I’m in New York City today at PLI headquarters on Seventh Avenue for the USPTO Post-Grant Patent Trials 2013 program. I will moderate a panel this afternoon, but as the day starts the first speaker is David Kappos, former Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office. Since leaving the USPTO at the end of January 2013, Kappos has landed at the New York offices of Cravath, Swaine & Moore, an extremely well regarded Am Law 100 firm and great place to land. It was good to see him, he says he is doing well, and he seems to have as much energy and enthusiasm as ever.

Kappos started by explaining that this is his first public speaking engagement since leaving the USPTO. From the outset he also explained that the slides he would be using for the presentation were prepared by the USPTO. This presentation was originally scheduled to be given by James Smith, Chief Judge of the PTAB, who had to beg off as the result of sequestration cuts.

This article is by no means a substitute for the presentation by Kappos. In 60 minutes he managed to bring everyone up to date on what is going on at the USPTO relative to Appeals and other post patent proceedings. Of course, there were a handful of things that particularly caught my attention, which are mentioned below, along with “my two cents.” To distinguish the Kappos presentation from my own thoughts I have put my own thoughts in italics.

Next week on Wednesday, March 27, 2013, I will be once again in New York City at Practising Law Institute headquarters on Seventh Avenue, roughly between Central Park and Times Square. The program for the day is titled USPTO Post-Grant Patent Trials 2013, which will provide 6 CLE credits for attendees.

I am a moderator for the segment titled Practice Before the PTAB Roundtable, which will discuss the first trial petitions filed, motions practice, scheduling, the possible need for rule refinements and practice tips for practitioners. Robert Sterne of Sterne Kessler and Professor Lisa Dolak of Syracuse University College of Law will be the panelists.

A new addition to the program just announced today is David Kappos, who is the immediate former Director of the United States Patent and Trademark Office. Kappos, a life-long employee of IBM prior to taking charge of the USPTO, is now with Cravath, Swaine & Moore LLP in New York City.  Kappos will discuss the Patent Trial and Appeal Board, specifically discussing ex parte reexamination, the remaining legacy inter partes reexamination cases, inter partes review and the transitional program relating to covered business method patents. His segment will run from 9:15 am to 10:15 am. In addition to being presented live in New York City the program will also be webcast.

For several years I was the lead attorney at a Taiwan company that manufactures technology and consumer electronic products, from light-emitting diodes to liquid-crystal displays.  Every month we received a new demand for patent licensing or indemnification and it was my job to dispose of them at no cost, without licensing, litigation, or outside counsel.  Usually it was possible, but occasionally we found ourselves mired in full-blown litigation.

It’s no secret patent litigation costs are immense.  According to the American Intellectual Property Law Association, the cost of an average patent lawsuit, where $1 million to $25 million is at risk, is $1.6 million through the end of discovery and $2.8 million through final disposition.  Adding insult to injury, more than 60% of all patent suits are filed by non-practicing entities (NPEs) that manufacture no products and rely on litigation as a key part of their business model.

However, whether one represents a plaintiff or defendant, manufacturer or NPE, there are actions one can take to help manage the costs.  Below are some general guidelines.

Between the legacy issue of bad patents, patent auctions and the many who purchase patents, what has started to happen is that the patent system rewards those who have the finances and ability to game the system. But the problem is extraordinarily complex. What is clear, however, is that the enforcement of bad patents is a problem within the patent and innovation industry.

But at the same time it would really be GREAT if the media and anti-patent community would get a clue and understand that the problem with bad patents is largely a legacy issue. Those that say that the United States Patent and Trademark Office continues to hand out dubious patents like candy are flat wrong. The bad patents that we witness being used in unsavory shake-downs have not been granted over the last few years, but rather were granted many years ago, under a different patent regime and when there was little findable prior art for patent examiners to use.

Those that pretend that bad patents issue today by the dozen and for a dime are living in a fantasy world that does not approximate reality. Yet the misinformation continues, undaunted by reality. So if reality doesn’t support the mountains of misinformation about the patent system and how it operates today, what is going on?

For a better part of the past year, there has been talk about the possibility of Congress moving a technical corrections bill to fix some “errors” within the America Invents Act (AIA).  The AIA was signed into law on September 16, 2011 and contains, as most major pieces of legislation do, some minor drafting errors.  On Friday, November, 30, 2012, a bill making technical changes to the AIA was introduced in the House of Representatives.  The bill number is HR 6621.  The proposed AIA package does NOT include a so-called “fix” to post-grant review that some considered to be substantive and not technical.

To rewind: Earlier this year, there had been some behind the scenes discussions on Capitol Hill about possibly modifying the AIA’s PGR estoppel provisions in a way that would have been problematic to patent owners.  The discussed change would have removed from the AIA the “could have raised” estoppel standard.  Concerns about weakening the PGR estoppels provisions as part of a ‘technical” package were communicated by members of the Innovation Alliance, university, inventor, and venture capital communities.

Fast forward to today:  The bill does not contain the troubling PGR “fix.” Key staff on the Hill believe the measure to be non-controversial. House passage of the measure could take place before year’s end.  What follows is the text of a draft section-by-section analysis of what was expected to be in the introduced AIA package of fixes.

The America Invents Act (AIA) has now gone through its second phase of implementation.  Initially there were few things that went into effect over the initial 90 days after President Obama signed the legislation into law.  The first major wave of the AIA took effect on September 16, 2012.  See, for example, Citation of Prior Art, Supplemental Examination, Oath/Declaration and Post-Grant Review et al. The most significant of the changes to U.S. patent law, namely the shift from first to invent to first to file, will not take place until March 16, 2013.  This is a monumental change to U.S. patent law so it is never too early to discuss the many issues that will present with this shift.

The first and most obvious place to begin any discussion of the shift to first to file is with a very basic question: What is prior art?  This is anything but an easy, straight forward question even under first to invent laws that we know so well and have been familiar with virtually throughout the entire history of the United States.  The complexity in what seems an otherwise simple question stems from the fact that prior art is defined by statute.  There is no common sense way to conceptualize what is, or what is not, prior art.

In two days we will celebrate the first anniversary of the signing of the America Invents Act (AIA). Over the next week to two weeks I will be focusing on the AIA, both in retrospect and insofar as practice and procedure is concerned at the USPTO.  Yesterday I wrote about Supplemental Examination.  Today we take a look a the Final Rules packaged titled Changes To Implement Miscellaneous Post Patent Provisions of the Leahy- Smith America Invents Act, which were published in the Federal Register on August 6, 2012.

The “miscellaneous” final rules primarily implement two things.  First, section 6 of the AIA to provides for an estoppel that may attach to the filing of an ex parte reexamination request subsequent to a final written decision in a post grant review or inter partes review proceeding. See 37 CFR 1.510(b)(6).  Second, the final rules expand the scope of information that a person may cite in the file of a patent to include written statements of the patent owner filed in a proceeding before a Federal court or the Office in which the patent owner took a position on the scope of any claim of the patent.

With respect to the first, relating to ex parte reexamination, USPTO rules will now require that a third party request for ex parte reexamination contain a certification by the third party requester that the statutory estoppel provisions apply to completed inter partes reviews and post grant reviews do not bar the third party from requesting ex parte reexamination. Cosmetically, the final rules also implement Section 3(i) of the AIA, which replaces interference proceedings with derivation proceedings, and replaces the title ‘‘Board of Patent Appeals and Interferences’’ with ‘‘Patent Trial and Appeal Board.”

On September 6, 2012, the United States Patent and Trademark Office published proposed rules in the Federal Register setting or adjusting fees for patent related services.  In proposing patent fees the USPTO is for the first time seeking to exercise the fee setting authority established under Section 10 of the America Invents Act (AIA).  According to the Federal Register Notice, the proposed fees are appropriate to cover patent operations at the Office, as well as create a “sustainable funding model” that will work toward further reduction in the patent application backlog.  The fees are also set with an eye toward a necessary “upgrade [of] the Office’s patent business information technology (IT) capability and infrastructure.”

Now begins a two month public comment period.  In order to ensure consideration, those wishing to submit written comments must do so no later than November 5, 2012. Comments should be sent by electronic mail message over the Internet addressed to: fee.setting@uspto.gov.  Further, these proposed fees will be fair game for discussion at the AIA Roadshows scheduled throughout the United States during the month of September.

The recurring theme will be decreased fees for those who qualify for micro-entity status, but increased fees for everyone else.  Decreased fees for micro-entity status are appreciated, but they will not even apply to all independent inventors, but only a subset of independent inventors who are at the lowest end of the income scale and who have had very few patents or patent applications.  Thus, even the professional garage inventor will be a small entity and will pay more — in some cases substantially more — than they pay now.  Not to mention the small businesses that are the engine of the U.S. economy.  These fees will be a real and substantial impediment to the patent process for those individuals and businesses that we need to be encouraging and incentivizing the most.

Post Grant Review, Inter Partes Review and the Transitional Program for Covered Business Method Patents were instituted with the goal of improving patent quality by giving third parties methods to challenge patents that are less expensive and less involved than litigation. Each of these procedures is a trial before the Patent Trial and Appeal Board (Board) composed of Administrative Patent Judges and subject to Part 42 of 37 C.F.R., Trial Practice Before the Patent Trial and Appeal Board.  The trials allow for limited discovery, which has not been available in Ex Parte or Inter Partes Reexamination, the existing procedures for challenging patents in the U.S. Patent and Trademark Office.  Because the discovery is limited, it is unlikely that these procedures will be used in cases where large amounts of evidence may be needed to prove patent invalidity.

Post Grant Review

A petition for Post Grant Review (PGR) must be filed no later than nine months after the issue date of a patent or, for claims broadened in a reissue, nine-months after the date of the certificate.  A third party may challenge a patent under PGR based on any ground that may be raised under 35 U.S.C. § 282(b)(2) or (3) including patent subject matter eligibility or utility under 35 U.S.C. § 101, novelty under 35 U.S.C. § 102, Obviousness under 35 U.S.C. § 103 and enablement, written description and definiteness under 35 U.S.C. § 112.  A PGR may only be instituted for a patent having claims with an effective filing date after March 16, 2013.  A PGR must be filed no later than one year after the petitioner has been sued for infringement and cannot be instituted if the petitioner has filed a declaratory judgment action against the patent.

Washington - The U.S. Department of Commerce’s United States Patent and Trademark Office (USPTO) announced today that it will publish final rules in the Federal Register on August 14, 2012, to implement three administrative trial provisions of the Leahy-Smith America Invents Act (AIA); inter partes review, post-grant review, and the transitional program for covered business method patents. The administrative trial final rules offer a third party a timely, cost-effective alternative to district court litigation for challenging the patentability of a claimed invention in an issued patent. These rules become effective on September 16, 2012. With this publication, all of the administrative trial rules the USPTO was tasked by the AIA to complete will have been published.

The final rules for inter partes review and the transitional program for covered business method patents apply to any patent issued before, on, or after the September 16, 2012 effective date. By contrast, the post-grant review final rules apply to patents issuing from applications subject to the first-inventor-to-file provision of the AIA, which does not become effective until March 16, 2013.

On Wednesday of last week I was in Washington, DC, and then on Thursday and Friday I traveled to New York City for the 6th Annual PLI Patent Institute.  Over these days out and about I heard similar stories from well placed individuals in the industry.  Had I heard it only once from one source I would have believed it to be true, given who was telling me, but I heard substantially the same thing from several very credible sources.  The troubling news starts with the fact that a technical amendments bill to the America Invents Act (AIA) that is working its way around Capitol Hill, and in true government by ambush fashion it could work its way into a bill at any time!   Everyone interested in stopping substantive changes to the AIA needs to be prepared to act fast!  In fact, I understand that if the Stop Online Piracy Act (SOPA) had moved forward the AIA Technical Amendments bill would have been attached to it.

What is the big deal about technical amendments?  The problem is that not all of the amendments will be “technical.”  For example, there is a plot afoot to change the estoppel provisions in the AIA relative to post-grant review and inter partes review.  As enacted, estoppel attaches relative to any ground raised or which reasonably could have been raised during the proceeding.  There is an intense effort to have the technical amendments modify the estoppel provisions to provide estoppel only for that which was “actually raised,” thereby excising the “reasonably could have raised” language.  This is obviously a substantive amendment, and a truly terrible idea.

USPTO Proposes Rules of Practice for Trials before the Patent Trial and Appeal Board and Judicial Review of Patent Trial and Appeal Board Decisions

Washington – The United States Patent and Trademark Office (USPTO) has proposed a consolidated set of rules related to trial practice before the Patent Trial and Appeal Board. The proposed rules implement the provisions of the Leahy-Smith America Invents Act relating to inter partes review, post-grant review, the transitional program for covered business method patents, and derivation proceedings.

It is virtually impossible to in any intellectually honest way truthfully determine what the legislative intent of Congress was for any particular piece of legislation.  Justice Antonin Scalia has railed against the use of legislative history for decades, saying “legislative history is irrelevant when the statutory text is clear,” and referring to the “legal fiction” that legislative history, including Committee Reports, actually reflect the intent of the Congress.  This is, of course, because it is exceptionally easy to get something into the legislative history, so anything that appears in the legislative history may only be the view of one particular Member of Congress, or worse the view of a lobbyist paying for access.  There is also the problem associated with Members of Congress saying things they simply don’t understand, and the reality that the legislative history cannot be cross examined.  Even Committee Reports are at best the view of a majority of a group that makes up a small fraction of the overall Congress.  It seems a fools errand to rely on legislative history in all but the rarest case, and Scalia’s view seems to be the prevailing view of this Supreme Court.

Notwithstanding the inherent unreliability of legislative history and the truly scary prospect of trying to get inside the head of Members of Congress, it seems fairly clear to me that the America Invents Act, which was signed into law by President Obama on September 16, 2011, contains at least a handful of things that can only be characterized as unintended consequences.  Among them are: (1) U.S. patents issued from foreign filings will be prior art as of the foreign filing date; (2) commonly owned patent applications cannot be used against each other for novelty purposes; and (3) the creation of an post grant challenge limbo because of the delay in initiating post-grant review procedures.

I have done quite a bit of writing about the America Invents Act, but I have been a bit derelict in providing the sequel to America Invents: A Simple Guide to Patent Reform, Part 1.  Part of the reason, if not the entirety of the reason, is that the major parts of the American Invents Act that remain are anything but simple.

I was speaking with John White via telephone yesterday about the America Invents Act.  Yes, John and I are thoroughly immersed in this legislation and coming up with wrinkle after wrinkle that you probably never thought about.  Fun I know, but that is what two wild, crazy and tremendously charismatic patent attorneys talk about!  In any event, I told him I was having difficulty and asked him — how do you describe prior user rights, post-grant review and supplemental examination simply?  His response: “You don’t.”  We went on to talk about how first to file isn’t all that simple either, although the name suggests otherwise.  This thing, the monstrosity that is the America Invents Act, will be a full employment act for lawyers!  But when is it ever good for clients when it is good for the attorneys?

In any event, on this note I embark upon Part 2, which will seek to make sense of prior user rights, post-grant review, preissuance submission and patentability changes. This will leave inter partes review, supplemental examination and derivation proceedings for the finale — Part 3.  I will endeavor to describe these in the most straight forward way possible, but I am going to completely punt on Section 18 as it pertains to business methods and post-grant review, at least for now.  I just see no way to explain that in a “simple” way.  Notwithstanding, look for an article on Section 18 soon (a relative term I know), along with an article about specific peculiarities and likely unintended consequences of the Act.

The America Invents Act, which just recently passed by the Congress and sent to the White House for President Obama’s signature, is the most significant patent reform legislation in decades, and it promises to change virtually all of patent practice as we know it over the next 18 months. Some pieces of the legislation will go into effect almost immediately, but other aspects of the legislation will become effective 12 months and 18 months after the bill becomes law. We are in for the largest set of changes anyone practicing has ever faced. The 1952 Patent Act codified what was in existence, the American Invents Act shakes the very foundation of patent law and patent practice.

The Practising Law Institute will host a one-day program titled America Invents Act: How the New Law Impacts Your Clients and Your Patent Practice. This event will be on Monday, September 26, 2011, and will take place live at PLI’s San Francisco Center in downtown San Francisco, California. The program will be webcast live over the Internet for all those who are unable to make it to the live location.