Judiciary HomepageChairman Moorhead, Ranking Member Schroeder, members of the Subcommittee:
Thank you for your invitation to testify on the bills being considered by the Subcommittee at today's hearing.
I am the Chair of the Section of Intellectual Property law of the American Bar Association. The views I will be expressing represent those of the Section of Intellectual Property Law. They have not been approved by The House of Delegates or Board of Governors of The American Bar Association, and, accordingly, should not be construed as representing the position of the Association.
The Section of Intellectual Property has more than 13,000 enrolled members. We follow activities in the Congress relating to intellectual property laws, and deliberate on and debate issues concerning which our members have experience and knowledge. Through these processes, we from time to time offer recommendations to members and Committees of the Congress . We hope our observations and recommendations are useful to the Committee, and welcome suggestion on how we might be more helpful.
My testimony will be in support of H.R. 1732, the "Patent Reexamination Reform Act of 1995", and H.R. 1733, the "Patent Application Publication Act of 1995". As I will explain in my testimony, the Intellectual Property Law section has adopted a number of formal policy positions over a period of a number of years which support the principles, and in many instances, the particular provisions, of these two bills. In the case of a few provisions in the bills, we have adopted no position, and our general support for the bills does not extend to these provisions which I will identify.
We have not adopted any positions regarding H.R. 632, and therefore my testimony will not address that bill.
H.R. 1732: PATENT Reexamination
Issues regarding patent reexamination and reissue, and
the role that third party participation should play in such
proceedings, have frequently had the attention of the patent
community, the PTO, and the Congress during the past 20
years.
In 1977, the PTO instituted rules, known as the "Cann amendments", permitting "no defects" reissue patent applications to be filed by patent owners. Under these rules, third parties could intervene as protestors in the proceedings to consider the reissue application.
Many practitioners felt that, under the Dann amendments, third party intervenors abused the reissue process. IN this regard, our section, then known as the Section of Patent, Trademark and Copyright Law, adopted a resolution favoring the abolition of the Dann amendments. The Dann amendments were abolished, and the present statutory reexamination provisions (35 U.S.C. 301-307) went into effect July 1, 1981.
Objectives of Present Reexamination Statutes
In approving these reexamination provisions, the House
Committee on the Judiciary articulated the following purpose
of the legislation:
"This new procedure will permit any party to petition the patent office to review the efficacy of a patent, subsequent to its issuance, on the basis of new information about pre-existing technology which may have escaped review at the time of the initial examination of the patent application. Reexamination will permit efficient resolution of questions about the validity of issued patents without recourse to expensive and lengthy infringement litigation. This, in turn, will promote industrial innovation by assuring the kind of certainty about patent validity which is a necessary ingredient of sound investment decisions." House Report No. 96-1037 (I), to accompany H.R. 6933, (hereafter referred to as the "House Report) at pages 3-4).
Your Committee report elaborated further on the objective of reexamination as a means to reduce litigation and the resultant delay and expense:
"The cost incurred in defensive patent litigation sometimes reaches $250,000 for each party, an impossible burden for many smaller firms. the result is a chilling effect on those businesses and independent inventors who have repeatedly demonstrated their ability to successfully innovate and develop new products. A new patent reexamination procedure is needed to permit the owner of a patent to have the validity of his patent tested in the Patent Office where the most expert opinions exist and a much reduced cost. Patent office reexamination will greatly reduce, if not end, the threat of legal costs being used to "blackmail" such holders into allowing patent infringements of being forced to license their patents for nominal fees." (House Report, page 4).
The costs today are considerably higher than the $250,000 mentioned in the Report.
Shortcomings of Present law
Experience since the enactment of sections 301-307
seems to indicate that the Committee's laudable objective
that reexamination serve as a speedier, less costly
substitute for litigation has not been achieved, at least
not the to the extent hoped for.
The Committee Report indicated (pages 25) that, at the time the 1981 legislation was enacted, approximately 200 reexamination cases per year were expected by the PTO.
In fact, in the 13 years following July 1, 1981 effective date of section 301-307, a total of only 3482 requests for reexamination were received by the PTO. Fifty- five percent of these requests were made by third party requestors.
We believe that the use of reexamination by third party requestors has been limited by the inability of third party requestors to participate significantly in the reexamination prosecution.
Under the current procedure, a third party requester files, as part of its request for reexamination, reasons which it believes support reexamination. Section 303 provides that the Commissioner then has three months which to determine if "a substantial new question of patentability affecting any claim of the patent is raised by the request".
If such a determination is made, the Commissioner must order reexamination and allow the patent owner at least two months to file a statement in response. If, and only if, the patent owner files such a statement, the third party requester has one, and only one, opportunity to be heard.
As noted in the explanatory material accompanying the bill when it was sent to the Congress by the Commerce Department, many patents owners forego their right to comment on the order of reexamination thereby denying third party protestors even that one opportunity to reply.
Increased Participation by Third Party Requesters
As early as 1985, our Section identified this very
limited role for third party requesters as a deficiency in
the present reexamination statutes and procedures. At that
time, we called for legislation to provide a greater degree
of participation by third-party requesters in reexamination
proceedings. We specifically recommended that this greater
participation include a privilege of responding one time to
each response by the patent owner to an official action.
In 1993, we adopted a policy favoring consolidation of the order for reexamination and first office action. In the same resolution, we favored allowing a third party requester to submit written comments, within strict time deadlines, on the patent owner's response to the first office action. We recommended limiting the scope of such comments to issues covered by the office action and the patent owner's response.
H.R. 1732 goes a long way toward achieving these objectives. Consolidation is permissive under the bill rather than mandatory, but supporting material accompanying the bill indicates that PTO expects "that consolidation will occur in the vast majority of cases."
The bill would allow third party requesters to comment upon any patent owner response filed to any PTO office action on the merits. This would be limited to one time only written comments "within a reasonable period not less than one month from the date of service of the patent owner's response." Third party comments would be limited to issues covered by the Office action or the patent owner's response.
The Section of Intellectual Property Law feels that these changes are important and beneficial. Under current law, once reexamination ins ordered, the proceedings become essentially ex parte between the examiner and the patent owner. As I noted earlier, the only opportunity for third party participation other than filing an original request occurs if the patent owner elects to respond to the order of reexamination. There is no opportunity to comment on any other office actions during the course of reexamination.
This inability to be heard throughout the reexamination process, coupled with a belief that courts and juries are more likely to uphold the validity of a reexamined patent, often leads potential third requestors to argue patentability in front of a judge or jury, rather than in a reexamination proceeding.
Our section has for many years favored modifying reexamination statutes and procedures to address these disincentives to utilization of reexamination as an alternative to litigation. We believe H.R. 1732 addresses these concerns in a positive way, and holds out real hope that the expectations expressed in the Committee Report in 1980 might be realized.
The bill amends section 304 to eliminate the patent owner's privilege of filing a statement on response to the reexamination order. Since no such statement is allowed, the bill removes the strategic advantage that the patent owner now has to submit a statement when it is to his or her advantage to do so, but forego a statement when the patent owner feels it is more advantageous to deny a privilege of response by the third party.
Compliance with Section 112
We also support the provisions of the bill which expand
the scope of reexamination to include the requirements of 35
U.S.C. 112, excerpt for the best mode requirement. In
1993, our section adopted a resolution supporting such an
expansion, a position which was reaffirmed last year, and
again by the Council of the Section just last month.
Preventing Two Bites at the Same Apple
Section 3 (f) of H.R. 1732 adds a new section 308 to
title 35. Proposed section 308 (b) is designed to prevent a
losing party in infringement litigation from "relitigating"
its assertion of the invalidity of patent claim by filing a
third party request for reexamination with the PTO.
The Intellectual Property Law Section supports this provision, which is consistent with a policy position which we adopted in 1993.
Third Party Participation in Examiner Interviews
Our section also supports a requirement that, under
controlled conditions, third party requesters be permitted
to participate in any examiner interview initiated by the
patent owner or by the examiner in reexamination
proceedings.
The "Statement of Purpose and Need" accompanying the Speaker letter which transmitted the proposed bill to the Congress addressed the question of such third party participation in examiner interviews. Page 6 of this Statement states that, while no statutory provisions exist or are proposed in H.R. 1732 in this regard, the Office has the authority to provide for such participation by rule making.
The Statement of Purpose and Need concludes the discussion of this topic with the following observations: "Such interviews could be conducted under controlled conditions before the examiner and could include the participation of an additional, more senior, Office representative. Third-party requesters should not be permitted to initiate examiner interviews."
We support these conditions of third party participation, which are virtually identical to conditions called for in our 1993 policy statement. We note, however, that not only is there no statutory provision for such participation proposed in the Administration bill, but that the statement accompanying its submission states merely that such procedures could be initiated by rule making. It does not express an intention to do so.
Accordingly, we recommend that such third party requester participation be specifically authorized by an amendment to the bill. We further recommend that the bill not permit third party requesters to initiate interviews, and that a senior PTO official should join the examiner in conducting the interview.
Appellate Rights
As a further incentive to utilization of reexamination,
H.R. 1732 would provide third party requesters with appeal
rights parallel to those provided to patent owners, both to
the board and to the Federal Circuit. Review by way of a
civil action under 35 U.S.C. 145 is not provided for.
If these appeal right are exercised, the third party is then stopped from later asserting, in any other forum, the invalidity of any claim determined to be patentable on appeal on any ground which the third party raised or could have raised in reexamination. This is to add finality to reexamination when the third party appeals or participates in an appeal.
The Intellectual Property Law Section of the ARA recognizes the importance of issues of appeal rights in the overall proposal to reform laws and procedures governing patent reexamination. Although we do not presently have a position on these issues, they are under active consideration. We expect to adopt policies regarding appeal rights in reexamination proceedings at our Summer Conference in two weeks. We will promptly inform you of our recommendations once they are finalized.
H.R. 1733, The "Patent Application Publication Act of 1995"
Let me now direct a few remarks to H.R. 1733, the
"Patent Application Publication Act of 1995".
The Intellectual Property Law Section supports early publication of patent applications. Knowing, Mr. Chairman, of your interest in the matter and that you planned to introduce legislation calling for early publication, our Section Council met to adopt a position on early publication just last month.
At that time, we adopted a policy favoring enactment of legislation to provide for early publication of patent applications "with proposed rights".
In this regard, we are pleased to note that H.R. 1733 does provide for provisional rights. We view provisional rights as an indispensable component in any legislation proposal calling for early publication. We could not support mandatory early publication without provisional rights to protect inventors from those who, utilizing information made available by publication, begin to exploit the invention between the time of publication and issue of the patent.
The policy statement we adopted last moth is a reaffirmation of support for early publication which we expressed in 1991. That support for automatic early publication was also tied to provisional rights. In addition, at that time we conditioner our support upon there first having been a change in United States law to provide a patent term measured from filing date of the application or from priority date. That change was course made by the Uruguay Round Agreements Act, and as we all know, became effective for applications filed beginning today.
H.R. 1733 calls for automatic publication 18 months from the earliest filing date. We believe this is an appropriate period of time. Our 1991 policy supported publication no sooner that 18 months and no later than 24 months from the earliest filing date or priority date.
We do believe that, in addition to provisional rights, early publication must also be accompanied by steps to provide accelerated prosecution of applications so that a first office action is provided will in advance of publication. This will enable inventors to make an informed decision whether to pursue the application or abandon it and rely upon trade secret protection.
H.R. 1733 addresses these concerns in provisions which you added, Mr. Chairman, to the draft bill proposed by the Administration. Those provisions prohibit publication of an application from an independent inventor until three months after first office action, if such an applicant requests such a delay. Applications asserting priority under sections 119 or 365 (c), those asserting the benefit of an earlier application under sections 120, 121, or 365, and international applications under section 363 are not eligible for such delayed publication. Additionally, the applicant must certify that the invention has not been and will not be the subject of an application in a foreign country.
These provisions do move in the right direction by addressing the dilemma facing inventors whose applications are about to be published before their is any indication whether those applications might be approved.
Rather than merely delaying publication indefinitely, we believe a superior way to address the problem is to mandate first office action in advance of the scheduled publication date. In an 18 month publication regime, we recommend that this first office action be required within 14 months from the filing date. We also believe that any such relief should be available not only to independent inventors, but to all applicants.
Patent Term Extension
Mr. Chairman, we note that you have also included in
H.R. 1733 provisions (section 8) to expand the patent term
extension provisions enacted in the Uruguay Round Agreements
Act (URAA) last December.
With patent term now to measured from filing date rather than from issue date, it is especially essential that inventors not lose valuable term of protection through delays in processing applications which are beyond the control of the applicant.
The URAA recognizes this principle in its provisions for extension of patent term when delays occur due to interference proceedings, government secrecy orders, or successful appeals of adverse determinations of patentability.
Section 8 of H.R. 1733 would modify the extension provisions in the Uruguay Round Agreements Act in a number of ways.
Perhaps most significant is the addition of new grounds for patent term extension in addition to the three contained in the URAA. Under the bill, extensions could also be granted for any "unusual administrative delay by the Office in issuing the patent".
H.R. 1733 would also provide a ten year "cap" on the maximum term of extension which could be granted for any qualifying delay. This ten year cap would apply to both the currently eligible categories, for which a 5 year cap is now applicable, and the new "unusual administrative delay" category.
Unlike the URAA provisions, section 8 of H.R. 1733 would not apply the extension provisions when a patent issues within a 3 years of the date of filing or commencement of the national stage under the Patent Cooperation Treaty, and would not take into account the benefit of any earlier filed patent application.
Finally, section 8 contains a "reasonable efforts" requirement on the part of applicants, which would deny extension for any period during which the applicant did not make reasonable efforts t conclude processing of the examination.
On a number of occasions, the Section of Intellectual Property Law and its predecessor have adopted policy statements favoring legislation to extend patent term when the ability to exploit an invention has been delayed by government authorities and through no fault of the patent owner.
In 1980, we adopted a position which "favors in principle granting to a patent owner an extended patent term when the ability to exploit commercially a patented invention has been delayed, during the term and through no fault of the patent owner, by governmental authorities, statutes or regulations."
We reaffirmed this position in 1984. In 1993, we broadened our support for patent term extension to include circumstances other than delays caused by governmental action. At that time we expressed support for "legislative extensions of the term of a patent if there are extraordinary circumstances that have substantially adversely affected the patent owner's enjoyment of the benefits of the patent."
The above described policies of our Section have been developed in the context of regulatory delay in the approval of patented products which require such approval before they can be marketed. However, the considerations supporting extensions under those circumstances are quite similar to those addressed by the "unusual administrative delay by the Office in issuing the patent" provisions of H.R. 1733. With patent term now measured from date of filing, every patent application unjustifiably delayed by the government will now result in loss of real time to commercially exploit the invention. Previously, under term measured from date of issue of the patent, this loss of real time of protection was, for the most part, limited to products, which, although already the subject of valid patents, required regulatory approval before they could be marketed and commercially exploited.
The question of whether and how to expand the extension provisions of the Uruguay Round Agreements Act is another topic which our Section will schedule for full debate at our upcoming Conference later this month. With the Subcommittee's permission, we would like to supplement today's testimony with a report on the conclusions reached in those discussions.
Thank you again, Mr. Chairman and Members of the Subcommittee, for the opportunity to present these views on behalf of the Section of Intellectual Property Law of the American Bar Association. I would, of course, be happy to respond to any questions Members may have.