By Donald Zuhn --
In a Wednesday Super Session entitled "A Model Patent Office for the Future -- Promoting and Protecting Investments in Innovation," a panel consisting of Sherry Knowles, Vice President of Corporate Intellectual Property at GlaxoSmithKline Biopharmaceuticals, Inc.; Q. Todd Dickinson, Executive Director for the American Intellectual Property Law Association (AIPLA); John Duffy, Professor of Law at George Washington University Law School; and Jeff Kushan, a Partner at Sidley Austin LLP, provided a long range view of what the model patent office of the future can and should look like to drive innovation and economic growth, and promote investment in IP-intensive industries.
Ms. Knowles (at left), who moderated the session, began the discussion by fondly recalling the "Golden Era" of patent prosecution in which U.S. examiners were intrigued by inventions disclosed and claimed in patent applications, and worked with applicants to advance prosecution. She noted that cooperation between the USPTO and its stakeholders had reached an all-time low, analogizing the USPTO to a "hospital that hates patients." Pointing to statistics showing a decreasing filing rate, a first quarter allowance rate of 42% (which Ms. Knowles noted was also an all-time low), and an increasing application backlog of applications, she labeled the current situation a "train wreck." Ms. Knowles contended, however, that stakeholders could not just count on patent reform, the courts, or the yet-to-be-named USPTO Director to fix the Office's problems, but rather had to play an active role (including working with the USPTO) to ensure that the USPTO's problems are solved.
Mr. Dickinson (at right), who served as USPTO Director during the Clinton Administration, discussed a number of challenges that will confront the next Director, including the application backlog, application pendency, the current revenue shortfall, examiner attrition, and examination quality. With respect to the first two challenges, Mr. Dickinson noted that the application backlog was approaching a million applications and that application pendency currently stood at 38 months. He indicated that Gary Locke, the new Secretary of Commerce, had recently proposed reducing pendency to only 10 months. While he found this goal to be laudable, he observed that the last time the USPTO had a 10-month application pendency, the country was embroiled in a Civil War. He also noted that only one USPTO Director had been able to reduce application pendency in the past thirty years (later confirming that he had been that lone Director). With regard to the Office's revenue shortfall, Mr. Dickinson pointed out that as a result of a drop in application filings and lower maintenance fee collections, revenue was down 10% for the year. The revenue shortfall, in turn, had forced the Office to implement a hiring freeze and eliminate programs such as law school reimbursement for examiners, which not surprisingly, had negatively impacted examiner attrition (although Mr. Dickinson noted that the negative impacts have been somewhat offset by the unsettled job market). Finally, Mr. Dickinson argued that examination quality was an issue that the USPTO needed to address, and one that patent reform (which has focused on downstream, litigation-related "reforms") could not fix.
Mr. Dickinson next proposed several USPTO reforms, including changes in Office leadership, the count system, examination time allotments and examiner pay, enhanced worksharing, an end to fee diversion, and deferred examination. Mr. Dickinson advised the new USPTO leadership that rulemaking transparency and attempts to engage stakeholders in the process would be critical to the success of any future rulemaking (a lesson he said he learned during passage of the AIPA, and a lesson that the last Administration never seemed to learn). According to Mr. Dickinson, the count system, by which the Office measures examiner (and supervisor) performance, was in need of an update (he noted that the system had not been significantly changed in 30 years). However, he advised session attendees that such an update would not come cheap, as the last update of the system cost $20 million. Mr. Dickinson also argued that the amount of time allotted for examination, which he said ranged from 18-36 hours per application, was also in need of an update. Mr. Dickinson warned, however, that adding just one hour to the examination of each application would result in an additional $20 million in expense. On the topic of worksharing, Mr. Dickinson stated that continued implementation of such programs would require a leap a faith and buy-in from stakeholders with regard to searches conducted by foreign patent offices. While noting that the last six Bush budgets and the first Obama budget had specified an annual end to fee diversion, Mr. Dickinson argued that a permanent end to fee diversion was needed in order to permit the USPTO to engage in long-term planning. Finally, on the topic of deferred examination, he admitted that his own organization had traditionally rejected deferred examination proposals, but refused to dismiss deferred examination as a possible tool for reforming the USPTO, stating that the devil would be in the details (e.g., how many years would be available, how would the fee structure be altered, how would intervening rights and patent term adjustment be handled).
In a presentation entitled "Ending the Patenting Monopoly: The Global Transition to Patent Office Decentralization," Prof. Duffy (at left) discussed the evolution of the USPTO from its current antiquated state. Noting that the USPTO had changed little since its 1836 origins, when the centralization of patent examination was a revolutionary (but perhaps sensible) concept, he argued that radical change was needed (and that such change was almost inevitable). Prof. Duffy argued that the current system, in which applicants were forced to deal with a single entity, necessarily created a monopolistic attitude at the USPTO. Thus, stakeholders upset over lengthy application pendency in the U.S. were left with no recourse but to accept that pendency.
As an example of a decentralized (or demonopolized) patent examination system, Prof. Duffy pointed to the Israeli patent system, in which applicants are allowed to use the examination of a corresponding application in a number of other patent offices to secure an allowance of an application in the Israeli Patent Office. Prof. Duffy also noted that steps towards demonopolization had already been taken in the form of the implementation of the PCT, where U.S. applicants can choose to have searches conducted by the USPTO, EPO, IP Australia, or South Korean Patent Office (and at significantly different costs); the creation of the EPO, where national offices compete with the EPO to provide examination services; and the Patent Prosecution Highway (PPH), a worksharing arrangement between the USPTO and a number of foreign patent offices.
Prof. Duffy concluded his presentation by discussing private searches, the peer-to-patent system, and accelerated examination/Application Quality Submissions (AQSs), in which entities other than the USPTO perform the search or examination functions. Referring to the above as the "cutting edge" of demonopolozation, Prof. Duffy predicted an inevitable move towards private searches. However, he acknowledged that inequitable conduct remained a thorn in the side of accelerated examination. Prof. Duffy also noted that the reaction to the demonopolization movement had not been favorable, pointing to a section of the Senate patent reform bill (S. 515), which labels search and examination functions as "sovereign," and requires these functions to be performed by U.S. citizens. Mr. Dickinson speculated that lobbying from the examiners' union had led to the addition of this provision to the bill.
Mr. Kushan (at right) was the last member of the panel to offer his suggestions for USPTO reform in a presentation entitled "An Idealized PTO for Biotech and Pharmaceutical Applications." Touching on the issue of patent quality, Mr. Kushan noted that the standards under which patents issue are frequently different from the standards under which patents are litigated. Mr. Kushan also agreed with Mr. Dickinson that the outdated count system and time allotted for examination needed to be changed. He also criticized the "two sets of eyes" policy as one in which examination was done "twice inefficiently" instead of just "once inefficiently." Mr. Kushan advocated for "on demand" examination, with the caveat that applicants should be required to pay higher fees to defer examination. He also contended that inequitable conduct reform was as necessary for the USPTO as it was for applicants.
In the question and answer portion of the session, Ms. Knowles proposed (somewhat surprisingly) that the USPTO should enact escalating fees for the presentation of additional claims (akin to current EPO practice), the filing of each new continuation, and the submission of each new reference. While the other panelists were less than enthusiastic about her proposal, none mentioned that in the absence of production goal reform (i.e., changes to the count system and examination time allotments) and inequitable conduct reform, escalating fees would be unlikely to resolve the problems confronting the USPTO. Ms. Knowles also asked the panelists for their opinions regarding the substantive or procedural nature of the rule limiting continuations that was at issue in Tafas v. Doll. Mr. Dickinson stated that the AIPLA believed the rule was substantive, but Prof. Duffy, noting his background in administrative law, suggested that Ms. Knowles would not be happy if the Supreme Court ever got their hands on the case. When Ms. Knowles stated that she thought the Supreme Court would provide a more favorable ruling for GSK than the Federal Circuit did, Prof. Duffy jokingly advised her to hire some new attorneys. When asked about his Supreme Court prediction after the session, Prof. Duffy indicated that the Supreme Court (where he once clerked) was not as familiar with patent law as it was with administrative law, and therefore, the Court would likely defer to the USPTO with respect to its interpretation of 35 U.S.C. § 120, and thus find the rule limiting continuations to be consistent with that section.