Patent Reform 2007: House of Representatives Passes H.1908

Legislative patent reform still has a long road to travel before reaching its conclusion. However, the passage of H.1908 by the House of Representatives represents a major leap forward along the path. The following are some highlights of the statute as passed. [H.1908.As.Passed].

First to file system: Obviousness and novelty would now be considered as of the “effective filing date.”  Novelty grace period would be eliminated except for the inventor’s own disclosures. Although unclear, the grace period appears to be completely eliminated for obviousness analysis. Interferences are gone.

Damages: Reasonable royalty calculations (the most common damage awards) would all require courts to conduct a thorough analysis to ensure that damages are equal to the “economic value [of the invention] properly attributable to the patent’s specific contribution over the prior art.” The entire value of a product or process can only be the basis for royalty calculations if the innovation is the “predominant basis” for market demand of the product. (a showing that may be impossible in most cases). Overall this would reduce damage awards.

Search Reports: PTO would be granted discretion in ordering search reports for all applications except those by a new group called ‘micro-entities.’

Treble Damages: The statute explicitly calls-out ‘willfulness’ as the sole reason for enhanced damages then severely limits the facts where willfulness can be found. Overall this reduces the likelihood of awarding treble damages.

Post-Grant Review: In addition to reexamination, a post-grant review proceeding would be available if filed within 12–months of issuance or with the patentee’s permission.

Open Examination: Anyone may submit prior art for any patent or pending application along with an explanation of why the art is important.

Tax Methods: A patent would not be available for a newly invented tax planning method. Tax planning methods do “not include the use of tax preparation software or other tools used solely to perform or model mathematical calculations or prepare tax or information returns.”

Venue and Jurisdiction: Strong limitations on venue would likely eliminate E.D.Texas as a potential choice.

Interlocutory Appeal: A district court would be given discretion to certify interlocutory appeals of claim construction decisions.

Inequitable Conduct: Inequitable conduct must be pled with specificity following FRCP Rule 9b. Inequitable conduct rules would be made explicit in the statute. Overall, this weakens the defense of inequitable conduct.

PTO Regulatory Power: The statute would give the PTO power to make the continuation rule changes that it has already implemented.

Patent Trial and Appeal Board: Following John Duffy’s Suggestion, the statute would have the board appointed by the Secretary of Commerce rather than the PTO Director.

Study of Patent Damages: The PTO will study how damage awards have changed based on the changes in the law.

41 thoughts on “Patent Reform 2007: House of Representatives Passes H.1908

  1. Does the new Section 102 allow you to swear behind intervening prior art of others using your earlier own public disclosure within the 1 year period? Or does the grace period only apply to your own disclosures and not those of others? More:

    I have a question on the proposed new Section 102 language that is in
    both bills. I haven’t heard the issue discussed and wanted to see if anybody knows what was intended and/or thoughts on what
    the language means. The language seems ambiguous to me, and I’m not
    sure if interested parties like the university community (and me)
    appreciate the potential consequences.

    In new Section 102(a)(1)(B), upon making his own public disclosure of
    the invention, the inventor gets a 1 year grace period to file his
    application.

    The question is whether that grace period would also apply to any
    intervening prior art/public disclosures of others that occur within the
    1 year period.

    Example: Inventor A publicly discloses his invention on Day 1.
    Inventor A files his application on day 365 at the 1 year mark. But on
    day 364, one day before the filing date, another Inventor B makes a
    public disclosure that is completely unrelated/independent of Inventor
    A.

    Is Inventor A’s application not novel because there was public
    disclosure of another 1 day before Inventor A’s application? Or does
    the confusing exception language in Section 102(b)(1) mean that Inventor
    A can remove/antedate/swear behind Inventor B’s public disclosure on Day
    364 based on Inventor A’s earlier public disclosure on Day 1?

  2. Mr. Lemley:

    Would you mind citing the section in which the “reasonably accessible” standard appears? I cannot find this language in the bill. Thanks

  3. “Is there something I’m missing?”

    Do you see a safe harbor in the “may” wording that Americans can bank on? I don’t. Considering how much notice and comment was had with the 5/25 provision, are you sure the Director would exercise any restraint in not requiring ESDs in all applications if 35 USC 123 as written became law? Is he (with no patent experience, unelected, and appointed in violation of 35 USC 3) really the person America should have given the discretion to do what he thinks is right for the USPTO/patent system? There is no sound reason to such a proposition. He doesn’t seem to realize that the ESD requirements place the attorney in a position where he must make statements that are adverse to his client, which can’t be good for justice. And that problem is not mitigated just because it only affects (from the USPTO’s view point) the “burden[some]” applicants who file cases with “too many claims”.

  4. dp-

    The way I understand your question is that you could sue in the EDTX as your place of business is there. Under 28 USC 1400(c)(5), you would have to meet the requirements that your busines is engaged in substantial (A) r&d, (b) manufacturing, or (C) management, and that such activities are related to the patent in dispute.

  5. It appears to me that 35 USC 123 falls short of requiring an ESD in every application: “The Director may, by regulation, require that applicants submit a search report…”

    This seems more like a grant of power to the Director to implement the changes in 37 CFR with respect to the 5/25 rule.

    Is there something I’m missing?
    Thanks.

  6. Jurisdiction question,

    So If my place of business is in E.D. Tex and have no contact with Del, I still have to sue in Del if that is where the corp. is based? even if the corp meets minimum contacts in texas?

  7. “Is there any caselaw where an applicant sent in an IDS after the issue fee was paid but before the patent issued, the USPTO chose not to consider the IDS and a court found that applicant engaged in inequitable conduct?”

    I’m not aware of any, but it’s only a matter of time until some litigator accuses an applicant in such circumstances.

  8. “What if neither applies, but you need to get the art before the examiner to avoid inequitable conduct issues?”

    Do you need to get it before the examiner or do you need to get into the USPTO? Is there any caselaw where an applicant sent in an IDS after the issue fee was paid but before the patent issued, the USPTO chose not to consider the IDS and a court found that applicant engaged in inequitable conduct?

  9. “Is not, then the proper course to allow the patent to issue and then file for a reissue?”

    … only if you can truthfully assert that you claimed more or less than you were entitled to, if you are filing the reissue, or that the art raises a substantial new question of patentability, if you file a reexam. What if neither applies, but you need to get the art before the examiner to avoid inequitable conduct issues?

  10. Kevin K.

    You are right. I double checked and the office is not required to consider the new IDS if the issue fee is paid. Is not, then the proper course to allow the patent to issue and then file for a reissue?

    Real Anonymous,

    You are also right. The examiner might very well make the next rejection final. Then it is off to an appeal.

  11. One aspect of the bill no one seems to have noticed is that it effectively eliminates quasi-secret prior art, setting a “reasonably accessible to the public” standard for publications and prior uses and sales. The original bill would have supplemented this with a prior user defense for those who had made private uses before the patentee’s filing date, but both the House and the Senate have apparently now replaced that with a study of prior user rights. The effect is that a number of things that are prior art today (uses and sales that aren’t affirmatively concealed but that are unlikely to be known; obscure publications; 102(g)(2) art) won’t be prior art once the first-to-file provisions go into effect.

    On the other hand, those sales and uses that are accessible to the public will now be prior art regardless whether they occur in the U.S. Unclear what the net effect will be.

  12. “If the examiner felt that it rendered the claims unallowable, then prosecution would be reopened and a rejection would be sent. If not, then prosecution would remain closed and the claims would still be allowed.”

    Mark, if the examiner felt it rendered the claims unallowable, are you certain he would not reopen prosecution, reject the claims, and then make the action final, reclosing prosecution? That would then put you in another major pickle I think. (I don’t know the answer to the question but know MPEP 706.07(a) allows him to make an action final based on references cited by the applicant under 1.97(c) *with a fee* – but perhaps not with the statement in 1.97(e), though such statement may not always be possible.)

  13. Mark,

    The problem is Rule 1.97(d) requires the Office to consider the IDS only if filed BEFORE the issue fee is paid. If applicant becomes aware of new, non-cumulative, better prior art AFTER paying the issue fee and before grant, then the only mechanism to get that art considered is to file an RCE (or CON). Under the new rules, if you’re out of RCEs and CONs and your competitor (who’s been watching your application in Public PAIR) sends you a nice new prior art reference to enjoy, then you’re in a bit of a pickle in view of the duty of disclosure and lack of procedural mechanism to have that art considered and/or to adjust the claims.

  14. I stand corrected.

    After I posted the above comment I realized that merely finding a new piece of prior art would not be sufficient to get another RCE. It would be too big a loophole.

    Nonetheless, if an IDS were filed under 37CFR1.97(d) after prosecution was closed, then the examiner would have to consider it. If the examiner felt that it rendered the claims unallowable, then prosecution would be reopened and a rejection would be sent. If not, then prosecution would remain closed and the claims would still be allowed.

    I’m not sure I see the problem.

  15. “Actually, I should correct that last comment: you are allowed the submit the art under the new rules, you just have to withdraw from issue.”

    Nope, according to 1.313(c), you can’t withdraw from issue simply to file an IDS:

    “(c) Once the issue fee has been paid, the application will not be withdrawn from issue upon petition by the applicant for any reason except:

    (1) Unpatentability of one of more claims, which petition must be accompanied by an unequivocal statement that one or more claims are unpatentable, an amendment to such claim or claims, and an explanation as to how the amendment causes such claim or claims to be patentable;

    (2) Consideration of a request for continued examination in compliance with § 1.114; or

    (3) Express abandonment of the application. Such express abandonment may be in favor of a continuing application.”

    Where the conflict comes in full force is when you are made aware of potentially material prior art that is closer than any art of record (or that refutes a secondary argument of patentability) but for which a voluntary amendment of the claims would not be necessarily appropriate (or prudent from a malpractice standpoint).

  16. “I think in that case you could petition for an additional RCE (assuming you’ve already used your quota) based on evidence that you “could not” have been submitted art earlier because you did not know about it until after the notice of allowance was issued.”

    Per FR, an IDS is not considered an “amendment, argument, or evidence” and therefore could not be the basis of a showing.

    Per FR 46739:

    “a petition under § 1.114(g) for a request for continued examination including only an information disclosure statement as the submission required by § 1.114(c) (i.e., not including an amendment, argument, or evidence) would not be granted.”

    What to do, what to do, when you are required by rule 1.56 to submit material prior art until patent issuance, but you are prohibited from doing such (in any meaningful way) after prosecution is closed by the RCE/continuation limits? (Well, you could just abandon the application… seems to be a result highly favored by the USPTO management.)

  17. Actually, I should correct that last comment: you are allowed the submit the art under the new rules, you just have to withdraw from issue.

  18. “I think in that case you could petition for an additional RCE (assuming you’ve already used your quota) based on evidence that you “could not” have been submitted art earlier because you did not know about it until after the notice of allowance was issued.”

    Example 85 in the FR notice specifically says that discovery of new prior art is not a good and sufficient reason for allowing another RCE. Presumably because you could have discovered it earlier. I think they give over 20 examples of potential reasons for another bite at the apple, and none is good enough.

    At least inequitable conduct is becoming more difficult to prove under the new law, and I don’t see how you would prove intent if you’re not allowed to submit the art under the new rules.

  19. I hear you real anonymous, however my client sometimes cuts it close, and the new “good and sufficient showing” seems to be fairly onerous. Its strange that the burden on applicants to submit material art including related office actions is increasing (vis a vis McKesson) with a corresponding increase in the difficulty of compliance. To me that sounds like a little slice of insanity over in Old Town.

  20. Thank you Mark, I actually was looking for the Rule 99 citation regarding third party submissions, but in my haste I cited 35 USC 301. See, even a simple Cave Man can get it wrong, imagine what a clusterfoxtrot a bunch of legislators can create.

    I can’t see how any new Rule could change the fundamental nature of 99 unless patent applications will no longer have 18 months of secrecy. At this point nothing would surprise me.

  21. “And has anyone considered the rammifications on the duty of disclosure for cases where art is discovered after a notice of allowance?”

    I think in that case you could petition for an additional RCE (assuming you’ve already used your quota) based on evidence that you “could not” have been submitted art earlier because you did not know about it until after the notice of allowance was issued.

  22. “And another thing… why is the so-called “Open Examination” being touted as some kind of new feature of the legislation. Have the “crafters” even read the existing laws and rules? 35 U.S.C. 301?”

    35 USC 301 apparently applies to patents, not patent applications. For patent applications, there are protests (1.291) which must identify an application by SN and be filed before the application was published (perhaps hard to do) and third-party submissions (1.99) which must be filed within 2 months of application publication and not include any comment on the references (perhaps unwise).

  23. And another thing… why is the so-called “Open Examination” being touted as some kind of new feature of the legislation. Have the “crafters” even read the existing laws and rules? 35 U.S.C. 301?

  24. KCB, I have been advising my clients/colleagues that the PTO’s authority for this disastrous rulemaking experiment could come under scrutinty, however, the clients can’t just sit back. Also, I don’t know if reality has really hit home to many yet, but the new rules severely limit the ability to take a couple of different style bites from the apple over time with regard to an evolving technology. Clients/applicants must now sit down with every inventor and and product development group to come up with a “perfect” long term plan for the IP strategy going forward for the forseeable future since the rules seem to encourage filing an omnibus application with an SSR. And has anyone considered the rammifications on the duty of disclosure for cases where art is discovered after a notice of allowance? What are applicants supposed to do with this art now since the PTO has pretty clearly stated that an RCE cannot be filed simply to have new art considered?

  25. The requirement to file ESDs is forcing the applicant to act as the patent office and presumably, at some level, against interest… ESDs will become an estoppel nightmare, and the question will be, well, you provided art from this class and subclass, but why not the other class and subclass?

  26. The Courts has been doing substantial work to rebalance the patent system. Why is this legislation still moving forward? Why harmonizes with the Japanese and Europeans? The current system give US a distinct advantage as the prefered R&D base. Why change things when it’s not broken?!

    This smells like payback to a large donor, eg. the one located in the rainy northwest.

  27. It seems to me that the timing of the USPTO’s rules package and the vote in the House of Representatives was not coincidental. At this point, it is not clear to me who actually benefits from all this turmoil… it will take the USPTO years to train examiners on all the changes. The only benefit which comes to mind may be in reducing the overall size of the USPTO.

  28. ” … Will first-to-file in the US actually happen, given that it appears to be dependent upon Europe and Japan adopting a grace period? Since I don’t see any moves in Europe to do this, could the provision (on p17 of the bill) be there as a blocking measure?”

    It’s an interesting bargaining move, which will work. Both Europe and Japan will jump at the offer of US moving to first-to-file, and a grace period is a small price to pay.

  29. KCB — It is clear to me that Congress is granting such authority to the Director. The Director already empowered to refuse to grant a patent for numerous non-substantive reasos, so I don’t see this as any different. For example, if the Director can refuse to grant a patent for failing to pay a fee, surely, he can refuse to grant a patent for failing to submit an ESD. There may be some Due Process issue regarding vagueness, depending on how the regulations are written.

    Look, the real issue here, as articulated by a colleague of mine, is whether clients are best served by filing ESDs that that are actually thorough, comprehensive, and looks at all substantive issues critically, or we should file ESDs that appear to be thorough and comprehensive, and appears to look at all substantive issues critically. The Examiners, for instance, are masters at making Office Actions *look* good, but when you actually dig into the art and the claims, you see that it is all smoke. Assuming some ESD type requirement makes it into law, my question for the group is, which approach do you feel better serves the client’s interests, taking into consideration all factors — litigation ramifications, costs, arrival at better claims, etc.?

  30. If they really want to harmonize the U.S. patent system with how they do it in the rest of the world they should model the U.S. Patent Office after the patent offices in China and India because that is where the majority of the world’s population lives.

    Even better, they should send U.S. patent applications to China and/or India to be examined.

    It’s called “outsourcing.” Everyone’s doing it these days.

    Then they can downsize the U.S. Patent Office by laying off all the Examiners and practically everyone else.

  31. If they really want to harmonize the U.S. patent system with how they do it in the rest of the world they should model the U.S. Patent Office after the patent offices in China and India because that is where the majority of the world’s population lives.

    Even better, they should send U.S. patent applications to China and/or India to be examined.

    It’s called “outsourcing.” Everyone’s doing it these days.

    Then they can downsize the U.S. Patent Office by laying off all the Examiners and practically everyone else.

  32. mrbellie,

    “Does the restriction against tax methods seem silly to anyone
    else or is it just me? Is this constitutional?”

    Appears to be the effect of a particular lobbying group.

    “Tell me what it means to “certiy interlocutory appeals of claim construction”"

    This means that as soon as the DC has a claim construction, a party may appeal that construction if the DC certifies it.

    This is the CAFC’s self-made problem. They treat claim construction as a matter of law and subject to de novo review AND proceed to overrule construction in a significant number of cases, and then act appalled at the idea that maybe parties believe claim construction should be settled before proceeding through infringement and invalidity arguments.

  33. What I find most interesting is Senator Leahy’s judiciary committee in the Senate holding hearings tomorrow on whether regulatory agencies are usurping the authority of Congress and state legislatures. It is readily aparrent that the new continuation rules are a quintessential example of this. I suspect that the good senator is going to espouse some oratory excrement, the redolence of which will permeate the national character, in furtherance of advancing the justification of the current acts of the USPTO. It can only be said that these so-called politicians like Senator Leahy, have difficulty with the democratic process. That is why the Continuation rules were promulgated before passage of the statute. That way the good senators advances the agenda of the special interests outside of the microscope of the Congressional legislative process. Let me be clear on this. Failure to pass the current patent reform act will be catastrophic for the PTO. It would be unreasonable, in my opionion, for in-house counsel to 1)fail to see that the Director does not have authority to promulgate these rules; and 2) not to challenge these rules were it determined to comply with the same would substantially hurt the company. In-house counsel face criminal responsibility under the Sarbanes-Oxley Act if actions are taken that substantially degrade the value of the company.
    For in-house counsel, the current mess places them at risk the most. I can just see Mr. Lerach sharpening his pencils to bring a new wave of Shareholder derivative suits based upon the actions of in-house counsel on this situation. Good luck my in-house colleagues.

  34. “…be exposed to this threat just because congress thinks they make too much money.”

    The problem here is joining Congress and thinks in the same sentence when it comes to this legislation!

  35. I believe there are some serious problems with the authority of the Director to do anything but allow patent applications when filed or reject the same upon art. It is clear that Title 35 seciton 102 mandates that the Director allow a patent application that satisfies the criteria set forth therein, unless he can support the rejection of the same. All the ESD and other machinations set forth in these rules violate Congressional authority. I STRONGLY recommend that Congress pass the new law or the Director hold these rules in abeyance until then. As it stands now, I must counsel clients that to avoid the expensive cost of satisfying 1.78, you could just as easily spend the money to sue the USPTO for a clear violation of Federal Law. Are there any other patent attorneys who feel compelled to inform the client that that the regulations rest upon Contitutionally infirm grounds? Is it not malpractice to inform the clients that there are alternatives to satisfying these rules by way of seeking injunctive relief?

  36. I think the definition of a micro entity needs revision.
    To be a micro entity, you must not be named on five or more previous applications and you can’t make more than two
    and one half times the median income.

    The restriction on applications seems to work against a person
    that applies for patents as part of their job but who also decides
    to apply for a patent as an individual. I don’t know if that is
    the intention but that’s the way I think it reads.

    The restriction on income bothers me. Many people belive that requiring a search report opens up new threats in terms of future litigation. Why should someone
    that makes more than a certain percentage of
    the median income be exposed
    to this threat just because congress thinks they make too much
    money.

  37. How is the post-grant review different from the reexamination
    procedures already in place?

    Does the restriction against tax methods seem silly to anyone
    else or is it just me? Is this constitutional?

    Tell me what it means to “certiy interlocutory appeals of claim construction”

    PTO regulatory power – if provisions of this bill are eventually
    passed, it seems like it could be big
    a can of worms unless litigation on the continuation rules
    is not settled before hand.

  38. I think there’s still a grace period for inventor’s publications but it’s hard to figure out. Maybe they got confused and forgot to trash it.

  39. Looks like a drafting oversite that obviousness has no grace period – even for the inventor’s publications. Hope this doesn’t reflect the rest of the bill’s drafting…

  40. Will first-to-file in the US actually happen, given that it appears to be dependent upon Europe and Japan adopting a grace period? Since I don’t see any moves in Europe to do this, could the provision (on p17 of the bill) be there as a blocking measure?

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