STATEMENT OF
MICHAEL K. KIRK, EXECUTIVE DIRECTOR
AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION
BEFORE THE
SUBCOMMITTEE ON COURTS, THE INTERNET
AND
INTELLECTUAL PROPERTY
COMMITTEE ON THE JUDICIARY
UNITED STATES HOUSE OF REPRESENTATIVES
AT THE OVERSIGHT HEARING ON REEXAMINATION
MAY 10, 2001
Mr. Chairman:
I appreciate the opportunity to appear before the Subcommittee today on behalf of the American Intellectual Property Law Association (AIPLA) to offer our
suggestions for improving patent quality through post-grant procedures in the United States Patent and Trademark Office. We understand that the purpose of
this oversight hearing is to specifically examine the current reexamination system, assess its effectiveness, and determine whether legislation is needed to
strengthen the system. Our comments will focus on steps that we believe should be taken to strengthen the existing reexamination system and, drawing from
H.R. 1333, to suggest the adoption of a post-grant opposition procedure.
The AIPLA is a national bar association whose more than 12,000 members are primarily lawyers in private and corporate practice, in government service, and
in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the
practice of patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting intellectual property. Our members represent both
owners and users of intellectual property. They share the common desire to see the procedures of the USPTO strengthened to ensure that only valid patents are
promptly issued and to have administrative mechanisms available in the USPTO to allow the public to ensure that only such patents are permitted to stand.
Introduction
The AIPLA commends you Mr. Chairman for taking a fresh look at how patent procedures can be improved to strengthen the quality of U.S. patents and
enhance the confidence of inventors, businesses, and the investment community in the patent system. We also commend the Ranking Member of the
Subcommittee, Mr. Berman, for his continuing interest as well, and in particular for the introduction of H.R. 1333.
Before turning to the specific comments that AIPLA wishes to make regarding the needed improvements to the existing reexamination procedures and/or
possibly augmenting these systems with an opposition system, we feel compelled to comment on what we perceive to be a much more urgent and compelling
problem: the fiscal crisis confronting the USPTO. As important and needed as strengthening the post-grant procedures of the Office is, the improvement of
these procedures in this time of crisis is, to use a hackneyed cliché, truly like rearranging the deck chairs on the Titantic. The imperative of improving the
procedures for strengthening U.S. patents recedes drastically when we are facing a situation where inventions in an increasing number of areas may well not
issue until after their commercial life has expired.
The budget sent by the President to the Congress last month proposes to give the USPTO $1.139 billion in FY 2002. The President's budget contains an
estimate that the Office will receive $1.346 billion in fee revenues in FY 2002. This means that if the President's budget estimates were accurate, the USPTO
would have some $207 million in fee revenues withheld--diverted--pick your verb--in FY 2002. As outrageous as this is, it does not begin to tell the entire story.
We need to face what is happening to the USPTO--the rapidly deteriorating engine of high tech products and services for this nation. According to the Fiscal
Year 2002 Corporate Plan of the Department of Commerce for the United States Patent and Trademark Office, published in April, 2001, "The processing
timeframes for granting patents and registering trademarks, called pendency, will increase … and pending application backlogs will continue to grow at this [the
President's] requested funding level." Following this statement, the Corporate Plan presents a chart that reveals that patent pendency to issue/abandonment will
climb to 38.6 months by FY 2006. A note beneath this chart qualifies this projected pendency increase: "It is important to note that the processing timeframes
for fiscal year 2006 assume that the USPTO will have full access to its fees beginning in fiscal year 2003 in order to make critical investments in personnel and
automation needed to achieve these timeframes." (emphasis added).
This gloomy picture becomes much worse when we contrast the out-year funding plans for the USPTO with the pollyannaish assumption in the USPTO's
Corporate Plan noted above. Contrary to the assumption in the Corporate Plan, the President's budget projects that an average in excess of $183 million in fee
revenue will be withheld from the Office in each of the years FY 2003 through FY 2006. If the USPTO forecasts a patent pendency of three years and two and
one-half months if it receives all of its fee revenue, what can we imagine might be the pendency if an additional $733 million is diverted in fiscal years 2003
through 2006? This essentially abolishes the patent system in any field where new products have a cycle life of less five years, and perhaps even longer. It
would certainly be a proud moment for the United States if it were the first nation to be hauled before the WTO for failing to live up to its TRIPs' obligation in
Article 62.2:
"Where the acquisition of an intellectual property right is subject to the right being granted or registered, Members shall ensure that the procedures for grant or
registration, subject to compliance with the substantive conditions for acquisition of the right, permit the granting or registration of the right within a reasonable
period of time so as to avoid unwarranted curtailment of the period of protection."
Would granting patents for inventions in several important fields such as biotechnology and computers years after their useful commercial life has ended be an
"unwarranted curtailment of the period of protection"?
Lest anyone get the impression that this is directed only at the current President's budget, or the current leadership of the Congress, rest assured it is not. This
chronic under-funding of the USPTO has been the modus operandi of the Executive Branch and the Congress for the last ten years. This crisis has been building
for years notwithstanding the pleas of the nation's inventors and businesses. In fact, the situation is worse because of the failure of those putting together the
budgets, whether in the Executive or Legislative Branches, to base their budgets on realistic estimates. It is already known, for example, that the fee collections
for both this fiscal year and next will fall short of stated projections by more than $130 million, only exacerbating the pressures to further reduce the
appropriation to the USPTO. Unless the funding crisis facing the USPTO is dealt with, the subject of this hearing will become an irrelevant sideshow. I turn
now to the topic of this hearing.
Reexamination
The ex parte reexamination system contained in sections 301-307 of title 35 was developed in the late 1970's and was enacted into law in December of 1980,
becoming effective on July 1, 1981. Its purpose was to provide an avenue for patent owners and third parties to bring to the attention of the USPTO pertinent
patents and printed materials which an examiner might not have uncovered during the course of patent examination. It was believed that reexamination would
provide an efficient, effective, and relatively inexpensive technique for the Office to consider whether an issued patent was valid, whether its claims should be
narrowed, or whether it should not have been issued at all. It was perceived that the reexamination process would thus benefit patent owners, the public, and
lessen the burdens on the federal court system.
During the debate on the establishment of the patent reexamination system in the United States, attention was focused on achieving the right balance between
permitting third parties to come forward with evidence and participate in proceedings and providing patent owners with a means to evaluate the validity of
issued patents quickly and inexpensively without undue harassment. With the benefit of nearly 15 years experience with reexamination, the AIPLA concluded
that the procedure was not performing as effectively as was envisioned and that a better balance needed to be struck between third-party participation in the
reexamination process and the interests of patentees in ensuring that the reexamination process remained reasonably prompt and inexpensive with no undue
harassment.
As early as 1991, the AIPLA adopted a resolution favoring the right of a third-party requester to participate in a reexamination proceeding. We supported the
opportunity for a third party to file comments on a patentee's response to an examiner's first action on the merits in a reexamination proceeding and to comment
on an examiner's decision confirming the patentability of any claims. This resolution also favored the right of a third party requestor to appeal a final decision of
an examiner confirming the patentability of any claims to the Board of Patent Appeals and Interferences and to the U.S. Court of Appeals for the Federal Circuit
(CAFC) and to participate in any appeal of rejected claims by the patentee to those two tribunals. To guard against harassment, we recommended that a third
party's decision to appeal or participate in such an appeal should create an estoppel that would prevent the third party from asserting the invalidity of any claim
in the patent in any forum on grounds which were raised or could have been raised.
AIPLA supported a succession of bills providing for such an inter partes reexamination system, beginning in 1994 with S. 2341 in the 103rd Congress (which
actually passed the Senate on October 4, 1994). We subsequently testified in support of a similar bill, H.R. 1732, in the 104th Congress in 1995, which became
TITLE V of H.R. 3460, the Moorhead-Schroeder Patent Reform Act. Early in the 105th Congress, Mr. Chairman, you introduced the successor legislation, H.R.
400, the 21st Century Patent System Improvement Act, TITLE V of which continued the inter partes reexamination amendment to the existing reexamination
procedures. We all remember the unprecedented--for a patent bill--two days of debate on the House floor on April 17 and 23, 1997, that finally moved the
measure to the Senate, but, unfortunately, not before a last minute amendment by Ms. Kaptur--a "submarine" amendment--deleted TITLE V.
Undeterred, you again introduced an amendment to the patent law to provide for inter partes reexamination as TITLE V of H.R. 1907, the American Inventors
Protection Act of 1999 in the 106th Congress. As introduced, TITLE V was generally consistent with the resolution that AIPLA had adopted back in 1991.
While TITLE V was not knocked completely from H.R. 1907 on its journey through the House, it took a couple devastating hits. First, an estoppel was added
that prevented any person requesting an inter partes reexamination from contesting any fact determined by the USPTO during the reexamination (unless that
finding of fact was later proved erroneous on the basis of previously unavailable information). Compounding this limitation, the right of a third-party requestor
to appeal an adverse decision or to participate in an appeal by the patentee to the CAFC was eliminated. This also made the other estoppels contained in the
TITLE somewhat unfair because they kicked-in even though the third-party requestor could not appeal to or participate in an appeal to the CAFC.
Since the effective date provisions of the inter partes reexamination procedure provide that it only applies to patents issued on original applications filed on or
after the date of enactment of the AIPA on November 29, 1999, there has been little if any opportunity for anyone to use the inter partes reexamination
procedure. It is our strong belief, however, that no one would dare use the procedure on an important patent because of the restrictions added to the TITLE
mentioned above. Consequently, the public remains without an effective means to efficiently, inexpensively, and fairly challenge a patent.
Opposition
While the legislation discussed above was wending its way through Congress, AIPLA continued to study the needs of the patent system, and particularly whether an even better solution could be devised to allow the public to challenge overly broad patent claims. When the original reexamination provisions were being crafted back in the late seventies, the concern most frequently expressed was that grounds for refusing patents other than patents and printed publications were not readily available to examiners, and that therefore reexamination should be limited to what examiners do the vast majority of the time--consider patentability only on the basis of patents and printed publications.
However, although both ex parte and inter partes reexamination limit the basis on which a third party can challenge a patent to either patents or printed
publications, examiners routinely consider other grounds when they have the information to do so. Thus, examiners do consider tangible evidence of knowledge
or use by others before the invention by the applicant as set forth in 35 U.S.C. 102(a). They also consider prior public use and sale as set forth in 35 U.S.C.
102(b) when information documenting such acts comes to their attention. Similarly, examiners routinely consider whether an application contains an enabling
disclosure--a description in such full, clear, concise and exact terms as to enable a person skilled in that technology to make and use the invention--as required
by the first paragraph of 35 U.S.C. 112.
In light of the growing complexity of new technologies and also looking at what other nations were doing, AIPLA established a Special Committee on Oppositions in 1994 to study the question of whether, on the basis of existing systems, it was time for the United States to adopt an opposition system. The Special Committee concluded, and the AIPLA Board agreed, that the time had come for the United States to take such a step. Under the approach recommended by the Special Committee and approved by the AIPLA Board in 1995, third parties would be permitted to challenge patents for the first 12 months after grant on the basis of any matters under section 102 and 103, as well as paragraphs 1 and 2 of section 112 of title 35. Any public use issues would be resolved based upon affidavit testimony subject to cross examination by means of deposition. Broadening amendments would be permitted during the opposition and it would be completely inter partes in nature, but subject to the control of an individual specially trained to tightly control legal proceedings and rule on the admissibility of evidence.
A comment is in order regarding the difference between an "opposition" system and an inter partes reexamination system. Most observers would say that an
opposition system tends to be a more robust, adversarial proceeding for a limited period of time following patent grant. On the other hand, reexaminations, at
least as they have existed in the United States, tend to be somewhat limited as to the basis on which they can be initiated and somewhat less adversarial, but they
can be initiated at any time during the life of a patent. There is no bright line between the two procedures and they can rationally co-exist in the same patent
granting system.
Although AIPLA had approved the creation of such an opposition system in the United States, we did not advocate its incorporation into our law during the
consideration of the bills that resulted in the AIPA. It was our belief that the time had not come for the adoption of an opposition system in this country. We
believe that the time has now arrived.
H.R. 1333
H.R. 1333 would establish a robust inter partes opposition procedure. It would permit any person, within nine months of the date of the grant of a patent, to file
a request for an opposition to the patent on the basis of sections 101, 102, 103, or 112 of title 35. The Director would order an opposition proceeding within 60
days of receiving a valid request, giving the patent owner at least 60 days to file a response to the request. If the patent owner files a response, a copy must be
served on the third party requester who may in turn file a reply to the response of the patent owner not later than two months after service of the copy.
Each opposition would be held before one of at least 18 administrative opposition judges serving on an Administrative Opposition Panel which the Director
must establish. The administrative opposition judge could consider any evidence the judge considered relevant, including oral testimony by experts, in direct or
cross examination, exhibits, affidavits, and depositions whether voluntary or compelled. The proceeding would be governed by the Federal Rules of Evidence.
No proposed new or amended claim could enlarge the scope of the patent during an opposition proceeding. Either the patent owner or the third party could
appeal the administrative opposition judge's decision (which is to be rendered not later than 18 months from the request) to the Board of Patent Appeals and
Interferences and either could seek court review by the CAFC or U.S. District Court for the District of Columbia. Either the patent owner or the third party
could participate in an appeal taken by the other. Final decisions in civil actions, inter partes reexamination proceedings, and oppositions would create estoppels
as to issues which were raised.
There are a number of aspects to H.R. 1333 which we favor. We support the bill's provisions allowing a third party, within nine months of patent grant, to
request an opposition on the basis of sections 102, 103, and ¶¶ 1 & 2 of 112 of title 35. We believe that examiners can properly evaluate such grounds of
patentability and that it would permit the public to come forward with an appropriately broader range of prior art than is currently possible in the reexamination
procedure.
On the other hand, however, we do not believe that either the "patent-eligibility" or the "usefulness" requirements set out in section 101 of title 35 form an
appropriate ground for opposition. There are very practical reasons for this. First, the requirement in section 101 that an invention be "useful" is fully captured
by the "enablement" requirement of section 112, first paragraph. Thus, where "utility" for an invention is an issue, it should be addressed in the more clear and
comprehensive basis provided though section 112. Second, the requirement for "patent eligibility" in section 101 has been construed by the courts - including
the U.S. Supreme Court - to encompass "everything under the sun made by man." Thus, it would appear undesirable, if not superfluous, to subject patent
owners to opposition proceedings to decide this issue. Where this issue might be manifest, it would presumably be well suited for district court litigation where
the parties have access to the full panoply of discovery under the guidance of a federal district court judge.
There are a number of other provisions in H.R. 1333 that we find troubling. We do not favor the special presumption of obviousness in section 3 of H.R. 1333
because we believe it unnecessary, confusing, and likely to lead to unnecessary litigation. For example, what is a "significant difference" between the teachings
of the prior art and the claimed invention? When is a claimed invention "appropriate" for use with computer technology?
Similarly, we believe that the requirement to "disclose in the application the extent to which the applicant searched for prior art" would unnecessarily lengthen
applications without serving a useful purpose and would add a new issue to litigate. Rule 56 already imposes a duty on all inventors named in the application,
all attorneys or agents who prepared or prosecuted the application, and every other person associated with the inventor or assignee who is substantively involved
in the preparation of the application to disclose all information known to be material to patentability. Failure to comply with this duty renders any resulting
patent unenforceable. A new requirement to disclose the extent to which the applicant searched for prior art will do nothing to make more prior art available to
the USPTO.
There are a few other details such as the statutory requirement to have 18 administrative opposition judges, the absence of any standard for ordering an
opposition to be held, the level of the fees for different types of oppositions, etc. for which we have some suggestions that we would be pleased to share with
the Subcommittee. Our comments should not, however, be construed to indicate opposition to the general concept of the opposition procedure set forth in H.R.
1333. Quite to the contrary, we view the bill as a very constructive step toward achieving our mutual goal of strengthening the patent system by providing a
means to fairly and inexpensively weed out improvidently granted patents.
A few areas that are not addressed in H.R. 1333 deserve mention. I noted that in the late maneuvering on the inter partes reexamination provisions in the AIPA,
the right of a third party requestor to appeal an adverse decision or to participate in an appeal by the patentee to the CAFC was stricken. In order to make the
inter partes reexamination sufficiently attractive to the public to use to test questionable patents, the third party requester must have the right to appeal to the
CAFC. I also noted that a "fact estoppel" provision was added to the inter partes reexamination procedure in the late maneuvering on the AIPA. Given that a
third party requester has no means to obtain discovery to demonstrate that an alleged "fact" is not truly a fact, we would strongly urge that it be deleted from the
inter partes reexamination provisions. Its continued presence will cast a dampening effect over the enthusiasm of members of the public to come forward and
present the desired evidence that the claims of a patent are too broad or otherwise improvidently allowed. The addition of an opposition procedure available for
nine months following the grant of a patent will have very salutary effects, but it must be kept in mind that in many situations a third party will not know it has a
commercial interest that might conflict with a patent until several years after the patent is granted. The elimination of this unduly harsh limitation will restore an
element of balance and fairness to the inter partes reexamination proceedings and promote its use in appropriate cases.
Finally, we would strongly urge that language be added to overrule In re Portola Packaging, Inc. 110 F.3d 786 (Fed. Cir. 1997). This case held that a rejection
made during reexamination does not raise a substantial new question of patentability if it is only supported by prior art previously considered by the Office.
When it is clear that a proper rejection can be made on some portion of a patent or publication, it makes no sense to force the issue into expensive federal court
litigation to resolve the issue.
That concludes my prepared testimony, Mr. Chairman. I would be happy to answer any questions which you or other members of the Subcommittee might have
and, of course, we pledge to work with you and the Subcommittee and with other users of the patent system to see that the opportunity for the public to fully
and fairly participate in the post grant scrutiny of patents is realized.
Consistent with the terms of House Rule XI, clause 2(g)(4), a curriculum vitae for Michael K. Kirk, who is testifying on behalf of the American
Intellectual Property Law Association, is submitted as part of his written testimony at the Oversight Hearing on Reexamination before the
Subcommittee on Courts, the Internet, and Intellectual Property, Committee on the Judiciary, United States House of Representatives, on May
10, 2001.
AIPLA represents only its members and has received no federal grants, contracts or subcontracts in the current and preceding two fiscal years.