By Donald Zuhn --
As we reported yesterday, the U.S. Patent and Trademark Office published a Notice in the Federal Register on Monday supplementing to its Alternative Claims Notice of Proposed Rule Making from last August. According to the Patent Office, the supplementary Notice was published in response to comments to the first Notice that questioned the impact of the proposed alternative claims rules on small businesses and independent inventors. While the supplementary Notice makes it abundantly clear that the Office believes that the new alternative claims rules "involve rules of agency practice and procedure for which prior notice and an opportunity for public comment are not required pursuant to 5 U.S.C. 553 (or any other law), and thus neither a regulatory flexibility analysis nor a certification under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) is required under 5 U.S.C. 603," the Patent Office has nevertheless decided to "subject the proposed rules to a regulatory flexibility analysis to provide a further opportunity for comment on the small business impact of the proposed rules."
The Patent Office's decision to provide an economic impact analysis for the proposed alternative claims rules (notwithstanding the fact that this analysis is being provided at the last minute) may be indication that recent attacks on the economic impact of the Office's other rules packages are finally having the desired effect. Examples of such challenges include Dr. Richard Belzer's submission to the Office of Management and Budget (OMB) of additional information regarding the paperwork burdens of the final claims and continuations rules and the final IDS rules, which Dr. Belzer estimated to be between $13 billion and $34 billion per year, and separate OMB submissions made by Dr. Belzer and David Boundy, which provided estimates of between $1.9 billion (Mr. Boundy) and $7.9 billion (Dr. Belzer) for the economic impact of the new IDS rules.
After the Patent Office published its supplementary Notice, we had a chance to discuss strategies for challenging the alternative claims rules with the architects of the campaigns against the claims and continuations rules and IDS rules. For those interested in providing the PTO with comments about the alternative claims rules or their economic impact, or alternatively, writing to the OMB about the economic impact of the alternative claims rules, Dr. Belzer's and Mr. Boundy's insights should prove to be invaluable.
Dr. Belzer (at left), who served as a civil service staff economist in the Office of Information and Regulatory Affairs within the OMB, began his discussion by noting that the Patent Office made four key assertions in the Alternative Claims Notice of Proposed Rule Making:
1. The proposed alternative claims rules are "not significant" as defined by Executive Order 12,866, and therefore, the Office "deemed [the rules] to be a trivial administrative matter below the threshold for centralized review by OMB."
2. The proposed alternative claims rules are procedural, and therefore, exempt from the Administrative Procedure Act (APA). Dr. Belzer contends that the Office's request for comments "was a defensive maneuver just in case the Office was challenged in court."
3. Because the alternative claims rules are exempt from the APA, they are also exempt from the Regulatory Flexibility Act.
4. The alternative claims rules have no associated paperwork burdens (the Paperwork Reduction Act requires agencies to provide public notice and seek comment on paperwork burdens associated with notices of proposed rule making). Dr. Belzer observed that the Patent Office has apparently not changed its position on this point, since the supplementary Notice was silent about paperwork burdens.
With respect to the first point, Dr. Belzer recalls two recent challenges to an agency's certification that a rules package has "no significant impact on a substantial number of small entities." Patent attorneys are quite familiar with the first -- the Tafas/GSK v. Dudas challenge, for which we eagerly await a decision. The other case is AFL-CIO v. Chertoff, which Dr. Belzer describes as involving a final rule establishing a safe harbor for employers trying to comply with the Immigration Control Act after receiving a letter from the Social Security Administration about inconsistencies between SSA records and an employee's name and social security number. In AFL-CIO, the Department of Homeland Security made a "no significant impact" certification, which a district court found to be improbable prior to issuing an injunction barring implementation of the rule. Dr. Belzer believes that the major difference between Tafas/GSK and AFL-CIO is that in AFL-CIO, the Small Business Administration (SBA) Office of Advocacy weighed in on behalf of the plaintiffs, and in Tafas/GSK, it "rolled over." [UPDATE: For more information regarding the AFL-CIO case, please see "DHS' 'No-Match Rule' Stopped by Preliminary Injunction: The Regulatory Flexibility Act and Illegal Aliens." A copy of the opinion can be found here.]
Dr. Belzer then addressed a few strategies for those who may want to be heard regarding their opposition to the Patent Office's latest rule making effort:
1. Submit informed comments on the Patent Office's Regulatory Flexibility Act analysis. According to Dr. Belzer, informed comments must go beyond mere "whining," and instead, take apart the Office's analysis and put it together "as it should have been done in the first place." Dr. Belzer believes that this was done for the continuation and claims rules, but only after the Office published the final rules in August, rather than at the notice of proposed rule making stage. Unlike with the continuation and claims rules, where "no one in the patent world understood the game," Dr. Belzer thinks that opponents of the alternative claims rules are "much better situated to be effective."
2. Pressure the SBA Office of Advocacy to intervene aggressively against the alternative claims rules.
3. Get the alternative claims rules on the OMB's radar. Dr. Belzer contends that the OMB is the critical entity for implementation and enforcement of Executive Order 12,866 and the Paperwork Reduction Act. He also notes that the OMB has a significant interest in Regulatory Flexibility Act analyses, even though the SBA Office of Advocacy has more influence with respect to such analyses.
4. Develop and provide the OMB with credible estimates of the paperwork burden of the alternative claims rules. Dr. Belzer points out that the alternative claims rules cannot be legally finalized without a showing of prior compliance with the Paperwork Reduction Act, stating that to the extent someone shows bona fide paperwork burdens, "then PTO is out of compliance with the law and OMB cannot allow it to proceed." Finally, Dr. Belzer notes that the OMB is accepting of anonymity, since the "PTO's means, motive and opportunity to retaliate are easy to explain and readily convincing" (note: in his previous representations to the OMB, Dr. Belzer did not reveal the identity/identities of his client/clients because he discerned a credible basis for fearing retaliation).
Mr. Boundy (at left), the Vice President of Intellectual Property for Cantor Fitzgerald L.P., wanted to let Patent Docs readers know that Dr. Belzer "is an incredibly valuable (and cost-effective) resource on these intra-executive-branch rulemaking oversight issues," and recommended that anyone interested in writing to the OMB contact him at [email protected].
With respect to submitting comments to the Patent Office, Mr. Boundy noted that while the Office's supplementary Notice concerned the economic impact of the alternative claims rules on small entities, large entities could also submit comments provided that they focused on the economic impact of the rules on small entities. Mr. Boundy also recommended that comments address (a) the estimated burden of the proposed rules in dollars per year, and (b) flaws and omissions in the Patent Office's assumptions and analyses. He notes that the types of burdens that are cognizable under the Regulatory Flexibility Act include additional paperwork costs, management of additional files and other information because of additional restriction requirements, loss of patent term, loss of asset value for species not pursued, business opportunities foregone, investments not made, companies not formed, companies that go out of business, and additional litigation arising out of double patenting issues.
Mr. Boundy agreed with Dr. Belzer that an effective strategy could be to focus on the fact that the Patent Office advised the OMB that the alternative claims rules were "not significant," which Mr. Boundy argues is a category reserved only for rules that "impose essentially zero burden, present no substantive issues, and are entirely non-controversial." In the supplementary Notice, however, the Patent Office has now taken a somewhat contrary position by arguing that the alternative claims rules will have a more "significant" impact.
For those writing to the OMB, Mr. Boundy advises that letters be addressed to:
The Honorable Susan E. Dudley
Administrator
Office of Information and Regulatory Affairs
Office of Management and Budget
Washington, DC 20503
[UPDATE: Dr. Belzer recommends that submissions be faxed or e-mailed to Ms. Dudley, rather than sent by regular mail, since the White House puts regular mail through intensive - and, therefore, time consuming - screens for anthrax.]
He also suggests that interested parties refer to exemplary letters that can be found here and here. More importantly, Mr. Boundy contends that writing the OMB is "an effective route to pursue," noting that he has received "some back channel feedback" that the IDS rule -- originally scheduled to be published by the end of 2007 -- is now "on indefinite hold" pending resolution of several similar challenges and the Tafas/GSK v. Dudas case. He also believes that the Patent Office's refusal to reply to several pending challenges (some might say stalling tactics) is further evidence of the effectiveness of such a strategy.
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