Docs at BIO: Panel Discusses Impact of USPTO Rules Changes and Patent Reform Legislation on Biotech Patenting

    By Donald Zuhn --

Last Thursday, a diverse panel comprising both in-house and outside counsel and both corporate and venture capital interests participated in a breakout session at the BIO International Convention to discuss IP challenges and strategies for biotech and pharma companies as a result of pending USPTO rules changes and possible patent reform legislation.  Participating in the panel were Dr. Jeffrey W. Guise, a Partner with Wilson Sonsini Goodrich & Rosati; Ms. Esther Kepplinger, the Director of Patent Operations for Wilson Sonsini Goodrich & Rosati; Dr. Kim Kamdar, a Principle with Domain Associates; Dr. Daniel P. Gold, the founder and former Chief Scientific Officer of Favrille, Inc.; and Ms. Hazel Aker, Senior Vice President, General Counsel, and Secretary of Cadence Pharmaceuticals, Inc.

In the first half of the session, Ms. Kepplinger provided an overview of pending USPTO rules changes and an update regarding patent reform.  Following Ms. Kepplinger's presentation, Dr. Guise moderated a panel discussion to determine how venture capitalists (represented by Dr. Kamdar), corporate executives (represented by Dr. Gold), and in-house counsel (represented by Ms. Aker) thought the rules changes and patent reform would impact biotech and pharma patenting.

With the claims and continuations rules being permanently enjoined, the IDS rules being seemingly put on hold (perhaps as a result of the Patent Office's questionable economic impact analysis), the alternative claiming rules being re-published for comment (again, as a result of the Patent Office's questionable economic impact analysis), and patent reform legislation being removed from the Senate calendar, one would have thought that Ms. Kepplinger might have very little to say regarding the topic of rules changes and patent reform.  However, the former Deputy Commissioner for Patent Operations at the USPTO came armed with a number of interesting statistics and valuable insight gleaned from her work in the Patent Office.

Ms. Kepplinger (at left) began by asserting that the collection of rules packages proposed by the USPTO in the past year would neither reduce the application backlog nor improve patent quality.  She also contended that the Patent Office had not done much internal review to determine whether, and how, the Office had contributed to the backlog.  If the Office had done so, Ms. Kepplinger argued that it would have found that many of its actions actually contributed to the backlog.

According to Ms. Kepplinger, the ill-fated continuation and claims rules serve as a perfect example of the Patent Office's flawed logic, which blamed the backlog on applicants' filing of increasing numbers of continuation applications.  Citing a study conducted at the George Mason University School of Law (see "Improving Patent Examination Efficiency and Quality: An Operations Research Analysis of the USPTO, Using Queuing Theory"), Ms. Kepplinger noted that contrary to the Office's hypothesis, the backlog has been caused by the issuance of too many non-final Office actions.  In particular, the George Mason study found that divisional and continuation filings have remained fairly stable over the past seven years, while RCEs have increased from 8.3% to 19.6% of total filings.  Ms. Kepplinger argued that this actually indicates that some examiners have been "gaming the count system."

Ms. Kepplinger next discussed statistics related to actions per disposal (APD; the number of actions issued before an application is allowed or abandoned).  Reflecting on her five years as Deputy Commissioner, she noted that the Office had always achieved an APD of about 2.3, and that between 1985 and 2004, the APD had remained at this level.  However, as shown below, the APD steadily rose between 2004 and 2007:

2004: 2.27
2005: 2.60
2006: 2.76
2007: 2.85

Ms. Kepplinger argued that while the jump in APD may seem small, it actually accounts for an increase of more than half an action per application.  Even more interesting was Ms. Kepplinger's observation that the USPTO had made the above figures available only after a FOIA request had been filed.  Moreover, Ms. Keplinger noted that the USPTO had recently begun to include design applications in its APD calculations (something she stated was not done during her tenure with the Office), which would skew the numbers in favor of the USPTO's position (i.e., yielding current APD values that are closer to past APD values).

Turning her focus to allowance rates, Ms. Kepplinger presented a graph (originally presented by Director Dudas) that clearly indicated that allowance rates had remained fairly constant between 1975 and 2000 (ranging from 60% to just over 70%), and had dropped significantly since 2000.  Ms. Kepplinger primarily blamed increased RCE filings for the drop in allowance rate (noting that when RCEs are subtracted from the post-2000 totals, the allowance rate returns to pre-2000 levels).  According to Ms. Kepplinger, other causes for the drop in allowance rate include:

1.  The USPTO's goal to achieve a 3.5% error rate (Ms. Kepplinger noted that supervisor bonuses are keyed to this goal, and that the USPTO recently began including design applications in its error calculations – presumably to keep the rate at or below 3.5%);
2.  The USPTO's desire to have a "second set of eyes" review applications prior to allowance;
3.  Massive hiring of new (and inexperienced) examiners;
4.  The reluctance of examiners to allow applications (Ms. Kepplinger noted that "you can't make a mistake if you don't allow"); and
5.  The KSR Int'l Co. v. Teleflex Inc. decision.

The latter part of Ms. Kepplinger's presentation was devoted to a discussion of the status of various USPTO rules packages and patent reform legislation.  With respect to the alternative claiming rules (which were recently re-published for comment; see "Patent Office Publishes Notice Regarding Impact of Proposed Markush Claims Rules on Small Entities"), Ms. Kepplinger provided four suggestions for dealing with these rules once they are promulgated (as she expected they would be):

1.  Use true generic claims, since the alternative claims rules will not apply to such claims (e.g., a claim reciting a citrus fruit will fall outside the rules, while a claim reciting an orange, grapefruit, or lemon would be encompassed by the rules);
2.  If possible, identify one embodiment that falls within two restricted groups, since such an embodiment could be used to argue that restriction was improper (Ms. Kepplinger noted that petitions on restriction in Group 1600 are granted about 60% of the time);
3.  Interview the case; and
4.  Be prepared to appeal.

Moving to the IDS rules, Ms. Kepplinger offered the following suggestions for dealing with these rules:

1.  Review the references to be cited and try to remove cumulative references from the list;
2.  Memorialize your analysis of references and place it in the file; and
3.  Utilize alternative methods of disclosing references (e.g., present references at an Interview).

On the subject of the continuation and claims rules, Ms. Kepplinger stated that "it's not clear that these will be gone forever," observing that one possible outcome of the USPTO's loss in Tafas/GSK v. Dudas is that the Office will try that much harder to get Congress to grant it substantive rulemaking authority.  On the bright side, Ms. Kepplinger argued that Tafas/GSK "has created a roadmap to challenge other rules packages."  Finally, in addressing the stalled patent reform bill in the Senate, Ms. Kepplinger asked session attendees to "keep your eye on" the Applicant Quality Submission (AQS) provision, since this is the one provision of the bill that the Patent Office really wants.  Ms. Kepplinger concluded by stating that the provision was one that "you may want to have your voice heard."

For additional information on this and other related topics, please see:

• "Docs at BIO: Representatives from JPO, EPO, SIPO, and USPTO Discuss Recent Developments in Japan, Europe, China, and the U.S.," June 22, 2008
• "Docs at BIO: Steve Burrill's State of the Biotechnology Industry Report 2008," June 19, 2008
• "Patent Office Publishes Notice Regarding Impact of Proposed Markush Claims Rules on Small Entities," March 10, 2008

Comments

[e6k]

"gaming the count system."

Of course they are. Is someone out there telling you differently? At the same time, attorneys are gaming the count system, and so are spe's and so is the international bureau. Everyone and anyone taking part in the prosecution of patents is gaming the count system. It just so happens that examiners are gaming the system the least of everyone because it is more difficult than it is for other parties to.

"3. Massive hiring of new (and inexperienced) examiners"

That is of course the major reason for many of the problems, but it is directly linked to the quantity of applications that must be examined. You'll have to lower the amount of the one to lower the amount of the other.

[Toto]

e6k, tap your heels together while repeating the words, "It's not a PTO management created problem." If that doesn't work, then continue throwing mirrors and smoke so no one considers the problem with PTO management. I agree with you - that's a really good way to help America.