On Monday, Secretary of Commerce Gary Locke sent a letter to the Senate Judiciary Committee expressing the Administration’s long-awaited views on S. 515 and patent reform in general.
The letter noted that the Administration has three goals for patent reform:
- Improving the management of the USPTO and patent examination process;
- Improving the quality of patentability decisions and harmonizing patent laws; and
- Better managing patent litigation.
First, Secretary Locke is pushing for fee setting authority for the PTO. Currently, many PTO fees are set statutorily and require congressional action for change. The Administration believes that the PTO could better manage its resources and plan for future initiatives if it had the authority to set its own fees.
The Administration also requested the ability to enact a limited interim fee adjustment to get the PTO on better financial footing while the final schedule is developed.
The PTO is requesting at least procedural, and preferably substantive, rule-making authority for matters at the PTO. The current state of this power is unsettled with the pending Tafas litigation.
The Administration supports the provisions in S.515 regarding inter partes reexamination and post-grant review. It does note, however, that the PTO may not currently have the resources to undertake these provisions. Thus, the PTO needs fee-setting authority and the ability to phase in these provisions to ensure that they work smoothly. The Administration offers to work with Congress in this regard.
Patent Quality and Harmonization
The Administration supports the first-to-file transition. Indeed, the Administration seems to support harmonization of patent laws generally, believing that it will reduce costs and increase predictability.
The Administration opposes the provisions in the bill that relate to search and examination, which limit these functions to U.S. citizens who are government employees. There is language in the bill that these are “sovereign functions” of the USPTO. The Administration believes that this will hamper the work-sharing proposals and arrangements that the PTO has with foreign patent offices, as well as with US-based vendors who provide patent-related services.
The Administration supports the compromise “gatekeeper” language on royalty damages. The Administration would also like to work with Congress on language to clarify the willful infringement standard because it believes that willfulness is often unnecessarily pled and places a burden on defendants to defend against such charges.
The Administration expressed its support for many other provisions in the bill, including teleworking of examiners, virtual marking, permitting applications to be filed by assignees, permitting pre-issuance submissions by third parties, expanding the prior use defense, eliminating sanctions for failure to comply with the best mode requirement, changes to venue, permission of interlocutory appeals, and the pilot program for district court judges with patent expertise. The Administration did note that some changes to the language in the bill on these provisions are needed.
Sen. Patrick Leahy (D-VT), chairman of the committee, vowed to bring the patent reform bill to the floor of the Senate “before the end of the year.”
Regarding the phase-in request by the PTO for the post-grant opposition and inter partes reexamination provisions, Director Kappos suggested ”a four year phase-in where we increase the number of new cases we can process every year, up to a limit.” He further stated that this is a common approach used in business.
Interim Fee Increase
Of particular interest to the patent community is what the limited interim fee adjustment would entail. Kappos indicated that the PTO is requesting a 15% increase in fees for one year or at most going into a second year. He believes this increase is significant, but necessary, as the PTO is facing a projected $200 million shortfall for FY2010. He believes that by the end of the year or so the PTO should be able to rely on fee-setting authority in the reform bill.
IP advocacy groups such as AIPLA have indicated that they will not support any fee increases or PTO fee setting authority unless it is tied to statutory language that prohibits PTO fee diversion. Without such language, it is difficult for the PTO to budget more than a few years out as Congress may decide to appropriate PTO user fees for other government business as it did in the past. The Administration has been completely noncommittal on this issue.