Judiciary HomepageThe Administration is pleased to offer its support for H.R. 1732 and H.R. 1733.
ù H.R. 1732, based on an Administration proposal, would make patent reexamination procedures cost-effective and meaningful way to reassess patent validity.
- The bill would expand reexamination to permit greater third party participation throughout reexamination procedures, and would provide a third party with a right of appeal.
- The bill would also permit any party to initiate reexamination to review compliance with section 112, except best mode.
- The bill includes safeguards to ensure that reexamination will not become a vehicle to harass patent owners.
- Patent reexamination reform is widely supported, particularly in the software industry.
- H.R. 1733 would provide for publication of patent applications 18 months after they have been filed. The pre-grant publication portions of H.R. 1733 are based on an Administration proposal.
- Publication would occur 18 months after the earliest effective date claimed by the applicant for the application.
- A patentee would be able to recover provisional lights for any infringing use of the patented invention that occurs between publication and patent grant. This will provide patent owners who use the new provisional patent application procedure 19 and one half years of enforceable rights in the patented invention.
- Publication would provide the public with early English language disclosures of foreign originated technology.
- Publication will also provide, at a date certain, important technical and business information about inventions that may be patented. This will help inventors and American businesses plan their business and more efficiently direct their research and development efforts.
- H.R. 1733 would amend existing law that governs pre-issuance patent term extensions.
- The changes add to existing extension authority by allowing extensions for pre-issuance delays caused by unusual administrative delays and to permit extensions up to a maximum of ten instead of five years.
- The Administration believes existing law adequately addresses reasons for pre-issue delays, but does not oppose the limited extension added by the legislation.
ù H.R. 1733 would enable an independent inventor to defer publication until three months after an initial patentability determination by the Office where the applicant requests this option under limited conditions.
- Situations are extremely rare where an independent inventor who is actively seeking an early Office action will not obtain one before the 18 month of pendency.
- Because of this. the Administration does not oppose inclusion of this provision in the legislation.
Thank you Mr. Chairman. I am pleased to testify today in support of two bills, H.R. 1732 and H.R. 1733, that will substantially improve our patent system. I am particularly grateful for the leadership expressed by the Chairman and the Ranking Minority Member, Ms. Schroeder, in introducing these bills and for permitting the Administration to assist in their development.
The first bill, the Reexamination Reform Act of 1995, would change our reexamination system to make it a more effective, and thus more attractive, option for reviewing patent validity questions. It would do this by increasing third party participation throughout the reexamination proceeding and by allowing review of patent validity questions other than those based on prior art. These changes directly address the perceived shortcomings of our current system. We thank the Chairman and the Ranking Minority member for introducing this legislation on behalf of the Administration.
The bill would provide limited, yet meaningful, participation by a third-party requester throughout the reexamination proceeding. It would do this by allowing a third party to provide written comments during each round of prosecution in the reexamination proceeding. A third-party requester, for example, would be permitted to provide written comments on statements made by the patent owner in response to an Office action. The bill would also expand the grounds upon which reexamination of a patent could be initiated to include non-compliance with all aspects of 112 of title 35, United States Code, except the best mode requirement. Finally, the bill would provide a third-party requester with a right of appeal from a final decision of the PTO in favor of the patent owner. Importantly, the bill includes safeguards to prevent third parties from using reexamination to harass patent owners. These safeguards include limitations on whether and when a request for reexamination may be filed and creation of a statutory estoppel against further litigation of patent validity questions addressed in reexamination proceedings, when a third party seeks and obtains judicial review of an Office determination.
H.R. 1732 would make several fairly significant improvements to our patent reexamination procedure which are fully consistent with the original Congressional intent expressed in the creation of this procedure. When Congress created the reexamination procedure in 1980, it cast it as an expedited, low-cost alternative to patent litigation that could be used to obtain administrative review of certain patent validity questions. To meet this goal, reexamination was structured as an ex parte proceeding that excluded participation by third parties during a reexamination proceeding. Reexamination was also limited to the review of only certain issues affecting patent validity; namely, compliance with 35 U.S.C. 102 and 103 in view of patents or printed publications. Substantial new questions of patentability in view of other statutory requirements of patentability could not serve as a basis for initiating or conducting reexamination.
Thus, in our current system, a third party may cite prior art consisting of Patents or printed publications, and request reexamination on that basis. If the Office finds that a substantial new question of patentability exists in view of the cited prior art, the Commissioner will issue an order granting the reexamination. The patent owner is then given the option of responding to the reexamination order. If the patent owner so responds, the third party may file a subsequent reply. This ends the substantive participation in the reexamination by the third-party requester.
These restrictions have helped make parent reexamination an orderly, expedited procedure. However, by the same token, these restrictions are why our reexamination system has not lived up to its potential. As I mentioned earlier, many have expressed concerns over the effectiveness and usability of our current reexamination system. For example, many people who testified at our software patent hearings last year expressed concerns over the lack of cost-effective means for challenging patent validity. For example, William Neukom, General Counsel of the Microsoft Corporation testified that:
"The threat of litigation involving a patent of questionable validity can be particularly damaging to a smaller company, which may not have the financial or the human resources to effectively challenge the patent's validity in the federal court process. Although the existing re-examination process affords a potential defendant an alternative venue in which to contest a patent's validity, the utility of the current re-examination process is limited by its ex parte nature and the limited scope of prior art that can be considered."
Others were more direct in their criticism of the current reexamination system and their calls for reform. Diane Callen, representing the Lotus Development Corporation and the Business Software Alliance stated:
"The current reexamination process ... is generally not viewed as a viable option by opponents to a patent due to the largely ex parte nature of the process. The BSA urges that reexamination be modified to provide more of an inter-partes proceeding, allowing opponents to a patent to feel more comfortable in relying on the procedure to efficiently resolve their concerns in what may be the Most efficient forum. "
One particularly striking comment is the often-heard advice given to a third party who knows of pertinent prior art that could invalidate a patent. The advice is that the third party not use patent reexamination. Instead, third parties are advised to reserve the prior art for later use in either a negotiation with the patent owner, or an infringement action in Federal court. Individuals advocating this stance point to the absence of effective third-party Participation in the reexamination proceeding coupled with a perception of "enhanced" validity that a reexamined patent enjoys, especially before a jury. Comments like these suggest to me that as far as third parties are concerned, there is a significant lack of public confidence in the current reexamination system as an effective means for challenging the validity of patents.
H.R. 1732 directly addresses the basis of this lack of public confidence in patent reexamination. If enacted, H.R. 1732 would provide third parties the opportunity to participate throughout the reexamination proceedings, but would do so without converting reexamination into a full-scale inter-partes proceeding. The bill would accomplish this by permitting a third party who has initiated a reexamination to provide written comments on any patent owner response to an official action of the Office. It does not permit the third party to raise new issues, nor does it give the third party the option of delaying the proceedings by filing multiple responses or by requesting extensions of time. Third parties will also gain a right of appeal from any final determination of the Office in the reexamination proceeding. This right of appeal however, comes at the cost of preclusion against subsequent litigation of matters addressed, or that could have been addressed, during reexamination in subsequent judicial or administrative proceedings, if both the third party and the patent owner participate in an appeal to the Federal Circuit following the reexamination proceeding.
The bill would also expand the grounds upon which one may challenge patentability to include compliance with all aspects of 35 U.S.C. 112, except best mode This is an important and desirable change, as validity questions related to claim scope and enablement often lie at the heart of a patent dispute. By making it possible to review these questions before the Office, patent owners and third parties alike will benefit through access to the special technical and legal expertise of the Office on the full range of issues with which the Office is familiar.
Finally, although a key reason for H.R. 1732 is to "open up" reexamination, the bill has been carefully crafted to ensure that patent reexamination does not become a vehicle for harassing patent owners. The bill contains two important safeguards in this regard. First, as noted above, the bill explicitly stops a third party from further litigating issues that were or could have been addressed during the reexamination if they participate in an appeal to the Federal Circuit arising out of the reexamination proceeding. This measure will prevent parties from using reexamination simply as a prelude to litigation on the same patent validity issue. Second, the bill precludes a third party from initiating multiple concurrent reexaminations, or from initiating a second reexamination on the same issues resolved in an earlier reexamination proceeding initiated by that party or its privies.
The changes proposed by the bill will make reexamination a more effective inter-partes procedure, giving patent owners and third parties alike a speedy, inexpensive and reliable way to resolve important questions related to patent validity. I believe the bill effectively addresses the calls for reform of the reexamination system that have emanated not only from the software industry, but from the patent bar and other industry groups.
The second bill that I have been asked to comment on today is the Patent Application Publication Act of 1995, H.R. 1733. This bill would provide for automatic publication of patent applications 18 months after their earliest effective filing date. This bill is based on an Administration proposal that was forwarded to Congress earlier this year, yet contains a number of significant changes. We support the legislation as a whole, because we believe it will serve the interests of the public in the patent system, and, when combined with the new patent term which takes effect today, will clearly serve the interests of patent owners.
Currently, all applications for patent in the United States are kept in confidence by the Office until a patent is granted. Only upon grant are the contents of the application published. This Practice differs from nearly every other country in the world. In most countries, patent applications are published 18 months after the earliest effective filing date claimed by the patent applicant.
H.R. 1733 would change our system to conform to this well-defined global model by providing for publication of an application at a fixed time after the filing of the application. I would like to focus my remarks on three aspects of the legislation that I believe are particularly important.
First, the legislation would require the Office to publish patent applications filed under 111 (a) or under 363 eighteen months after the earliest effective filing date claimed for the application. That date would be the original application filing date if no claim for foreign or domestic priority is made. If an applicant claims the benefit of the filing date of one or more earlier filed U.S. or foreign applications, or claims the benefit of either foreign or domestic priority to the filling date of an earlier filed priority document, publication will occur 18 months after the earliest of any such date claimed. Importantly, only applications filed under 111(a) or 363 will be subject to the publication requirement; provisional patent applications and design patent applications will not be published.
The legislation would also create "provisional rights" for patent owners. These rights would permit the patent owner to recover a reasonable royalty from any party that uses the subsequently patented invention during the period between the date of publication and the date of the patent grant. To obtain a reasonable royalty, the legislation requires that the invention claimed in the patent be identical to the claimed invention as published, and that the infringing party have actual notice or knowledge of the published patent application. Because this right is limited to a reasonable royalty, the patent owner cannot obtain an injunction or recover attorneys fees with regard to pre-grant infringement. Provisional rights will serve to deter infringing use of the published invention prior to the date of the patent grant, and to compensate the patent owner if such use occurs.
Finally, the legislation will also give published patent applications "prior art" status similar to patents. Thus, a published application will be applicable against other pending applications as a prior art document as of its earliest effective domestic filing date. Pre-grant publication will help bring the most relevant prior art to the attention of the Office during the pendency of any related application.
Pre-grant publication will provide a number of significant public benefits. Most significant is the availability of an English-language disclosure of foreign originated patent applications no later than 18 months after the foreign application was filed abroad. In most cases, we will publish an English language version of the foreign originated application only six months after a foreign inventor decides to seek protection in the United States. This will occur in those cases where a U.S. application is based upon an earlier filed foreign application and the applicant uses the full one year priority period available under the Paris Convention. Pre-grant publication will thus place our domestic inventors on an equal footing with inventors in to)reign countries, who now have access in their own language to technology disclosed in U.S.originated applications 18 months after having been filed in this country.
Pre-grant publication will also ensure that information about all pending applications will be available to U.S. researchers, scientists, inventors and businesses after a reasonable period. Delays in I he processing of applications, whether intentional or unintentional, will no longer prevent American innovators from being able to predict where they should be directing their research efforts. And, when combined with the patent term of 20 years from filing date, pre-grant publication will finaLly help to put an end to the problems for American industry caused by submarine patents .
Finally, the availability of provisional rights in conjunction with the changes implemented through the Uruguay Round Agreements Act will provide patent owners with a significant benefit; namely, a procedure that will enable them to enjoy 19 and one half years of some form of a recoverable right under a patent. A patent applicant who files a provisional patent application, and then files within one year a non provisional application, if H.R. 1733 is enacted, would be able to recover at least a reasonable royalty for any infringing use of the subsequently patented invention that occurs 18 months after the provisional application was filed. Thus, six months after the applicant begins the examination process by filing a non-provisional application claiming the benefit of the provisional filing, a royalty claim will be available. With the 20 year patent term, this translates into 19 and one half years of protection for patent owners who elect to use this procedure.
H.R. 1733, as introduced, differs from the Administration s version of the bill. I would like to comment briefly on some of these differences.
One significant change is the addition of a new section on patent term extensions for pre-issuance delays. This section would extend the patent term extension authority now embodied in 35 U.S.C. 154(b) for pre-issuance delay to enable a patent owner to receive an extension where issuance of a patent was delayed due to unusual administrative delays by the Office. lt would also enable a patent owner to obtain an extension of up to ten years in duration for pre-issuance delays.
When the Administration developed legislation to implement the Uruguay Round Agreements, we carefully reviewed existing examination practices. We then considered the most likely effect of a 20-year from filing patent term; namely, promotion of a rapid conclusion of prosecution. Based on this careful evaluation, we proposed, and Congress enacted, legislation that provided a limited form of patent term extension authority for pre-issuance delays. Section 154(b), in force as of today, rhus provides that patent owners will be able to extend the term of patents, up to a maximum of five years, where the issuance was delayed due to an interference proceeding, a secrecy order or a successful appeal by the patent owner.
Present 154(b) does not include the authority for patent term extensions on ~he basis of "unusual administrative delays." The reason we did not propose inclusion of a provision to provide patent term extensions on this basis was that, in our opinion, there would not be a significant number of applications in which administrative processing delays, attributable solely to the actions of the Office, would exceed three years. Present 154(b) also limits pre-issuance patent term extensions to a maximum of five years. Again, this was based on our belief that there would not be a significant number of applications that are subjected to secrecy orders, or appeal or interference proceedings that would exceed five years.
It remains our belief that the instances will be extremely rare in which delays due to administrative processing of applications attributable solely to the Office will exceed three years and that the current statutory authority that limits patent term extensions to five years will provide an adequate remedy in all but the most rare of situations. However, we are aware of concerns that have been expressed by members of Congress and other individuals related to the 20-year patent term. The new provisions related to patent term extensions would fully address the basis of those concerns. Because the instances in which these new provisions would apply will be rare, and because the new provisions fully address the concerns that have been identified, we have no objection to the limited changes that H.R. 1733 would make to 154(b) .
HR. 1733 also introduces a new provision related to pre-grant publication that would enable an independent inventor, under certain circumstances, to delay the publication of an application until three months after issuance of an Office action addressing the merits of the application. We recognize that this provision has been added to address a legitimate concern that has been expressed by an important segment of our patent user community; namely, that an independent inventor who is not planning to pursue protection abroad obtain some indication from the Office as to patentability prior to the publication of his or her application. Based on our current examination statistics, it is an extremely rare occurrence where an independent inventor has not received some indication from the Office on the merits of his or her application prior to the lath month of pendency. Furthermore, procedures are available today that enable an applicant to obtain expedited processing of an application. Such procedures can be invoked in instances where an applicant desires an early indication of patentability on an application. Accordingly, we do not perceive this provision to be necessary. We also recognize that the provision as crafted will not place a significant burden on the Office. As such. we have no objection to inclusion of this provision if the Congress concludes it is needed to address a legitimate concern.
Finally, I would like to explore the possibility of working with the subcommittee to address two concerns we have related to certain differences between the Administration's proposal and H.R. 1733, as introduced.
First, the bill does not include provisions that were included in the Administration's version of the bill to ensure full recovery of provisional rights. I am referring here to provisions that would exempt provisional rights from the ordinary application of the six-year statute of limitations measured from the date of infringing activity. The Administration's version of this bill would have provided that a patent owner could recover provisional rights regardless of the period between publication and grant, and would be able to do so up to six years from the date of the patent grant. H.R. 1733 does not contain these assurances, which we believe should be part of any publication-based system.
Second, implementation of pre-grant publication will require us to carefully evaluate the procedures we implement to govern the time at which an applicant must make a claim for priority. Priority claims dictate when an application will be published in a pre-grant publication system. In contrast, under our current system, priority claims may be added at any time before the grant of a patent. It has been brought to our attention ~hat in setting forth procedures to permit an applicant to present a "late" claim to priority, we have not addressed certain fee-related questions associated with the procedure of making a late claim for priority.
I thank the Chairman for his leadership in introducing these bills, and would be pleased to address any questions the Committee has on either bill.