By Donald Zuhn --
Last week, the U.S. Patent and Trademark Office published a notice of proposed rulemaking in the Federal Register (79 Fed. Reg. 4105), in which the Office proposed changes to the rules of practice that it claimed would "facilitate the examination of patent applications and . . . provide greater transparency concerning the ownership of patent applications and patents." The notice, entitled "Changes To Require Identification of Attributable Owner," states that:
This initiative is one of a number of executive actions issued by the Administration that are designed to ensure the highest-quality patents, enhance competition by providing the public with more complete information about the competitive environment in which innovators operate, enhance technology transfer and reduce the costs of transactions for patent rights by making patent ownership information more readily and easily available, reduce abusive patent litigation by helping the public defend itself against frivolous litigation, and level the playing field for innovators.
The proposed changes to the rules would require that the "attributable owner" be identified at the time an application is filed (or shortly thereafter), during the pendency of an application when there is a change in the attributable owner (within three months of such change), at the time the issue fee is paid, when maintenance fee payments are made, and if a patent becomes involved in supplemental examination, ex parte reexamination, or a trial proceeding before the Patent Trial and Appeal Board. The notice explains that the proposed rules use the term "attributable owner" rather than "real party in interest" to avoid confusion that might arise from use of the latter term elsewhere in Title 35. The notice also indicates that applicants would not be required to identify the attributable owner for provisional applications or International applications prior to the commencement of the national stage in the United States.
In addition, the notice seeks comments as to whether the Office should permit applicants and patentees to voluntarily report licensing offers and related information to the Office, which the Office would then make available to the public. Licensing information that the Office envisions as possibly being reportable includes the willingness to license, licensing contacts, license offer terms, and commitments to license a patent on royalty-free or reasonable and non-discriminatory terms.
According to the notice, the rules changes would facilitate patent examination by helping to:
(1) Ensure that a "power of attorney" is current in each application or proceeding before the Office; (2) avoid potential conflicts of interest for Office personnel; (3) determine the scope of prior art under the common ownership exception under 35 U.S.C. 102(b)(2)(C) and uncover instances of double patenting; (4) verify that the party making a request for a post-issuance proceeding is a proper party for the proceeding; and (5) ensure that the information the Office provides to the public concerning published applications and issued patents is accurate and not misleading.
The Office also expects the rules changes to:
(1) Enhance competition and increase incentives to innovate by providing innovators with information that will allow them to better understand the competitive environment in which they operate; (2) enhance technology transfer and reduce the costs of transactions for patent rights since patent ownership information will be more readily and easily accessible; (3) reduce risk of abusive patent litigation by helping the public defend itself against such abusive assertions by providing more information about all the parties that have an interest in patents or patent applications; and (4) level the playing field for innovators.
Under the rules changes, the Office would collect two types of owner information: (1) titleholders (i.e., assignees), and (2) enforcement entities (i.e., real-parties-in-interest having the right to enforce an issued patent -- defined by the notice as entities that have not already been identified as titleholders, but who are necessary to be joined in a lawsuit in order to have standing to enforce the patent or any patent resulting from the application). For both of the above categories, the attributable owner would also have to identify the "ultimate parent entity" as defined in 16 C.F.R. § 801.1(a)(3). The notice indicates that ultimate parent entities would be those entities that ultimately control titleholders or enforcement entities. In discussing the above ownership interests, the notice explains that:
In many cases, these types of ownership interests may be coextensive. Specifically, the titleholder (or assignee) is often the same entity that has the right to enforce the patent, and is not controlled by any other entity (and so would not have to separately report an ultimate parent entity). Most additional reporting will need to be done by companies that have complicated corporate structures and licenses, which often include the complex structures used by certain patent assertion entities ("PAEs") to hide their true identities from the public. Some of this additional reporting may include exclusive licensees. Although exclusive licensees are sometimes confidential now, they would only need to be disclosed where their rights are so substantial that they have enforcement rights in the patent. In such circumstances, the public has a strong interest in knowing their identities in order to have an accurate picture of the competitive patent landscape, to allocate their research and development efforts appropriately, and to take licenses or purchase patents proactively and efficiently from the correct entities, as dictated by business needs.
The rules changes would also provide applicants and patentees with the means to correct omissions and errors in the identification of attributable owner, as well as "excuse good faith failures" to notify the Office of the attributable owner or provide correct and complete information about the attributable owner.
The notice indicates that the proposed rules changes are the result, in part, of the work of the White House Task Force on High-Tech Patent Issues, which published a paper detailing five executive actions and seven legislative recommendations "to protect innovators from frivolous litigation and ensure the highest-quality patents in our system" (see "'When the Patent System is Attacked!' -- The White House Task Force on High-Tech Patent Issues"). The Office also notes that in 2011 it began soliciting comments regarding the process of collecting assignment and real-party-in-interest information (see "USPTO News Briefs," December 15, 2011, and "USPTO New Briefs," December 20, 2012).
A discussion of the specific rules changes can be found on pages 4111-14 of the notice, and a list of the proposed changes to the rules can be found on pages 4119-21 of the notice.
Comments on the notice of proposed rulemaking, which must be submitted by March 25, 2014, can be sent by e-mail to [email protected], by regular mail addressed to: Mail Stop Comments-Patents, Commissioner for Patents, P.O. Box 1450, Alexandria, VA 22313–1450, marked to the attention of James Engel, Senior Legal Advisor, Office of Patent Legal Administration, Office of the Deputy Commissioner for Patent Examination Policy, or via the Federal eRulemaking Portal (http://www.regulations.gov). The notice also indicates that the Office will be holding two meetings with stakeholders (at locations and times to be announced) in order to obtain input on the proposed rules changes.
I'm still digesting this, but one thing is clear: if the rules are adopted, we can all go from being patent practitioners to corporate secretaries. Or detectives. I prefer doing patent work myself, and that's what my clients prefer to pay for.
Posted by: Dan Feigelson | January 29, 2014 at 01:47 AM
Perhaps the executive branch should just pass its own law changing the fact that patents are personal property.
Next we perhaps should make public a complete list of every individual's (real person and legal person) property holdings so that everything is transparent. I hear that the NSA has data to share, and only those who have something to hide would disagree, right?
Or if the logic behind these rule changes is taken at face value, perhaps we should change corporations law to remove the ability to have ANY assets so hidden. After all, patents are not the only thing that so constrains complete knowledge on a competitive basis, and streamlining personal property and corporate structure would have additional benefits of streamlining tax codes as well.
Posted by: Skeptical | January 29, 2014 at 06:19 AM
@Dan Feigelson--totally agree. Yikes. Also, what about a situation where a US company has licensed a patent from an assignee that is a foreign company? If the US patent attorney (i.e., me) doesn't get accurate information from the foreign company about the 'ultimate parent entity,' what would the consequence be? Holding the US patent invalid, thereby injuring not only the foreign company but the (potentially faultless) US company? At least any such changes should only affect new filings, so that any consequences might possibly be addressed in the license.
Posted by: Beckitt | January 29, 2014 at 11:28 AM
With so many legal determinations, can patent agents even comply with these rules? Or can they rely on the client to provide the correct information? Or the client's corporate attorneys?
Posted by: Courtenay Brinckerhoff | January 29, 2014 at 01:23 PM
I love the (extreme) overreaching part on Federal Register page 4110 "Hidden Beneficial Owners:"
Information required to be reported would also include identification of entities that are trying to avoid the need for their disclosure by temporarily divesting themselves of ownership rights through contractual or other arrangements. THE OFFICE DEEMS the beneficiaries of these temporarily divested rights to be attributable owners. (emphasis added)
The Office is rewriting Corporations law all on its own.
But some will no doubt say that the ends justify the means. Whether that type of thinking holds water (or is supposed to hold water) in our legal system, I remain...
Posted by: Skeptical | January 30, 2014 at 10:01 AM
Don/Skeptical,
There is a huge issue as to whether the USPTO has the statutory authority to promulgate this proposed rule in view of the Tafas case: is this proposed rule permitted by statute and is it substantive or procedural? Unfortunately, there is also the 2006 case of Star Fruits where a divided Federal Circuit panel upheld the authority of the USPTO to enforce an analogous 37 CFR 1.105 (permitting an examiner to request information from the applicant on penalty of abandonment of the application). Judge Newman vociferously dissented in that case (and for good reason), arguing that 37 CFR 1.105, and how it was applied, violated the Administrative Procedures Act.
Posted by: EG | February 06, 2014 at 08:20 AM
EG,
Over at Patently-O Ron Katznelson traced the statutory authority and anon traced the statutory intent.
Neither supports the scope of the proposed rules.
Posted by: Skeptical | February 09, 2014 at 10:35 PM