Yesterday the United States Patent and Trademark Office held a public meeting on the so-called Three Track examination proposal, with everyone in agreement that the proposal is quite welcome, at least in principle. On June 4, 2010, the USPTO published a Notice in the Federal Register setting out the preliminary Three Track proposal and setting Tuesday, July 20, 2010 as a date for the public to come to the Alexandria, Virginia campus to let PTO Officials hear their thoughts. This public meeting proceeds the due date of written comments by a full month, and many of those who spoke explained they would continue to review the proposal and follow up with additional written comments. For more information on the specifics of the proposal please see USPTO Announces New Examination Rules.
One thing can be said definitively: everyone thinks it is a good idea, no one has issues with accelerating applications (Track 1) or allowing them to remain on course as today (Track 2), but there were numerous concerns raised about applicants slowing applications down (Track 3). The good news for the PTO, however, is that speaker after speaker highlighted the same or similar concerns, so it does appear as if there are a finite set of manageable considerations for the PTO to address. In fact, the senior PTO Officials that I spoke with after the public meeting were extremely pleased and quite grateful. I was told by one senior PTO Official that the points raised were all good and that the PTO intends to take them into consideration and address the concerns, along with whatever written feedback they receive. What a refreshing change that will be!
Leading off the event was Patent Commissioner Bob Stoll, who spoke for only a few minutes and then turned the microphone over to USPTO Director David Kappos. Kappos started off much the same way that he has whenever he speaks of of the Three Track proposal, by indicating that the Patent Office should recognize what the shipping industry has known for years; namely that not all packages need to arrive at the same time. Kappos went on to explain that Three Track is about “giving choices on how to spend resources.” He then went on to lament: “I wish I could tell you we have enough change underway already,” but that the USPTO is “years away from having [pendency] under control even with all we are doing today.” This was a sad, but honest appraisal of the sad state of affairs, which is only exacerbated by the lack of appropriate funding for the Patent Office.
The first speaker up was Richard Wilder of Microsoft Corporation. Wilder, ironically, did not have a power point presentation, which lead to laughter and a few jeers from the audience of about 125, which was augmented by the webcast audience. Wilder explained that Microsoft strongly supports the Three Track proposal because it will allow for the prioritization of the most important patent applications and delay costs through deferred examination.
Wilder did raise some concerns associated with the implementation of the Three Track, and stated that Microsoft supported an appropriately high fee for entrance into Track 1 so as to discourage over use. The logic is that if Track 1 is took cheap to pursue then everyone would choose Track 1 acceleration and that would lead to no realized benefits. Similarly, Microsoft worries that USPTO resources will be diverted to Track 1, thereby making ordinary examination (Track 2) slower than it already is.
The most controversial part of what Wilder said, at least to me, was that Microsoft would like third party requesters given the ability to demand immediate examination of a patent application so that certainty could be obtained where necessary. On top of this, Microsoft believes that those third party requesters should have to pay lower fees for a demanded immediate examination than would a party who sought Track 1 acceleration. The logic, although quite tortured if you ask me, was that third party requesters shouldn’t have to pay for the examination, but rather just enough to deal with the review of a petition requesting immediate examination.
Obviously, the ability to demand immediate examination of the application of another has serious flaws, which some from the audience immediately identified. One is that it would defeat the patent strategy selected by the applicant, and who exactly would trump? The wishes of the third party or the wishes of the applicant? How would moving between and among Tracks be handled. For me, however, the bigger question was why should a third party who is attempting to defeat the will of the applicant pay less? I don’t favor a third party being able to demand immediate examination, but if it were to be included the third party should pay for the entire examination plus a premium to make sure that it is not over used and abused.
While Microsoft was concerned with Track 1 fees not being high enough, presumably because Microsoft has no interest in Track 1 and sees it as potentially problematic if high-tech start-ups were to use it, as would likely be the case, Warren Tuttle, President of the United Inventors Association, had the exact opposite concern. Tuttle spoke last at the meeting, and was gracious enough to provide me with a copy of his prepared remarks, which he largely read from with some ad libbing.
Clearly the most significant concern for independent inventors will be the additional cost involved with pursuing the option-one, fast track application process. One important concern is not just the money issue, though the extra cost may certainly prove a burden for many. Of equal concern is the perception that may grow through word of mouth, and other viral communications, painting this reform efforts as one favoring larger companies. The natural, intuitive thought process for many spirited, independent inventors may be that only larger companies, or wealthy individuals, will be able to afford the fast track. A resulting populism may resonate if this issue is left unattended and… may even be used to potentially create ill will. This needs to be addressed from the outset, to gain rational understanding and trust.
Tuttle went on to point out that “there appears to be no recognition in the proposal for small entity status,” suggesting that there should be such a small entity break in fees. Tuttle also observed that Track 3 would not like be of interest to independent inventors, but that the UIA has no philosophical problems with Track 3 although it would seemingly only benefit those who are not independent inventors.
Todd Dickinson, former USPTO Director and current Executive Director of American Intellectual Property Law Association, was also among the presenters yesterday, speaking on behalf of the AIPLA. Commissioner Stoll called him to the podium simply saying “Todd, would you like to come up?” Dickinson came to the podium and in his typical affable manner showed his quick whit as he said “thank you Bob, I realize like Cher I only need to be known by one name…” Which prompted Stoll to quickly retort “is that Todd or is that Q?” Laughter abounded, which was not the first time the audience engaged in laughter. There was some kind of a comedy show or recital in the other side of the divided Madison Auditorium, which at times got rather loud, particularly during Dickinson’s presentation. All of the speakers managed, and Dickinson once stopped and recognized the fun being had next door, and then continued.
Dickinson explained that the AIPLA has “great interest in [Three Track] as a proposal.” He also indicated that within the AIPLA there are “many questions,” as well as “some enthusiasm and some concerns.” On a preliminary note Dickinson pointed out that implementation has “the potential to be fairly complex” and such “complexity may present a challenge to the average examiner and average applicant…”
Not long into his presentation Dickinson addressed what for many in the patent community is THE big issue. After going through what the AIPLA understanding of Track 1 is Dickinson explained it is viewed in a “generally positive” light, but that how strongly it could be supported depended on a few things; namely the AIPLA wants to see “a permanent end to fee diversion.” There is concern that without an end to fee diversion the fees paid under Track 1 might not go “toward their intended target.” The way Dickinson puts it is extremely kind and very politic indeed. The way I would say it is that without an end to the siphoning off of money by Congress increased fees for Track 1 would wind up pay for a tunnel under an interstate highway for a turtle crossing or other such nonsense. High fees paid only to be raided by Congress would be an extraordinarily tough pill for the applicant community, and Patent Bar, to swallow.
Dickinson went on in great detail regarding the proposal. A few of his other points that caught my ears were that AIPLA has the exact opposite concern than Microsoft (siding with the UIA), fearing the fees for Track 1 might be too high and thereby seldom used. The AIPLA also would like to see the number of claims for a Track 1 application increased to 6 independent claims and 40 total claims. The AIPLA would also like to see fee breaks for small entity status and micro entity status, which would be consistent with current patent reform efforts, but as Dickinson did acknowledge later in a Q&A period the PTO has its hands tied on fees to a large degree by statute. Another suggestion raised, and echoed by many, was to inquire about whether the PTO would pilot the program first, particularly since it is complex and quite a change. Dickinson also suggested that it seems this proposal is to address the current backlog and pendency crisis, so perhaps there should be a sunset provision included to return to a single, traditional examination track once the pendency is under control.
As Dickinson transitioned into discussing Track 3 he pointed out that the AIPLA is perhaps likely to oppose the first filed application provisions, citing adverse impact on foreign based applications (which was echoed by 3M and others). Dickinson also explained that the “Japanese have most significant and vocal concerns” due to the fact it appears as if previously filed foreign applications would be at a disadvantage and slowed. The risk of retaliation toward US applications filed in foreign Patent Offices was cited by Dickinson and echoed by others. Finally, Dickson pointed out that Track 3 “downplays PCT as a major means to achieve work sharing.”
Steven Skolnick, speaking on behalf of 3M, explained that 3M does support the Three Track proposal and offered the following guiding principles that should govern:
- Rules should not favor or disadvantage applicants based on size.
- Track 1 fees should be reasonable for applicants while still allow the USPTO to recoup costs associated with accelerated examination.
- Rules should not discriminate against applicants based on where application was first filed.
- One queue for all accelerated or prioritized applications provided a single queue does not undermine the reasons for having a multi-track examination system.
- Pendency of Track 2 should not increase relative to today and ideally should decrease.
- The maximum delay under Track 3 should be 30 months from the earliest priority date.
Skolnick also inquired about why Track 3 election cannot be made at any time prior to when the USPTO takes first action on an application. To me this seems like a no-brainer. I can’t see any reason why Track 3 election shouldn’t be allowed to be made prior to first action. Perhaps the USPTO could even give applicants a courtesy notice in advance of taking up an application and asking if they want to elect Track 3 or some other deferment. At least for the foreseeable future this could let less important applications slide and more important applications naturally advance. On top of that, if the application is already published then society has had the benefit. This was a good question/suggestion by 3M, at least in my estimation.
Hans Sauer, Associate General Counsel for Intellectual Property for the Biotechnology Industry Organization (BIO), also presented and his presentation was quite compelling. Sauer set the table by explaining that BIO members share come common characteristics, such as the very long time to market for their products, the fact that their products stay on the market for a long time and the relatively few patents that pertain to any innovation. As a result, BIO members leverage IP to get cash from investors to withstand the likely 10 years they will need to remain in business without showing positive profit. Sauer summarized the BIO position early on as saying its members support a three tier patent system in principle, which would allow for more flexibility over timing of applications.
Sauer explained, and rightly so I think, that most BIO members will not be all that interested in Track 1, but there may be specialized situations where it could be useful. In those possibly rare situations Sauer explained that Track 1 will be warmly received by BIO because it removes disincentives to current acceleration procedures. With respect to Track 3, he explained that there is the elimination of some disincentives associated with Rule 103, “but PTA will always be there as an issue with BIO members.”
Sauer asked: “Does [Track 3] really provide prosecution timing benefits over the use of the PCT system?” He then went on to say answer his own question by explaining that it does not seem that Track 3 provides benefits when compared to filing a PCT application and entering the National Stage. He also pointed out that there are not PTA disincentives associated with filing a PCT and then entering the National Stage, thereby implying that Track 3 might not be that interesting or attractive to biotechnology companies. He also, like many others, questioned waiting on a foreign search, asking “can an application claiming foreign priority ever be fast tracked without waiting for a foreign search and Office Action?”
The other presentation I saw (and I did not see Doug Norman of IPO) was the presentation of Alec Schibanoff from American Innovators for Patent Rights. Schibanoff started off by saying that a one-size-fits-all patent system is no longer workable and similarly a one-size-fits-all patent is no longer appropriate either, spending a meaningful percentage of his presentation on urging for a three tier patent right with escalating rights and terms. Obviously, that cannot happen at this time because the Patent Office couldn’t make such a change, so perhaps AIPR is setting this up as an agenda item for the future.
Schibanoff said at one point “Track 1 favors large companies to the detriment of small businesses,” as if this is fact. Personally, I am not sure at all that this is true. In fact, I suspect the exact opposite is true. Assuming, of course, that the fee is low enough to be realistically used by applicants it would seem that Track 1 will most benefit start-up companies who have at least some low levels of funding from investors. It will also benefit independent inventors who are not on a shoestring budget and want or need a patent quickly. It should also benefit everyone if Track 3 can be made enticing enough for some heavy users to opt to give their line placement to others. Nevertheless, a good suggestion was to not limit the number of claims for Track 1 given that additional claims already demand a premium. The trouble, however, is that I know that some applications are filed with thousands of claims, which would crush any hope of expediting applications should any of those applicants wind up in Track 1. So the point is good, but I do sympathize with the Patent Office need to have some kind of a limitation, provided of course a continuation could be filed to go back for more claims.
While I have weaved my 2 cents in throughout, allow me to make a few observations. First, like so many others I think the Three Track proposal is an outstanding attempt to triage patent applications. It will be critical to strike the appropriate balance on fee levels so that those who could most benefit from it, namely independent inventors and start-up businesses, can afford acceleration where that could make all the difference in obtaining funding from investors or signing a licensing deal.
Equally critical, however, is that acceleration under Track 1 not become nothing more than an expedited final rejection. It is the view of some in the Patent Bar that historical methods of expediting applications simply lead to fast rejections and treatment from rushed examiners that is less than thorough. In fact, one friend of mine has always referred to filing a Petition to Make Special as “waving a red flag” that tells the examiner to “reject me quicker!” I suspect there is some truth to that perception given that it is easier to reject than it is to allow, and when time allowed for action is compressed there is a natural tendency to get work off your desk one way or another. So the challenge will be to make sure that any accelerated processes that have an applicant pay a premium are going to be full, fair and honest consideration of the application on the merits.
Finally, I will observe that this entire proposal seems to me to absolutely require more people to opt for Track 3 than for Track 1. I do think that is likely going to be the case if the Patent Office gets it right, but failure to take into consideration the PTA issues and real or perceived disincentives for biotech and pharma would spell doom for the success of the proposal. There will likely be a relatively small subset of applicants who are willing to pay a premium for a very quick patent. Universities, biotech companies, pharmaceutical companies and many others who operate on the frontiers of pure science or in highly unpredictable or long to market industries should love Track 3. If for some reason they do not as a result of both real and perceived disincentives then the Patent Office will wind up being squeezed to do work faster but without anyone volunteering to give up their place in line. So look for Patent Term Adjustment to be at the top of the list of things provoking written comments, along with fear that waiting for an Office Action in the first filed country will import foreign delays into the US process, thereby causing a cascading effect and exceptionally slow US prosecutions.
All in all I would characterize the mood of the PTO officials I spoke with as up-beat and the mood of the stakeholders in attendance was generally positive, but with reservations about the mechanics of Track 3. After the event I too would be upbeat if I were among the senior ranks at the USPTO. Those aspects that were viewed as negative or needing more work or clarification seemed few, were identified over and over again and should be addressable. That being the case it seems the majority of the proposal is acceptable and the community remains hungry for these types of creative initiatives, which sadly is all we have given that Congress continues to be AWOL on even relatively meaningless reforms, let alone reforms that could actually do some real good.