Patent System in Crisis: Backlogs, Examiner Layoffs and Judicial Overreach | IPWatchdog Unleashed

This week on IPWatchdog Unleashed, I’m going to talk about an issue of enormous importance. The U.S. patent system feels to me an awful lot like the Titanic right now, and it feels like we’re fast approaching an iceberg with disaster imminent.

The Trump Administration is making major changes to reduce the size of government to address the $37 trillion federal debt, which is crippling the nation. And with protections given to federal employees the Administration will have its hands tied to some extent. But where there is much latitude to eliminate employees during their probationary period, and to withdraw job offers. That means the easiest way to downsized government is to withdraw outstanding job offers to would-be patent examiners and fire examiners on the job for less than a year, while they are still within the probationary period.

Meanwhile, as the number of examiners is being cut, the backlog of unexamined patent applications is at an all-time high. How the previous Administration allowed for the backlog of unexamined applications to grow so large demands investigation, but the reality of the situation is the backlog is at an all-time high.

With respect to the size of the backlog, you may have heard that it is somewhere between 830,000 to 860,000 applications. But as the result of increased fees put into effect by the previous Administration, there was a rush to file continuations earlier this year before the fees increased. And I’ve been told that more than 300,000 continuations were filed before the fee increases went into effect. While I have not been able to officially verify that figure, I’ve been told by several sources familiar with what is going on inside the PTO that the number of unexamined applications may currently exceed 1.2 million applications. And with job offers for up to 600 patent examiners withdrawn, and a fear that a similar number of probationary examiners, perhaps even more, will soon be terminated, no one knows for sure what the Office will do to address this historic backlog.

Shifting gears, there is also a separate crisis unfolding at the Federal Circuit. In 2021, the Federal Circuit issued a ruling in Hyatt v. Hirshfeld that held that prosecution laches is presumed if it takes more than six years to obtain a patent. This is significant because if prosecution laches is found, the patent is unenforceable. And astonishingly, despite the statute saying issued patents are presumed valid and enforceable, the Federal Circuit ruled that if it took longer than six years to obtain the patent, the burden shifts to the patentee to prove that the delay was reasonable or excusable or the defendant did not suffer any economic or evidentiary prejudice.

And before you conclude that this is just a one-off decision limited to Gil Hyatt, I invite you to consider three things. First, Hyatt, like many others, was a victim of the infamous USPTO SAWS program, which was a program specifically designed to delay and prevent applications from ever issuing its patents. Second, despite having patent applications pending still at the USPTO, Hyatt has not been issued a patent in over a generation. And third, the presumption of unenforceability has also been applied against Sonos in their patent litigation against Google. So, this is not just an issue isolated to Gil Hyatt.

Over the last year, I’ve asked audiences at every program we’ve done with IPWatchdog how many patent practitioners have cases that have been pending for more than six years. Each time, every practitioner in attendance always raises their hand. Then I ask a follow-up question. How many of you would say that at least 50% of your docket has been pending for longer than six years? And again, virtually every hand is raised.

The Federal Circuit treatment of prosecution rings the death knell for continuation practice. And let’s remember that a continuation is often necessitated by an examiner limiting examination to a subset of the originally filed parent application. This limitation of the application to a piece of what the applicant has invented is not just common, it literally happens all the time.

Simply stated, there is no limit to the number of patents a single application can spawn. And 18 years ago, when the office tried to limit the number of continuations that could be filed and thereby limit the number of patent claim that could be obtained, they were enjoined in federal court—an injunction that remains in effect still. There is no limit to the number of claims or continuations an inventor is entitled to if the inventor has a patent eligible, new and non-obvious invention, and of course, if the inventor is willing to pay the fees.

Why the Federal Circuit is drudging up prosecution laches to kill patents is unclear. What is clear, however, is that the Supreme Court directly and unquestionably disagrees with the Federal Circuit view of laches. First let’s go all the way back to 1897 in United States v. Bell Telephone. The Supreme Court correctly said that when the Patent Office takes possession of a case, the office determines when and how the case will proceed in a timeline set forth by the statute. So how can a patent applicant be expected to do more than timely respond and follow the timelines established by Congress? That is, in fact, the rhetorical question that was asked by the Supreme Court in 1897.

Fast forward to 2017 in SCA Hygiene Products v. First Quality Baby Products, when the Supreme Court specifically and unceremoniously overruled the Federal Circuit on the question of laches. Even after the Supreme Court had said just three years earlier that there could be no laches defense in the context of a copyright lawsuit, if the lawsuit was brought within the statute of limitations, the Federal Circuit still ruled that laches was a valid defense to a patent infringement lawsuit that was brought within the statute of limitations.

It was ridiculous for the Supreme Court to need to say this in the context of patents after just saying it in the context of copyrights, but thankfully the Supreme Court took the case and did, predictably, overrule the Federal Circuit. In do so the Supreme Court explained that applying laches within a limitations period specified by Congress would give judges a legislative overriding role that goes beyond the judiciary’s power. The Supreme Court also explained that applying laches within a limitations period would also clash with the very purpose for which the laches defense developed in equity courts. As the Supreme Court explained, the principal application of laches was and remains to claims of an equitable nature for which the legislator has provided no fixed time limitation. Finally, the Supreme Court explained that laches is a gap-filling doctrine, and where there is a statute of limitations, there is no gap to fill.

So, the Federal Circuit is just clearly wrong when it says that prosecution history laches renders patents and patent claims unenforceable, because there is a statute of limitations associated with patent prosecution. In fact, there is a statute that defines the timeline within which an applicant must take action to respond to the patent office during prosecution to keep the case from going abandoned. What this means is a patent applicant cannot possibly unreasonably delay during prosecution or appeal because the patent applicant has no control and must operate within the statutory and regulatory timelines explicitly set forth in the laws and rules.

And continuation practice itself cannot legitimately be seen as a delay. Continuations are specifically permitted and controlled by statute. Thus, this made-up, ill-advised, non-statutory doctrine of prosecution laches is based entirely on judicial disdain for the legitimate and required prosecution practices and the well-established statutory and regulatory timelines.

Ironically, the Patent Office can take as long as it wants to issue an office action during prosecution or appeal. The Patent Trial and Appeal Board can take an unlimited amount of time to issue a decision in response to appeal. The Patent Office can take an unlimited amount of time to allow a claim after a patent applicant receives a favorable decision from the Board. And the Patent Office even has the authority to simply reopen prosecution even after the examiner has lost on appeal to the Board. So, exactly who is fooling who? The Patent Office can take as much time as they want but applicants are statutorily required to act within a matter of months, yet the Federal Circuit thinks it is the applicant acting within the time frame authorized by the law and rules that is the inexcusable, unreasonable actor? Talk about breathtakingly shortsighted and truly naïve.

This sudden focus on prosecution laches is not to prevent a patent owner from extending the life of a patent. Since 1995, when the U.S. changed patent term from 17 years from issue to 20 years from the earliest filing date, patents are going to end when the patents are going to end, period. There is no extending of any patent term whatsoever. And if a continuation is filed years after the underlying parent application, the continuation term is still governed by the original filing date of the parent application. So, it is false to say or suggest this is being done to prevent patent term from being inappropriately extended. Patent term cannot be extended, period. Anyone who says otherwise is not being truthful.

This is a big issue because when we are talking about continuations, we are talking about innovations that are the most valuable. If you’re filing continuations on an innovation, it’s because you think you want more claims because you think you have something valuable. And sadly, there’s an effort to take away those valuable claims to limit the number of valuable patents. And we have this very bizarro world where patents on trivial things are never challenged. Patents that cover things of little commercial value are not questioned. But if you come up with something that is valuable, something that other people want to copy, something that really affects commerce in a positive way, well, no patent for you. Or if you do get a patent, we’ll just have to take that away. That type of arbitrary government by the judiciary is an assault on innovators.

If the Federal Circuit persists and continues to ignore the statutory language and continues to ignore the Supreme Court, with the patent backlog as large as it is and how it will inevitably grow in the coming year, innovators are going to need to seriously consider whether it even makes sense to apply for a U.S. patent anymore. Even with the backlog, you may get to the end your first prosecution within six years, but you certainly aren’t going to have any realistic chance of filing a single continuation and to have that continuation case wrapped up within six years.

It seems we’re at an impasse. If the Federal Circuit persists with its application of prosecution laches there’s a very real chance that most patents issued by the USPTO in the coming years will in fact be presumed to be unenforceable, which is both absurd and contrary to all fundamental principles of patent law. And this is a very big deal. Encouragement of innovation by Congress provides a win-win situation that keeps on giving forever. Strong patent protection is not a handout or an altruistic pursuit. Offering strong patent protection makes innovation profitable. And it is in the self-interest of America because when patent rights are strong and not easily defeated, investment capital is more readily available for basic scientific research and for the research and development that is necessary to get new products to market.

It is simple. The more profitable innovation is, the more investment capital will be available for innovation and the more innovation that will result. And for the R&D projects that fail, the venture capitalists absorb the failure at no cost to the public. And for the R&D projects that succeed, new generations of products get to market, thereby enhancing society, making America more competitive, increasing wealth, adding high-paying jobs, and increasing tax income to the government. It really is a scenario where rising tides lift all boats. And this success keeps giving forever because after a patent expires, the technology and innovation represented in the patent can be freely used forever by anyone for any reason without payment.

So don’t fall for the nonsense that strong patent rights get in the way of progress. Nothing can be further from the truth.

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