Prepared Statement of Jon D. Grossman, Esq.
Dickstein Shapiro Morin
& Oshinsky LLP
202-785-9700
Before the House Subcommittee on Courts, the Internet and Intellectual
Property
Subject: Oversight Hearing on Patent Law and
Non-Profit Research Collaboration
Mr. Chairman: I appreciate the opportunity to appear before this Subcommittee. I am a patent practitioner in private practice with over 20 years of patent experience and I represent a number of different clients, including several major research universities. My testimony today does not necessarily reflect the views of my clients.
I. BACKGROUND
My comments today pertain to oversight by this Subcommittee regarding proposed legislation amending or reinterpreting Section 103(c) of Title 35 of the United States Code.
The primary purpose of Section 103(c) is to allow free
communication among researchers within an organization concerning invention
developments. In 1997, a decision by the
U.S. Court of Appeals for the Federal Circuit, OddzON Products, Inc. v. Just Toys, Inc. 122 F.3d 1396, 43 U.S.P.Q.
2d 1641 (Fed. Cir. 1997) restricted the scope of Section 103(c) to
communications between researchers working within an organization. The
To avoid the problems that arise from OddzON, it is my understanding that this Subcommittee is reviewing the possibility of amending or clarifying the interpretation of Section 103(c) to extend the protection afforded by this Section to include collaborative research arrangements. The intent of the amendment or reinterpretation is to preclude obviousness rejections of an invention, as claimed in a patent application, or invalidation of a patent on obviousness grounds based on subject matter developed by any members of the collaborative effort and which qualifies as prior art only under Sections 102(e), (f) or (g) of Title 35.
It is my conclusion that, to the extent Section 103(c) contains weaknesses as revealed by the OddzON decision, those weakness may be tempered by a limited amendment restricting the expanded scope to federally funded research agreements with universities, small businesses, and non-profit organizations in line with The Bayh-Dole Act of 1980[2], The Stevenson-Wydler Technology Innovation Act of 1980[3], and The Small Business Technology Transfer Act of 1992[4]. In particular, I am concerned that broadening the scope or meaning of Section 103(c) may cause unintended problems that negatively impact the U.S. Patent & Trademark Office (“PTO”), complicate patent practice, and harm competition.
II.
COLLABORATIVE RESEARCH IS
NOT
SEVERELY THREATENED BY OddzON
There is no doubt that collaborative research is an important part of the engine that drives our economy. Researchers from different institutions need to freely communicate ideas and pool resources to create new inventions. It is not uncommon for prior developments to be used against a researcher’s subsequent inventions. But this does not always result in a bar against patentability. In my 16 years in private practice, and in my several years as a patent examiner, I have rarely encountered obviousness rejections based on Section 102(e), (f) or (g) prior art that needed a Section 103(c) fix. Why is this?
By and large most universities that engage in collaborative research are able to easily ferret out inventions and quickly protect them. When there are joint institutional collaborations, each researcher usually knows what he or she contributes to the effort as well as those contributions of their respective colleagues. After all, academia is incredibly competitive and achieving credit for one’s work is a researcher’s raison d’etre. Further, to the extent there are prior art collections that are relevant to on-going research, most researchers are sufficiently sophisticated to avoid the 102(e), (f) or (g) pitfalls. They know what was previously created, and they understand the benefit of filing for patent protection.
If a researcher can foresee a potential prior art problem, he or she often takes steps to anticipate and avoid the problem. For example, if a potential patent applicant knows of another pending application which may potentially be considered prior art under Section 102(e), he or she can file a patent application for the subsequent invention as a continuation or continuation-in-part application (claiming priority to the prior application). The benefit of this practice is that the new patent application is afforded the same priority date as the prior application. Hence, the subject matter of the earlier application is eliminated as prior art, and any potential 102(e)-based rejection can be avoided.
Another way potential prior art problems can be avoided is by disclosing an invention as soon as possible after conception. This can be accomplished quickly by means of a provisional patent application. Provisional patent applications are informal filings that are assembled quickly. Sometimes the provisional patent filing is little more than a draft paper, a long-winded e-mail, or informal notes. These easy and inexpensive filings dramatically improve the ability of researchers to freely disclose their inventions almost immediately after conception. Thus, even universities with tiny budgets and without the availability of patent lawyers routinely protect their ideas well before they are communicated to outside collaborators. The filing of a provisional application allows the researcher up to a year to prepare and file a formal patent application, which will carry the filing date of the provisional application, as its effective date. Such early disclosure enables joint researchers to claim priority dates behind many potential 102(e) references.
Moreover, it is rare that any institution desires joint ownership of intellectual property rights. For most institutions, the notion of joint ownership of intellectual property has all the qualities of a bad marriage. The patent rights owned by each co-owner involve inseparable rights with no “rules of the road” (each entity owns one half of an undivided whole interest) and no duty of accounting. Accordingly, to the extent that there is a collaborative effort, a great deal of attention is typically paid to how to break apart the rights, so that they are owned separately by each research partner. For these scenarios, Section 103(c) in its present form works well.
As a final matter of interest, most universities that I have represented simply do not have massive patent prior art collections or disclosures. If there is a 102(e), (f) or (g) reference or disclosure to grapple with, then it can usually be solved by one of the previously elaborated approaches.
III. BROADENING THE MEANING OF 103(C)
MAY LEAD TO WORSE
PROBLEMS THAN OddzON
It is critical that federal law aggressively promote collaborative research. From my standpoint, the best way for Congress to accomplish this important objective is to increase public funding, provide tax incentives, and institute programs such as those provided for in the Bayh-Dole Act of 1980 and the Stevenson-Wydler Technology Innovation Act of 1980. Promoting collaborative research through the patent laws, however, requires great care in order to avoid creating worse problems elsewhere.
A.
Amending 103(c) May Have An Anti-Competitive Effect
The biggest concern that I have with the proposed amendment to § 103(c) is the potential loophole it creates. Universities are not the only entities that do collaborative research. Companies do it all the time. And with companies, it is not inconceivable that a change to 103(c), such as the one proposed to extend the protection to all joint research and development arrangements, could create an anti-competitive effect.
Many areas of technology have one or two dominant companies and a number of small competitors. Not surprisingly, the big competitors file lots of patent applications and therefore own lots of patents. In fact, it is common for large corporations to have a steady stream of new patents issue in their respective patent portfolios. They have sophisticated patent programs in place, and receive lots of attention and advice from in-house and outside counsels. If two big competitors were to set up a “joint research agreement,” companies such as these would be the primary beneficiaries of the amended or re-interpreted 103(c), which would allow them to receive substantially broader patents and also more patents than under the present statutory boundaries.
Moreover, if smaller competitors were not invited to join in the collaborative efforts they would get a “double-whammy:” They would not receive the full benefits of 103(c) and/or they would be subject to increased enforcement activity and/or higher license fees from the large patent holders.
Even if the amendments to 103(c) were restricted to non-profit and university collaborators, there would still be problems . For example, a number of my university clients conduct research funded by commercial interests. Indeed, this is a sought-after arrangement. Typically, a for-profit company funds the university’s basic research. The company funding has strings attached in the form of an obligation by the university to assign to the company any patents that emanate from the funded research. If Section 103(c) were just restricted to non-profit institutional collaborations, smaller businesses would again be hurt by large corporations squeezing them out of favorable collaborative arrangements with the non-profits, especially if the patent rights were subsequently assigned to the large companies. Any amendment to 103(c) thus should be limited to federally funded collaboration projects which already carry protective restrictions in favor of non-profit organizations, universities, and small business entities.
B.
Amending 103(c) Will Create An Administrative Burden On The PTO
A further problem with the proposed legislation is that it would have problematic impacts on other aspects of patent practice. The proposed amendment would require that patent examiners make legal judgments under the rules of evidence to determine whether a party seeking to prove the existence of a research collaboration has met his or her burden in establishing the collaboration’s existence. Many patent examiners are not lawyers, and do not understand the rules of evidence. To the extent patent examiners make legal judgments, those judgments are constrained to questions of obviousness, novelty and other aspects of patentability based on the requirements of Title 35 and its related rules under the Code of Federal Regulations and the Manual of Patent Examining Procedures. It would be a burden on the PTO to train examiners to understand substantive contract law and the Federal Rules of Evidence. It would also be a burden on examiners to review, understand and judge the merits of the documents submitted in support of the existence of a joint research collaboration.
A potential solution to this problem could be to promulgate additional rules which simply place the burden on the patent applicant to judge the sufficiency of evidence to support a joint research collaboration that qualifies under amended section 103(c). To claim this benefit, all that would be needed would be a clear and conspicuous statement having prescribed language similar to that currently used by patent applicants to establish common ownership of an application and prior invention.[5]
C.
Amending 103(c) Will Create Double Patenting Problems
Another concern is the impact of the changes to 103(c) on double patenting issues. It is common when there is a 35 U.S.C. § 103 rejection based on 102(e) prior art for the examiner to also frame a rejection based on double patenting.
Double patenting arises from the principle that one individual or entity cannot be granted more than one patent covering a single invention. The “one invention – one patent ” rule is not a prior art based rejection. Rather, it is based on the statutory language of 35 U.S.C. 101 which states that “whoever invents or discovers any new and useful process, machine, manufacture or composition of matter … may obtain a patent therefore.” The prohibition against double patenting is also critical in preventing patent owners from impermissibly extending the effective term of a patent. Finally, it avoids the problem of subjecting third parties to having to pay royalties to multiple patent holders for the same or substantially the same invention.
Typically, a double patenting rejection is easily overcome by filing what is known as a terminal disclaimer. A terminal disclaimer causes the term of the second patent to expire at the same time as the first patent. A terminal disclaimer also declares that during the undisclaimed portion of the patent term, the disclaimed patent would only be enforceable for so long as both patents remained under common ownership. So, if you have one patent application with claims that overlap the claims of a second application (or patent), the effects of the terminal disclaimer will be to give the same term and common enforcement rights to both.
Presently, terminal disclaimers are only available to the common owner of both the pending application and the prior application or patent. If 103(c) were amended to allow 102(e) based prior art to be disqualified on the basis of an established joint research agreement, however, you could potentially have two (or more) patents issue with patentably indistinct or overlapping claims, owned by different entities. Filing a terminal disclaimer would not be available as a remedy because of the different ownership between the application and the 102(e) reference. Thus, if Congress were to amend 103(c) as proposed, there would have to be similar changes implemented in the rules for double patenting and terminal disclaimer practice.[6]
The current proposal to amend 103(c) provides the remedy of including a requirement that the information shared in the research collaboration not have been disclosed or claimed in an earlier filed patent application. More specifically, it is proposed that any amendment to 103(c) be expanded, with respect to joint research arrangements, to enable disqualification of 102(f) based prior art, but not 102(e) based prior art. Also, joint research applicants should only be able to disqualify section 102(g) based prior art if that art has not been publicly disclosed, such as in a prior patent, publication, or otherwise.[7] This alternative requirement may also go a long way toward avoiding the terminal disclaimer conundrum.
IV. CONCLUSION
In summary, it is a worthwhile endeavor for the Subcommittee to consider measures to improve America’s competitive edge. Clearly, collaborative research should be encouraged in a manner which has an overall positive impact. The present proposal to amend 103(c) however has the potential to complicate patent practice, create additional burdens to the PTO and harm competition. I therefore respectfully urge that this Subcommittee not amend Section 103(c) as presently proposed.
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