By Kevin E. Noonan --
Tuesday was Sharon Barner's first day as Deputy
Director of the U.S. Patent and Trademark Office, and she spent part of it
addressing members of the patent bar in Chicago. In a 90-minute
roundtable meeting, Ms. Barner and Commerce Department General Counsel Cameron
Kerry discussed patent reform and the Administration's support for S. 515, as previously outlined in a
letter from Commerce Secretary Locke to the Chairman and Ranking Member of the
Senate Judiciary Committee (see "Obama Administration Weighs in Supporting Patent 'Reform'"). Unfortunately, Mr. Kerry, a
self-confessed patent law naif, did most of the talking. And while his
message was consistent with Secretary Locke's letter, it was also only a little
less vague on specifics, while at the same time evincing a failure (still) to
recognize the harm and suspicion remaining from the last Patent Office
administration.
Mr. Kerry began the proceedings (after an introduction from Ms. Barner) by
saying there was a "bright new day at the PTO." He praised the
leadership of Director Kappos, specifically mentioning the withdrawal of the
continuation and claims rules as "turning over a new leaf" at the
Office. However, he also said that the PTO administration needed
something more in order to solve the problems the Patent Office is facing. That
something more is patent reform, and as became evident, particularly and
specifically substantive rulemaking authority for the PTO. This is what
is needed for the Office to provide "quality" patents (the first red
flag), and "certainty" (another), and of course improve patent
litigation and promote global patent harmonization. He also said he had
not spent one day since his swearing in earlier this year not working for
passage of a patent reform bill, and that he was "optimistic"
that patent reform will pass "once and for all" in this Congress. This
optimism stemmed, he said, from the compromises worked out by Senators Leahy,
Specter, and Feinstein in the bill reported out of the Judiciary Committee last
spring ("on balance, this is a good bill"), as well as judicial
decisions that have convinced many that Congress may not have to address every
aspect of patent reform by changing the law.
Much of the focus of Mr. Kerry's address had to do
with solving the problems of the Office such as the backlog and patent "quality,"
and how the Office needed the "tools" to solve those problems (all
within the context of a patent reform bill whose provisions will exacerbate,
rather than ameliorate, these problems). Both Mr. Kerry and Ms. Barner posed their talks in the guise of asking
for help. But it is clear that the
Administration believes it knows what needs to be done, and that the only help
they are really interested in is getting these proposals passed with a minimum
of disagreement from the patent bar and their clients.
Specifically addressing the Patent Office, Mr. Kerry (at left) said that patent reform
was necessary to overcome the backlog, reduce pendency, hire examiners, invest
in IT and other infrastructure, and improve patent "quality." Reform
would give the Office the tools, specifically fee-setting authority to fund
these improvements. He also said that "we need to hit the reset
button" on patent law to stimulate the "engine" of the U.S. economy. Ms. Barner chimed in saying that stakeholders need to "step back and
look at the big picture," specifically that the country needs a strong
patent system, so that America (which has "the best patent system [in the
world] that needs some tweaking") can promote innovation and lead the
world. Admirable sentiments, but consistent with this Commerce Department's
rhetoric that is long on principle but short on specifics.
To the question of "what is the definition of
a good quality patent," Mr. Kerry deferred to Ms. Barner (after making the
tautological statement that a good patent recites subject matter that is "clearly
patentable"), who recited her "opening statement" to the effect that
the claims needed to be novel, useful, and non-obvious, supported by a
disclosure that adequately described and enabled what was claimed. This is certainly the textbook answer
but in many ways it is not the correct one; it has been evident for some time
(and maybe it was always the case) that the definition of a "good quality
patent" is one's own patent, and "bad" or "poor quality"
patents are those held by one's competitors. Mr. Kerry also asserted that a "bad" or "poor
quality" patent is one having a claim or claims that should not have been
granted, thereby echoing the standards of the "second pair of eyes"
review that has led to a precipitous drop in allowances (and ironically has
contributed to the financial shortfall experienced by the Office over the past
year). This statement was particularly disquieting in view of intelligence that
the new Administration had eliminated this program, purportedly evincing an
understanding that it had paralyzed examiners into a fear of allowing any
claims whatsoever. Ms. Barner also
stated that "we don't always know the good [patents] but we know the bad
ones," suggesting a standard uncomfortably reminiscent of Justice Stewart's
definition of pornography.
Ms. Barner (at right) reminded her listeners that patent "reform"
came together after the FTC report, and that report said that it takes too long
to get a patent, it's too expensive to litigate, quality has been going down,
and the outcome is too uncertain, all of this has had an adverse impact on
promoting innovation. Thus, no "magic
bullet" to "fix" the U.S. patent system -- it is an organic,
interrelated whole.
Turning to specifics, Mr. Kerry had the following comments (many in response to
questions from the audience) about specific provisions of S. 515:
• Fee-setting authority: Mr. Kerry mentioned provisions of the
bill that would grant the Office fee-setting authority to be important for the
agency to get back on its financial feet. He said that such fee increases could be on the order of 15%, which would
merely restore the Office's budget to what it was before the financial crisis
hit in the 4th quarter of 2008. He also said that the philosophy of fee increases would be
to have fees "rationally related to costs and conduct" and to be used
to effect "behavior modification" without further elaboration. He said he could not assure the
audience that fee diversion would not return (calling it "a political
problem"), but hoped that it could at least be forestalled long enough to
get the Office's financial house in order. He also said that while financial woes were "a big
piece" of the current application pendency backlog, "more rational"
incentives were needed during the examination process.
• Post-grant review: Mr. Kerry stated that members of the
Commerce Department were working with members of Congress for a "workable"
post-grant review scheme that would include inter
partes examination, and he particularly pointed out the need to avoid the
estoppel effect that attaches to issues that "could have been raised"
in inter partes reexamination. The new administration is addressing
Senator Kyl's objection to post-grant review and Congress is getting the PTO's
input on how this can be effectuated. Mr. Kerry stated that there were two key ingredients
needed to implement a post-grant review process. First, the Office needed fee-setting authority to have the financial
ability to have adequate staffing. Second,
the program would have to be "phased in" over a period of one to four
years, implementing "beta testing" of procedures. He also mentioned the need to clarify
the scope of the Office's procedural and substantive rulemaking authority in
this area.
Ms. Barner argued in support of post grant review
that litigation had become "too expensive and too uncertain," and
post grant review would "put patentability questions back before the
experts [in the Office]," putting the onus back on the Patent Office rather
than having patents grant and then testing them in litigation. Mr. Kerry stated that "the reality
is that examination does not stir up all prior art" as a justification for
post-grant review. In making this
argument, it sounded like the Administration has decided against supporting
efforts to "improve" the quality of the art cited during initial
examination (for example, using Applicant Quality Statements to characterize
the prior art, as was espoused by the last Administration) in favor of
substituting post-grant review for litigation, as a way to reduce the costs of
challenging "bad" patents and giving the responsibility in the first
(really, second) instance to the Office rather than the courts.
Regarding post-grant review procedures, Mr. Kerry
did not mention specific proposals, but stated that the goal was to make the
post-grant review procedures "simple enough" that they would not take
too long or cost too much. Subsequent inter partes
reexamination proceedings would have a higher threshold, but one aspect he said
should be changed is to not have the threshold be "so high" that it
inhibits use thereof; in this regard, he made specific reference to estoppel
provisions for any art or argument that "could have been raised"
during the reexamination. Ms.
Barner and Mr. Kerry mentioned without elaborating on several procedural
proposals, including adopting an "ITC-like" system where post-grant
review would be completed within a year, with reexamination permitted only if a
patent was in litigation. Ms.
Barner dismissed a suggestion from the audience that post-grant review be
confined to questions of anticipation: although seeming to agree that this might make review easier, she noted
that in her experience anticipation was a concept juries could appreciate,
whereas obviousness would benefit from Patent Office expertise in combining
references and evaluating claims under current obviousness standards. She also mentioned that there have been
proposals that would not limit the art cited in post-grant review proceedings
to printed publications, but again did not elaborate on these proposals.
• Substantive rulemaking: An audience member asked, how can we be
sure that we won't get a set of rules in future like the claims and
continuation rules should the Office be given substantive rulemaking
authority? Mr. Kerry deferred to
Ms. Barner, who said that the goal of the Office should be to be responsive to
its stakeholders, but that "for as many of the stakeholders who were
opposed to those [claims and continuation] rules, there were people in favor of
them," necessitating compromise. While stating that she isn't a proponent of the rules,
she did contend that the Office must "ultimately" have the power to
enact rules to make it work better. Mr. Kerry refused to comment about rules "adopted by a prior PTO
administration and withdrawn by the current administration."
Mr. Kerry did assert that substantive rulemaking
would be done by a different process than the way the claims and continuation
rules were promulgated, and that stakeholders could expect any rulemaking process
to be transparent under the Kappos regime. One audience member reminded Mr. Kerry that conferring
substantive rulemaking authority would be letting the genie out of the bottle,
and no matter how beneficent the present administration may be, it could be
replaced or succeeded by one less committed to transparency and more inclined
to impose rules on the public in a manner forestalled for the claims and
continuation rules only due to the fact that the Office did not have
substantive rulemaking authority. Mr. Kerry contended that there may be future efforts to adopt new rules by
this administration using a process that provides the public with the
opportunity to comment, resulting in rules "better attuned to the needs"
of stakeholders. (He also stated
that "most" agencies have substantive rulemaking authority although
neither he nor Ms. Barner could name one.) He cited the Examination Guidelines for implementing the
Federal Circuit's Bilski decision
recently published for comment as an example of the benefits of granting the
Office substantive rulemaking authority under the Kappos administration. Not content with this answer, Hal Wegner pressed the
issue, stating that while no one questions Dave Kappos' competence, "what
would prevent a future administration" from using substantive rulemaking authority
to pass "odd rules." Mr.
Wegner suggested that one mechanism for minimizing this outcome might be to specify
that future Patent Office officials had the appropriate background in patent
law, something he contended was the intent of provisions of the American
Inventor Protection Act of 1999 to that effect. He noted however that a court had decided that the standard enunciated
in the statute was not sufficiently clearly defined to support Greg Aharonian's
challenge to Margaret Peterlin's appointment as Deputy Director during the
previous administration, despite an alleged deficiency in her background. He asked whether the administration had
given any thought to "nailing down" such requirements "in such
detail" that we will "always have" people of the quality of Mr.
Kappos and Ms. Barner as Patent Office administrators. Mr. Kerry acknowledged that there is
nothing in the current bill in that regard, and that the "basic backstop"
to prevent arbitrary imposition of rules in a future administration were the
provisions of the Administrative Procedures Act.
• Patent Office administration: An audience
member asked what efforts are being considered for strengthening the examining
corps, and would monies from any fee increase be used to increase pay and
retention? Ms. Barner said that
Mr. Kappos was "focused on this issue" but not as simple as putting
in more money, mentioning the count system and other ideas.
More questions from the audience included: What
about the attitude and morale of the corps? Are examiners afraid to make a decision? Are the examiners delaying examination
in the hopes that the application will be abandoned? How much of this is dependent on management, and will it
change under the Kappos regime?
Ms. Barner said that most examiners want to do
their job and want to do it well, and that they have been trying to do so under
some "very trying" circumstances. She believes there has been "abuses" of the rules
that "keep applications churning" in the Office (frankly,
demonstrating a lack of understanding about how examination has been happening
in recent years). Mr. Kerry noted
that Mr. Kappos had reached out to the examiners and the union to try to
address their concerns.
• First to file: Mr. Kerry and Ms. Barner were asked why the change to a "first
to file" system was not tied to concessions from foreign patent offices,
specifically the establishment of a grace period (something included as a "trigger" for the conversion
in the bill passed in the House of Representatives in the last Congress). Mr. Kerry contended that the
administration supported the change because it would be good for U.S.
applicants, providing a more uniform set of filing rules worldwide. Mr. Wegner commented that there was "0.000000%
chance" that any of the major foreign patent offices would agree to
establishing a grace period, since in 1990, Commissioner Manbeck had scuttled an
agreement on the grace period that had been hammered out between the different
offices.
• Duty of disclosure: In response to a question about whether
Congress could eliminate the duty, Ms. Barner noted that the duty is imposed by
Supreme Court precedent, and thus may be outside the power of Congress to
eliminate. However, an audience
member suggested that Congress might define the scope of inequitable conduct.
• Best mode: Ms. Barner said she thought the requirement was "peculiar"
but is a question up for debate on whether it should be required to have a
patent grant (showing an unfortunate misunderstanding of the process: best mode is rarely if ever considered
during patent prosecution, but rather acts to prevent enforcement of a patent
procured without disclosing the best mode, thereby preventing a patentee from
inequitably extending the advantage provided by the patent grant after patent
expiry).
As mentioned, Tuesday was Ms. Barner's first day on
the job, and she deferred in large part to Mr. Kerry during the
discussion. When asked, she said
her intention was to apply her passion for patent law to the goal of getting a
patent reform bill passed. Ms. Barner asserted that she would spend her time "making
the stakeholders understand the big issues." Respectfully, the problems of the Patent Office are not in
the realm of the "big issues." The problems facing the Patent Office
are real and pressing, and in large part these problems will not be solved by
the current or any bill -- it is a matter of better, effective management and
facing the realities of an increasingly technology-driven world and increasing
participation of U.S. and ex-U.S. inventors. It should not be too much to hope, or expect, that the
Kappos administration will expend its energies on solving these problems, and
leave patent reform efforts (benighted or otherwise) to others.
October 20, 2009 - 
