USPTO Director Announces New Examination Options

    By Kevin E. Noonan --

Undersecretary of Commerce and U.S. Patent and Trademark Office Director David Kappos today announced a three tiered patent prosecution regime, termed "Three Track" to be instituted in the Office.  The scheme will be implemented as rulemaking pursuant to 35 U.S.C. § 2 and after a Notice and Comment period under the Administrative Procedures Act, although the Director noted that Congress would (under current law) need to set fees for the different prosecution options (or enact legislation providing the Office with fee-setting authority; see "New USPTO Fee-Setting Bill Introduced in House").  The Director's announcement was made to a group of about a dozen reporters on a conference call this afternoon, as well as a press release published on the Patent and Trademark Office website.

The Directed explained the three tiers as follows.  The first tier, "Fast Track" or "Track One," constituting an accelerated examination procedure, is aimed at having a first Office Action issue within four months after filing, with final disposition (defined as allowance or Final Rejection) in no more than twelve months.  Notably, there will be no requirement for an Examination Support Document (ESD), due to the "resistance of the patenting community" over this requirement in current accelerated examination procedures and the response to this requirement in earlier-proposed patent "reform" bills and the infamous "claims and continuations" rules finally rescinded by the Director last fall (see "'New Rules' Officially Rescinded").  In response to a question, the Director explained that this first tier examination was not intended to replace existing accelerated examination (which does contain an ESD requirement).  The Director said the Office did not want to take away applicant options, but did say that if applicants abandoned existing accelerated examination procedures in favor of the "Fast Track" approach, he could see the Office eliminating these other existing protocols.  He also said that the Office would take advantage of its experience and infrastructure with these other accelerated examination schemes.  In response to another question, the Director said that there had been 3,714 applications that have used existing accelerated examination procedures since 2005.  Answering yet another question, the Director predicted that the time required to examine applications in certain arts (making these arts less amenable to accelerated examination), and the costs would be an impediment to large corporations requesting this accelerated "Fast Track" examination.  The Director said that the fee would not be trivial, but that in the absence of independent fee-setting authority (something which the Director took the time to mention was in a presently-pending bill in the House of Representatives introduced by Rep. Conyers and Smith (H.R. 5322) and that was supported by the Obama administration), fees to be imposed for first tier Fast Track examination would need to be set by Congress.  The Director also noted that any reduction in fees for traditional small entities (50%) or (even smaller) "microentities" (75%), constituting individual inventors and others (as defined in the current Senate patent "reform" bill, S. 515) would likewise require Congressional implementation.  The Director cited small entities and microentities as components of the economy that create the most innovation and new jobs, saying the Office "really wants to help them."  The Director also commented on the Patent Prosecution Highway (PPH) as a way to accelerate examination, conserve Office resources, and reduce the backlog.

The second tier ("Track Two") constitutes the status quo, and would be the "default" mode for examination, according to the Director.  Applicants would need to do nothing to elect this examination mode different from what is done currently.  The Director also noted his hope that the pendency under this track will be reduced to 10 months to first action and 20 months to final disposition.

The "Track Three" third tier is an extended or delayed examination, which would permit an applicant to defer examination for up to 30 months from the earliest priority date.  Analogizing this tier to the current Patent Cooperation Treaty timetable, the Director asserted that discussions with many constituencies ("small entities, large entities, pharma, information technology, and everybody in between") tell him "regularly" that applicants wanted a way to defer examination as a way to reduce costs.  The Director also noted that he envisions a system where the Office's actions were tied to payment of the fee for that action, and to provide a way to "exit" the process when an application is no longer desired (such as when a search shows anticipating prior art).  The Director conceded that this tier was expected to address, in part, the current application backlog.  The Director's hope is that by deferring examination some applications would be abandoned and thus not contribute to the backlog or consume Office resources.  (This behavior is observed in foreign patent offices, albeit where application pendency requires a yearly annuity payment.)  This is particularly important in view of reductions in the examiner corps occasioned by attrition not counterbalanced by new hiring.  Unaddressed was the effect (if any) of electing this third tier on patent term adjustment; in view of the current statutory provisions and Office rules that reduce such adjustments for applicant "failure to diligent prosecution" it is likely that deferring examination will incur such costs.  This can be expected to make the third tier much less attractive for arts, such as biotechnology and pharmaceuticals, where reduced term has real-world economic consequences.  As with first-tier examination, the costs for deferring examination, including delayed payment of search fees or examination fees, will depend on Congressional authorization unless the Office is granted independent fee-setting authority.

In another Office initiative, the Office will delay examination until a first Office Action is issued by a foreign patent office (including for example the Japan Patent Office) for applications arising from a first foreign filing.  The USPTO will treat this Action as a "first office action" on the merits and require an applicant to file a paper addressing the rejections contained in such a foreign action.  The Director hypothesized that in some instances this will be a perfunctory response, such as those occasions where the basis of the rejection does not have a counterpart in the U.S. ("absolute novelty"-based rejections are one example).  For other grounds of rejection in common between the U.S. and the foreign patent office (such as § 102(b) rejections, for example), the applicant would be required to address the rejection in the form of a preliminary amendment, which the Director contended would thus advance prosecution of the U.S. application by overcoming rejections before substantive examination by a U.S. examiner, as well as avoiding RCE practice and get the application in condition for final disposition.  While this proposal certainly has benefits for the Office, the requirement that an applicant with a first foreign-filed application wait until the applicant receives an action from a foreign patent office can be expected to delay U.S. examination (since there is typically a much longer delay to first action in foreign offices compared with the U.S.; the Director suggested applicants can take steps to reduce this delay).  This suggests that foreign filers may benefit from the practice (which already is advantageous for creating § 102(e) prior art) of filing a U.S. provisional application on the same day that the foreign application is filed.  This would provide such applicants with a first U.S. filing that would enable them to avoid such delay.

Finally, in response to a question from a Reuters reporter, the Director stated that the Office expects to collect between $146-242 million more than was appropriated to the Office (and likely, he said, to be towards the high end).  Thus, the rationale for a 15% surcharge in fees (and fee-setting authority generally) seems to have evaporated, but the Director notes that the Office has needs (like increased hiring and IT infrastructure improvements) that have not been addressed.  (He did not mention that the problem seems most easily resolved by preventing Congress from diverting these funds from the Office by the appropriations process.)  He also noted that another use for the monies would be to fund a reserve mandated by the Office of Management and Budget.

This proposal incorporates features either instituted (accelerated application) or earlier proposed (delayed examination) intended to address both the backlog and arguments that the backlog is harming innovation.  The Director expressed the opinion that the proposal would provide the circumstances for "gobs of jobs" to be created based on more a efficient patent application system.  Clearly, the Director has the correct attitude (helping applicants get patents under the law efficiently and effectively) and recognizes the relationship between a properly-functioning patent system, innovation, and the economy.  It is an attitude that remains refreshing in view of recent history of the Office.

In the Office's press release announcing the "Three Track" initiative, the Office noted that it was seeking input from the patent community regarding the proposal.  As part of that effort, the Office will be holding a public meeting on July 20 at 1:30 pm (EDT) at the USPTO’s Madison building, 600 Dulany Street, Alexandria, Virginia.  Those interested in attending the meeting must register by 5:00 pm (EDT) on July 16.  The Office is also seeking written comments, which must be submitted by August 20.  A June 4 Federal Register notice will provide additional details regarding the initiative.

Comments

[Caroline Nash]

I will attend the meeting on the 20th of July.

The new options only complicate an already complicated system. It would be better for all if the Office would just hire enough examiners to handle the work load efficiently. I am not in favor of the new three tier system.

[Gena777]

This is an indication that Director Kappos understands that different patent applications should be treated differently -- implementing this concept could contribute to increased efficiency at the USPTO. Though I'm not yet convinced that fast/ordinary/delayed is the ideal system for categorizing patent applications, at least it's a step in the right direction. I believe that the USPTO needs to start reviewing several different types of multi-tiered approaches to patent examination, because the traditional one-size-fits-all approach doesn't meet the needs of today's environment.
http://www.washingtontimes.com/news/2010/may/25/patent-reform-misses-the-mark/