Patent Reform: Post Grant Review Musings

Once upon a time I used to not get worked up at all about proposals for patent reform, because after all they almost always didn’t seem to go through, or even if they did what was passed was hardly what was suggested.  Then, my good friend John White told me about six years ago that this time patent reform was going to happen, it was just a matter of time.  Since then I have written numerous articles on proposed patent legislation, followed the issue, reviewed transcripts from Congressional hearings and have watched multiple Congressional hearings streaming online, even while on vacation one year.  The end result is that not much has changed… at least not yet.

We have heard this all before, and to some extent it does sound a little like a “chicken little mentality” has captured the imagination of policy wonks and patent attorneys alike, but it is hard to deny the fact that there is growing momentum for real reform at the United States Patent Office.  Sadly, what the United States Senate will vote on Tuesday, September 6, 2011, does not represent that real reform that so many are hoping for.

On Tuesday, September 6, 2011, the U.S. Senate will hold a vote on whether or not to end debate on patent reform, the so-called America Invents Act.  In February the Senate passed S. 23, its version of the America Invents Act, by a vote of 95-5.  Then in June the House of Representatives passed its version of the America Invents Act – H.R. 1249 – by a vote of 304 – 117.  The House version was not identical to the Senate version, hence the need for the Senate to vote again.  Unfortunately, the House version added some bad things (i.e., prior user rights and modifications to post grant review) and stripped the one thing that everyone characterized as true reform; namely the guarantee that the Patent and Trademark Office would be adequately funded.  The prohibition against Congress siphoning off funds and treating the USPTO as a government piggy-bank was removed by the House.  See U.S. Patent Office Pays More Taxes then General Electric. It seems virtually certain the Senate will accept this clearly inferior piece of legislation, undoubtedly claiming a victory.  But a victory for what and for who? I suspect that will go unanswered in the celebratory aftermath.

One common thread of the talk about patent reform has been the all to familiar reality that patent litigation costs have skyrocketed.  While this has certainly been good for patent litigators and law firms, it has not really been all that helpful for businesses, particularly small businesses.  There is growing concern that the threat of costly patent litigation is deterring small hi-tech companies from engaging in research and development. The reason, of course, is that many entrepreneurs and small businesses simply do not have the resources to deal with even minor law suits.  So what is the answer?  One answer seems to be to create a new post-issuance review procedure, which in my opinion has real potential to backfire in a big way!

Of course, post issuance review at the Patent Office is not at all new.  There does exist such a procedure, which currently takes the form of one of two types of reexamination proceedings, but such proceedings are so constrained by what can be considered that they are under-utilized.  On top of that, they are cheaper in terms of legal fees so there is a question among some whether some patent litigators steer their clients away from reexamination, but that is another story for another day.

So how could a new and allegedly improved post-issuance review process work where reexamination has been lackluster at best in terms of use and obviating the need for litigation?  That is a good question, and one that does not seem to get asked much, if at all.  Rather, it is assumed as if it is plain on the face of the legislation that another avenue to challenge a patent is a good idea, will result in high quality patents, will obviate the need for litigation and otherwise make a better patent system.  But where is the proof?

Why would we expect a new post-issuance review to work any better than the current prosecution process?  Why are we to expect the Patent Office, which is certainly not equipped to handle litigation-like proceedings, could adequately and appropriately resolve issues of patentability in a post grant review proceeding when they are so horribly under-funded?   Why would anyone think this is a good idea?  Simply stated, the America Invents Act layers on more and more responsibility for the USPTO but without any additional funding.  For years the federal government has been notoriously adept at layering unfunded mandates onto the States, but with this legislation they will layer unfunded mandates onto the USPTO; an agency that accepts absolutely no taxpayer funding.  Yes, the USPTO runs itself on a percentage of the user fees it collects, with 5% to 10% getting kicked up the chain back to the Treasury Department.  Yes, Uncle Sam gets a “taste” of every dollar collected by the USPTO, siphoning off user fees every year, leading to an embarrassingly large backlog that has stifled job creation in the United States.

There is, however, going to be substantial disagreement with respect to how post-issuance review reform becomes implemented once the legislation finally passes and is signed by President Obama.  The Patent Office will have its hands full writing rules and regulations to implement the America Invents Act, so no one will really know what to expect in terms of process until that rulemaking process has completely unfolded.

While many do understand the importance of some type of meaningful change to the status quo, many also fear that any change in the system could easily wind up favoring large corporations with deep pockets.  Still others fear that anti-patent groups will tie up patentees in a bureaucratic process that will significantly reduce the usefulness associated with seeking a patent.  It seems virtually certain that the work load created by another post-issuance review process will only further bog down the Patent Office, which is already the No Patent For You In a Reasonable Period of Time Office.