efforts of such companies.  We have already discussed the money spent on lobbying by Millennium Pharmaceuticals ($1.28 million), Genentech ($1.8 million), and AstraZeneca ($4.1 million).  Most of these funds presumably went to lobby on the patent reform and biologics bills that were being considered by Congress last year.

Last week, Forbes.com reported that Abbott Laboratories has vaulted to the front of the pack by spending $4.4 million on lobbying.  Not all of Abbott's lobbying costs were applied to the patent reform and biologics bills, however, as the company also lobbied for changes to the tax code that would reward businesses for investing in research, and supported funding to raise kidney disease awareness and help purchase AIDS medication.

For additional information regarding this topic, please see:

• "Biotech and Pharma Companies Spent Millions on Lobbying in 2007," March 5, 2008
• "Millennium Pharmaceuticals Spent $1.28 Million on Lobbying in 2007," February 8, 2008

Harry Manbeck on Inequitable Conduct

    By Kevin E. Noonan --

Harry Manbeck, name partner of the Rothwell, Figg, Ernst and Manbeck firm and former Commissioner of the Patent and Trademark Office (1990-1992) has written a letter to Senators Leahy (D-VT) and Specter (R-PA), chairman and ranking member of the Judiciary Committee.  The letter concerns provisions of S. 1145, the patent "reform" bill pending in the Senate, that propose changing the sanctions available for inequitable conduct.  These proposals, as previously discussed on Patent Docs would limit the current sanction, unenforceability of all claims in a patent where the applicant or her counsel had violated the duty of candor, to those situations where one or more patent claims had been found invalid.

Mr. Manbeck's letter reviews for the Senators the development of the current sanction regime, particularly focusing on A.B. Dick Co. v. Burroughs Corp., 798 F.2d 1392 (Fed. Cir. 1986).  In that case, inequitable conduct was found, even though the undisclosed prior art had been independently uncovered by the examiner and all claims rendered invalid by that art were cancelled before the patent granted.  The rationale, according to Mr. Manbeck, is that the conduct (intentionally withholding references from the examiner) was enough to merit the sanction, even though none of the granted patent claims had been obtained as a result of the misconduct.  According to Mr. Manbeck, this result discouraged "mischief" during patent prosecution, and is an important check on the temptation to gain an unwarranted advantage by withholding relevant prior art.

Mr. Manbeck recognizes the other side of the issue -- that the inequitable conduct doctrine was intended to discourage misconduct, not unintentional mistake.  While urging that the Senators not adopt a "but for" approach to inequitable conduct, Mr. Manbeck also suggests that sanctions less severe than unenforceability be considered.  Specifically, Mr. Manbeck suggests that infringed claims in a patent "tainted" with inequitable conduct but containing valid and infringed claims be limited to reasonable royalty instead of lost profits damages.  Mr. Manbeck urges that the inequitable conduct doctrine not be weakened by legislation that would bar sanctions for patents containing only valid claims despite evidence of the kind of "mischief" found in A.B. Dick.  According to Mr. Manbeck, this type of misconduct should provoke a sanction so as to maintain its influence in discouraging inequitable conduct.

While ably presenting the case for keeping inequitable conduct sanctions regardless of whether a misbehaving applicant or her counsel is successful or not, neither the letter nor the pending legislation addresses how to prevent honest mistakes during prosecution from being elevated to an inequitable conduct allegation.  Until such a proposal is made, the problem with inequitable conduct will not be solved.

It's Getting to Be Crunch Time for S. 1145

    By Kevin E. Noonan --

The patent community got its biggest scare in quite a while late last year, when a rules package thought to be dead for almost a year was released on August 21, 2007 (see "New Continuation and Claims Rules Published").  And even then, initially the only member of our community that stepped forward to challenge the rules was sole inventor Dr. Triantafyllos Tafas, who was eventually joined by GlaxoSmithKline (see "Inventor Sues PTO to Prevent New Continuation Rules from Taking Effect" and "Hooray! - (Finally) the Big Dogs Have Joined the Hunt").  Only an 11th-hour decision on the eve of the new rules being implemented by Judge Cacheris of the Eastern District of Virginia prevented those rules from coming into force, with all of the negative consequences they would have had (and, in truth, might still have).

The patent community is approaching another critical deadline regarding how the U.S. patent system goes forward.  The Intellectual Property Owners Association (IPO) and other sources report that Senator Patrick Leahy (D-VT) (at right), chairman of the Judiciary committee, and Senator Harry Reid (D-NV) (at left), Senate Majority leader, intend to bring the Senate's patent "reform" bill (S. 1145) to a vote in the eight weeks after the Senate reconvenes from its spring recess.  At present, Senator Leahy is working on several amendments, and intense lobbying continues:  the oxymoronic Coalition for Patent Fairness has written the Senator to propose statutory requirements for damages apportionment (seemingly unwilling to give judges the leeway to fashion equitable remedies under the current proposals), former commissioner Harry Manbeck has written to Senator Leahy and Senator Specter (R-PA, the ranking committee Republican) on the inequitable conduct provisions, and other stakeholders are similarly exercising their right to petition their government for a bill that favors their interests.

There is much not to like about S. 1145; however, no matter what your views, now is the time to let your Senator know.  The bill won't come to a vote unless there are 60 votes to close debate, and several Senators have exercised their prerogative to place a "hold" on the bill.  Senator Leahy has said he will not pursue patent reform next year if this bill does not pass (and with a new administration, his committee may be busy addressing a backlog of judicial appointments).

So, the time is now.  Let your Senators know how you feel.  And remind them, if you can, that they are up for re-election this year.  Since 33 of them will be "at risk" in this way, maybe there is a chance they will listen.

Biotech and Pharma Companies Spent Millions on Lobbying in 2007

    By Donald Zuhn --

Last month, we noted that Millennium Pharmaceuticals spent $1.28 million in 2007 lobbying Congress and the Department of Commerce on patent reform and biologics legislation.  Under federal law, lobbyists are required to disclose activities and expenditures that could influence members of the executive and legislative branches.  Since the news of Millennium's lobbying spending was released, information regarding the lobbying efforts of other companies and organizations has been published.

In particular, Forbes.com reported at the end of February that Genenech Inc. spent $1.8 million lobbying the federal government in 2007.  While a portion of Genentech's lobbying expenditures were directed to patent reform and biologics legislation, the South San Francisco biotech company also lobbied on other bills that would impact the biotech drug market.

Another Forbes.com report from February indicates that AstraZeneca PLC topped both Millennium and Genentech by spending $4.1 million on lobbying in 2007.  According to the Forbes report, AstraZeneca's lobbying efforts were directed to patent reform and biologics legislation.

Finally, on the other side of the patent reform issue, an Associated Press release from late last month reported that the Coalition for Patent Fairness paid Patton Boggs LLP $500,000 last year to push for patent reform legislation.  According to the Coalition's website, the organization is "a diverse group of companies and industry associations dedicated to protecting consumers and enhancing U.S. innovative potential by strengthening our nation's patent system," which the Coalition argues " leaves U.S. consumers and businesses at a clear disadvantage" by forcing companies "to focus more on the risks of innovation than the benefits to consumers and society as a whole."  The Coalition seeks to reform damages (courts should be required to focus on the value that is attributable to the patent in question, and not on the full value of the entire product); reform the willfulness standard and procedure for litigating willfulness claims; establish a new administrative procedure for post-grant review of patent grants so that wrongfully-issued patents can be effectively reviewed and redressed within the U.S. Patent and Trademark Office, rather than in the courts; and changes to venue standards to prohibit "venue shopping."

POPA President Critical of USPTO During House Subcommittee Oversight Hearing

    By Donald Zuhn --

Last week, we reported on appearances by Jon Dudas, the Undersecretary of Commerce for Intellectual Property and Director of U.S. Patent and Trademark Office, and Alan Kasper, the First Vice President of the American Intellectual Property Law Association (AIPLA), at an oversight hearing on the USPTO held by the House Subcommittee on Courts, the Internet, and Intellectual Property.  The Subcommittee also heard statements from Robin Nazzaro, the Director of National Resources and Environment for the U.S. General Accountability Office, and Robert Budens, the President of the Patent Office Professional Association (POPA).  Today, we address Mr. Budens' statement, in which the POPA President spared no criticism of the Patent Office's efforts to increase patent quality and decrease pendency.

Mr. Budens, who represents more than 5,800 patent professionals at the USPTO, began by acknowledging that "[t]he USPTO has been the target of much criticism in recent years for failing to allow high-quality patents and doing so in a timely manner."  He noted that "[t]his criticism has resulted in increased scrutiny of the day-to-day operations of the USPTO as well as review of the laws governing the patent system," but argued that the solutions being proposed by the Patent Office and Congress "go far beyond what is truly necessary to improve performance at the USPTO."  According to Mr. Budens, the problems facing the Patent Office -- namely patent quality and pendency -- are "internal problems of the USPTO," and "must be solved in the USPTO."  In particular, he contended that these problems could only be resolved by providing patent examiners with the time and tools that they need to do the job right.

The POPA President argued that three key components were required to "do the job right":  people, time, and tools.  With respect to the first component, Mr. Budens noted that while application filings have continued to rise, "years of inadequate funding and restrictions on hiring [have] left the USPTO severely understaffed."  However, in view of the 3,411 examiners the Patent Office hired between 2005 and 2007, Mr. Budens stated that the Office no longer has a significant hiring problem, but rather has a problem keeping the people it does hire.  In support of this argument, Mr. Budens pointed out that during the same three-year period, the Office lost 1,478 examiners -- or nearly one examiner for every two it hired.

In addition, the POPA President disputed Mr. Dudas' testimony that the Office's attrition rate for examiners with less than three years experience was only 15.5%, arguing that the Director's attrition statistics "do not appear to correlate with previously published USPTO data," which actually show an attrition rate of between 30 and 44%.  Mr. Budens also attacked the initiatives (e.g., retention bonuses, increases in examiners' special pay rate, and part-time employment) the Patent Office "claims" to be instituting to increase examiner retention.  Mr. Budens concluded his attack on the Office's retention policies by stating that:

the one thing management could do to increase retention, it has consistently refused to do for more than thirty years -- provide examiners with the time to do the job right.  More than any other factor, the most common reason examiners leave the USPTO is the unrelenting stress caused by the agency's outdated production system.

The POPA President summarized that "[w]hen it comes to retention of examiners, the agency's anti-employee actions speak much louder than their words."

Moving to the second component of "doing the job right" (i.e., time), Mr. Budens continued his assault on the Patent Office's antiquated production system, reiterating that "for more than thirty years the agency has refused to adjust examiners' production goals to compensate for the increasing complexity of technologies, larger and more complex patent applications, and an ever-expanding body of both patent and non-patent literature (prior art)."  Calling the examiners' high-stress environment the equivalent of a "legal sweatshop," Mr. Budens noted that "a GS-12 examiner has, on average, about 20.4 hours, spread over one to two years, to complete the examination of a utility-type patent application."  Depending on the technology area, he explained that some examiners may have as little as 11.2 hours, and no more than a maximum of 22.1 hours, to examine an application.

Mr. Budens also noted that while the Patent Office's production goals have remained essentially unchanged since they were put in place in 1976, examiners currently examine technologies (such as biotechnology) that simply did not exist when the production goals were put in place.  In addition, examiners must search ever increasing amounts of information to identify relevant prior art.  Using just the collection of U.S. patents as an example, Mr. Budens pointed out that while it took the Patent Office two hundred years to issue its five millionth patent, in the seventeen years since U.S. Patent No. 5,000,000 issued, more than 2.3 million additional patents have issued.

The POPA President argued that "[t]rying to do high quality examination of patent applications in 2008 in the amount of time examiners were given in 1976 has left examiners angry, stressed-out and demoralized."  Moreover, he added that "POPA's data revealed that one third of examiners work unpaid overtime just to keep their jobs!"  Finally, Mr. Budens noted that while a 2003 National Research Council of the National Academy of Sciences study indicated that providing examiners with a one-hour increase per application would cost the USPTO $11.3 million, the one-hour increase would decrease litigation expenses by more than $17 million.

Addressing the final component of "doing the job right" (i.e., tools), Mr. Budens argued that:

after neglecting the U.S. classification system and eliminating one of the most useful and unique search tools in the world -- the paper search files -- the agency wants to finish the job of effectively outsourcing the search to patent applicants by obtaining statutory authority to require all or nearly all patent applicants to perform a mandatory search and submit an Applicant Quality Submission (AQS) in their patent applications.

Mr. Budens contended that the Office's dogged pursuit of AQS legislation was misplaced since 37 C.F.R. § 1.56 -- when properly enforced -- was more than adequate to accomplish the goal of increasing patent quality.  According to Mr. Budens' group:

[a] patent search is an integral part of the examination process and represents an inherently governmental function that should not be outsourced to the private sector.  As the patent search forms the very basis of determining property rights in the United States, the search should be performed by U.S. Government employees free of any conflicts of interest -- USPTO patent examiners.

Mr. Budens added that "[t]he only clear effect of the AQS is to dramatically increase the cost of applying for a patent."  As for the Patent Office's true motivation in seeking an AQS provision in the patent reform legislation, Mr. Budens speculated that the Office desired "to effectively outsource the patent search to applicants so that it can 'gain efficiency' by reclaiming that search time from examiners thereby requiring them to examine more cases."  He suggested that the because AQSs will "dramatically increase the cost of protecting innovation in America" and the benefits of AQSs were speculative at best, the AQS provision should be deleted from the Senate bill.