United States: ´Radical´ Changes Proposed by USPTO Will Alter Patent Process

Originally Published in Massachusetts Lawyer's Weekly, May 1, 2006
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

As the U.S. Patent and Trademark Office endeavors to find solutions for managing its vast workload, it is considering changes that, if accepted, will significantly alter the course of the patent process. These proposed rules are still under serious debate and the USPTO has requested comments and alternate proposals from the public. This article will discuss the implications of the proposed rule changes and how they may impact Massachusetts businesses.

Long Delays

The U.S. Patent and Trademark Office (USPTO) currently faces unreasonably long delays in the initial examination of patent applications. For example, the average time from filing to a first action in a newly filed patent application is 27.4 months for applications in molecular biology; 41.6 months in technologies related to simulation, modeling, and emulation of computer components; and 45.3 months for interactive video distribution technologies. With patent terms limited to a maximum of 20 years from initial filing date, these delays seriously erode the effective life of a patent. The USPTO blames much of its examination backlog on excessive filing of continuation applications and increasing numbers of claims in each application. As a result, the USPTO has proposed two radical changes to the patent rules to curtail these practices and reduce its current backlog. If adopted, the rules would apply to all applications that have not been substantively examined as of the date the rules go into effect.

Proposed Rule Changes

The first rule change the USPTO proposes is to limit the number of continuing prosecution opportunities as a matter of right. Under the current rules, there is no restriction on the number of continuing and divisional applications a patent applicant can file, as long as one application in the chain has not yet issued. The proposed rules permit only a single continuation application or request for continued examination to be filed as a matter of right, with one very narrow exception. The USPTO also intends to limit divisional application practice to those applications directly resulting from a restriction requirement in an immediately preceding case. Voluntary divisional applications will no longer be permitted. The narrow exception to the single continuation rule involves cases in which an applicant can establish that the amendment, argument, or evidence that necessitated the continuation application or request for continued application could not have been submitted prior to the close of prosecution. Qualifying for this exception is expected to be very difficult.

The USPTO proposal also anticipates the public’s natural reaction to the new continuation rule -- i.e., the filing of multiple patent applications in place of a single initial application. To counter this expected response, the proposed rules also limit an applicant’s right to file a patent application within two months of the filing date of another pending or patented non-provisional application, if it contains overlapping disclosure with that application, names at least one inventor in common, and is owned or subject to an obligation of assignment to the same entity. This proposal includes applications filed by parties to a joint research agreement.

The second rule change proposed by the USPTO to address its application backlog problem is to limit initial examination of applications to focus on only 10 claims unless an applicant supplies an examination support document. All independent claims in an application must be designated for initial examination. If the application contains fewer than 10 independent claims, dependent claims may be designated for examination. Examination of non-designated claims that are dependant on designated claims may be held in abeyance until the application is otherwise in condition for allowance.

The examination support document (ESD) is a new paper which must be filed in any application that either (a) contains or is amended to contain more than 10 independent claims, or (b) designates more than 10 total independent and dependent claims for initial examination. The ESD must state that a search has been conducted of U.S. and foreign patents and applications, as well as non-patent literature. An information disclosure statement is required, including identification of any claim elements disclosed in the cited references, and a detailed explanation of why the claims are patentable over each reference. Finally, the ESD must include a showing of any written description support for each limitation of each designated claim in both the present application, as well as any U.S. benefit applications. Even a cursory review of this list of examination support document requirements makes it clear that filing such a document would impose significant burdens, not to mention liability, on an applicant and its representatives.

Mixed Reaction

There is certainly some support for the rule changes proposed by the USPTO from groups who favor early certainty in patent landscapes and elimination of the patent troll’s ability to pursue submarine patents and derive ransom from another company’s successful products. However, there is also very strong opposition to the implementation of these proposed rules by groups who believe that the USPTO has neither the authority nor a substantiated basis for implementing the rules.

Moreover, many industries, including biotechnology and other high tech industries, would be particularly adversely affected by the proposed rules. For example, start-up companies often rely on patents as their main assets for attracting working capital. Because it is often important to obtain prompt patent issuance in order to secure essential financing, applicants are often motivated to take narrower claims in an initial patent and pursue broader scope claims in subsequent continuation applications. A "one continuation application" limit may prevent an applicant from obtaining the full scope of protection for their invention. Thus, if adopted, the proposed rules would negatively impact a company’s ability to obtain a patent portfolio necessary to demonstrate value for obtaining venture capital.

Costs of prosecuting applications are also likely to significantly rise if the proposed rules are implemented by the USPTO. For example, for every restriction requirement issued, an applicant will be required to file all divisional applications before allowance of the restricted application or lose the right to file that divisional application. This multiple divisional application filing practice will replace the current practice of serial filing of divisional applications, which allows small and start-up companies to keep expenses down for technologies that take a long time to bring to the market, while preserving their right to ultimately obtain full protection for their inventions.

Written comments on the proposed rules are being accepted by the USPTO until May 3, 2006. However, in spite of strong opposition to these rules to date, the USPTO continues to express confidence that it will finalize the rules essentially as proposed before the end of the year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.