INVENTIVE STEP

Pres. Obama plans to sign the patent reform bill on Friday, September 16.  This means that several parts of the legislation will go into effect shortly.

The PTO will be granted fee-setting authority (although not necessarily the right to keep all collected fees).  New fee amount will have to go through notice-and-comment rule-making as described below. 

The PTO will implement its previously planned Track I Accelerated Examination.  For a fee of $4,800/2,400, up to 10,000 applications during the first fiscal year will be placed on a fast track examination path having an office-wide goal of disposal within 12 months of granting accelerated status.

Micro-entity

A new fee level for a “micro-entity” should go into effect immediately upon enactment.  Micro-entities are entitled to a 75% reduction in certain PTO filing fees.  To qualify as a “micro-entity,” certain conditions must be met.

For unassigned applications, the entity must not include any inventors that have been named on 5 or more patent applications.  Thus, “micro-entities” are newer inventors.  The application must not be licensed or the inventors must not be legally obligated to license or assign the application.  Each inventor must have an income of less than 3 times the average gross income reported by the Department of Labor for the previous calendar year.

For assigned applications, the inquiry is similar.  None of the inventors must be named on 5 or more patent applications.  The application can only be assigned to an entity with 5 or fewer employees.  And the assignee must have an income of less than 3 times the average gross income for the previous calendar year.

15% Surcharge

On Sept. 26, a 15% PTO surcharge on patent fees goes into effect to aid the PTO’s funding crisis.  During a webinar yesterday sponsored by Foley & Lardner LLP, Patent Commissioner Bob Stoll announced a plan to hire 1500 additional patent examiners.  As noted by Hal Wegner, however, the PTO is currently funded by a continuing resolution of Congress that expires at the end of the current fiscal year on Sept. 30.  Because fee diversion was not ended by the new law, the agency is still at the mercy of Congress for its continued operations into FY2012.

Rule-Making

The new legislation will require significant rule-making by the PTO to implement the various sections.  The PTO must go through notice-and-comment rule-making procedures required by the Administrative Procedure Act to implement such new rules.  Thus, the PTO has set up a new website for this purpose:  http://www.uspto.gov/patents/init_events/aia_implementation.jsp.  The new rules will be published in the Federal Register and public comments are needed to promptely enact them. 

Several other aspects of the law also go into effect immediately, including the preclusion of multiple, unrelated parties in one patent suit, changes to the standard for granting reexamination requests, elimination of the best mode as a defense to infringement, preclusion of patenting of tax strategies, virtual patent marking, and the requirement of actual injury for false marking suits.

Patent reform is a reality, as the Senate passed H.R. 1249 without amendment.  The voting on the proposed amendments was close; passage of the overall bill was not.

Senate Action

Sen. Jeff Session’s (R-AL) proposed amendment on retroactive patent term extension failed 51-47.  Sen. Maria Cantwell’s (D-WA) proposed amendment to strike the special business method reexamination procedure failed 85-13.  Sen. Tom Coburn’s (R-OK) proposed amendment to prohibit fee diverion failed 50-48; the Senate actually voted to table Sen. Coburn’s amendment, thereby killing it.

Finally, the Senate passed the unmodified bill 89-9.  Senators voting against the bill were:  Barbara Boxer (D-CA), Maria Cantwell, Tom Coburn, Jim DeMint (R-SC), Ron Johnson (R-WI), Mike Lee (R-UT), John McCain (R-AZ), Claire McCaskill (D-MO), and Rand Paul (R-KY).  The bill now proceeds to Pres. Obama for signature and enactment.

Effects of the Bill

The “effective date” of the bill will be the date it is signed by Pres. Obama and becomes law.  Most effects of the bill have been covered in detail on this site and will not be felt for some time.  These include the transition to first-to-file which takes place 18 months from the effective date (March 2013).

Some changes will take place sooner.  The “micro entity” filing status for 75% reduced fees takes place immediately, while the 15% surcharge on PTO fees and the $4,800 fee for prioritized examination take place 10 days after enactment.

A complete copy of the bill as passed is here.

Yesterday, the Senate debated the House Patent Reform bill, H.R. 1249, and agreed to the motion to consider the bill.  Thus, the bill is now laid before the Senate.

The Senate has scheduled 5 hours of debate on the bill today beginning this morning.  Several amendments have been proposed and will be debated today.

Sen. Jeff Sessions (R-AL) has proposed an amendment that would strip a provision for retroactively lengthening the time for applying for patent term extension.  This provision was added to the bill due to lobbying efforts on behalf of a particular drug company.

Sen. Maria Cantwell (D-WA) has proposed an amendment to strip the special business method transitional reexamination program from the bill.  Alternatively, she seeks to amend this provision to clarify the definition of a business method covered by the program.

Finally, Sen. Tom Coburn (R-OK) has proposed an amendment that would prohibit Congress from diverting PTO fees.  The PTO would be permitted to spend all of the money that it collects from users.

Several other Senators have proposed political amendments, but these are the ones dealing with the merits of the bill.

At 4:00 today, the Senate will take roll call votes on the amendments.  After vote on these amendments, the Senate plans to vote on the merits of the bill. 

If any of the amendments are agreed to prior to passage, the amended bill must be returned to the House for further consideration by that body.  If all proposed amendments fail, the passage by the Senate would constitute passage of the final bill.  The bill would then proceed to Pres. Obama for signature and enactment.

Congressional action is hard to predict, but at this point it appears that passage is imminent.

The Senate voted 93-5 to invoke cloture on the motion to proceed to consideration of H.R. 1249.  Only 5 Republicans voted against cloture:  Sens. Tom Coburn (OK), Jim DeMint (SC), Ron Johnson (WI), Mike Lee (UT), and Rand Paul (KY). 

Senate Rules

I am not an expert on parliamentary procedure or on the rules of the U.S. Senate, but the following is my understanding of how the debates and votes will proceed.  Please correct me if I am wrong.

The Senate has rather complex rules regarding bringing bills forward for debate, presenting amendments, and actually considering the bills on the merits.  Multiple votes are required on many bills.  While most votes on motions are simply passed by “unanimous consent,” or a voice vote, any sentor may request that an actual recorded vote take place.  The Senate rules permit unlimited debate on most motions and bills unless a vote is taken to “invoke cloture” on the debate.  Again, this vote may be dispensed with by unanimous consent, but otherwise requires 60 votes to pass.

When a bill is passed by the House, it is “referred to” the Senate.  The Senate may submit the bill to a committee or it may seek to present the bill to the entire chamber.  First, a bill must be “before the Senate” in order to be considered.  This requires a vote (or unanimous consent) of the Senate.  Once the bill is before the Senate for consideration, it may be amended and debated on its merits.

The Senate is not actually considering or voting on its own version of patent reform, S. 23, that is passed in March.  Instead, it is considering the House version of the bill, H.R. 1249, that the House passed in June.  Thus, it is necessary to get H.R. 1249 before the Senate for consideration on the merits.

Sen. Harry Reid (D-NV) made a motion in June to invoke cloture on the question of laying the bill before the Senate.  The actual vote yesterday was on Sen. Reid’s motion to  invoke cloture on the motion to proceed to consider H.R. 1249.  This is not a vote on the merits of the bill, but only on whether the Senate can move to consider the merits of the bill.  Debate on the merits of this motion will proceed today after the morning business in the Senate and requires a simple majority vote.  Once that takes place, the Senate can move to consider the bill on its merits.

While the Senate may reach agreements or unanimous consent on several of these steps, passage of the bill may not be quite as iminent as was originally thought.  The Senate may now take up to 30 hours to debate whether to consider the merits of H.R. 1249 before it actually does so.  Next, come the votes on the merits of the bill before its final passage.

Sen. Coburn’s Statement

Sen. Coburn has long been a proponent to ending fee diversion.  He proposed the amendment to S. 23 that would have ended th practice.  After yesterday’s vote, he issued a statement decrying fee diverion as a tax on innovation.  In his statement, he indicates that he will raise his amendment to end fee diversion once again.

If my amendment fails, I will do everything in my power to slow the bill and highlight this egregious tax on innovation.

At 5:30 pm EDT today, the Senate will vote on a judicial nomination before proceeding to a cloture vote on H.R. 1249.  To invoke cloture requires the votes of 60 senators.  If cloture is invoked, debate on H.R. 1249 will be limited to 30 hours and only to the bill as it stands and any amendments that have been filed prior to the cloture vote.  Senate rules require that an up-or-down vote be taken on the bill before the upper chamber of Congress is permitted to take up other business.

H.R. 1249 is the House version of the Patent Reform bill that passed that chamber in June.  Although the Senate passed the original Patent Reform bill in the 112th Congress, the House has thusfar won the fight over the issues.  The House bill differs from the Senate version in that it does not end the practice of PTO fee diversion by Congress and it adds several other provisions such as the defense of prior user rights.

When the two houses of Congress pass different versions of the same legislation, a typical procedure is to convene a Conference Committee with members of both chambers that work together to craft a compromise that can then be passed by both houses.  In this case, the Senate appears to be satisfied to permit the House to carry the day on Patent Reform.

If the Senate simply passes H.R. 1249, the bill will proceed to Pres. Obama for enactment.  If the Senate passes H.R. 1249 with amendments, the amended bill would need to be re-passed by the House or proceed to a Conference Committee before enactment.

The Senate appears ready to capitulate.  I expect the cloture vote to pass today with limited debate on the House bill before it is passed late this week or early next week.

Stay tuned . . .

Given Sen. Harry Reid’s (D-NV) push for cloture on patent reform and the Senate’s previous 95-5 approval vote, and the more pressing budgetary issues facing the country, passage of H.R. 1249 seems inevitable.  The bill is littered with problems, but the number one problem is that, unlike the Senate bill, it does not guarantee an end to fee diversion.  Therefore, without permitting the PTO to keep all of its collected fees, adding additional requirements to the PTO in the form of post-grant oppositions and other new procedures will only add to the PTO’s backlog and pendency problems.

Fee Diversion

Make no mistake about it.  Without the guarantee of S. 23 to end fee diversion, diversion will continue.  Congress views PTO fees as part of the general budget that it is free to use as it pleases.  It then allocates another amount of money to the PTO to fund its operation.  Congress has never allocated more than the PTO has collected, but it has allocated nearly $1 billion less than what the PTO has collected over the past 10-15 years. 

The result is, of course, an additional tax on PTO users.  Tea Party members who have pledged not to raise taxes are doing exactly that when they steal money from PTO users for the general budget.  Congress has already robbed the PTO of $100 million of collected fees in FY2011.

The debt ceiling fight resulted in a serious push to cut spending by the federal government.  The Tea Party and other members of the Republican Caucus have refused to permit a tax increase of any kind.  Regardless of whether this is good or bad politics, Congress needs to decrease spending.  Congress considers PTO fees to be part of the general federal budget.  What’s do you think is going to happen to fees collected by the PTO?  What a great way to cut federal spending without raising taxes, right?

The legislation to raise the debt ceiling created a Super Committee that will be meeting to make recommendations on cutting federal spending further in an effort to reduce the deficit.  As pointed out by Hal Wegner, the members of the Committee include:  Rep. Jeb Hensarling (R-TX) co-chair; Sen. Patty Murray (D-WA) co-chair; Rep. Dave Camp (R-MI); Rep. Fred Upton (R-MI); Sen. Max Baucus (D-MT); Sen. John Kerry (D-MA); Sen. Jon Kyl (R-AZ); Sen. Pat Toomey (R-PA); Sen. Rob Portman (R-OH); Rep. James Clyburn (D-SC); Rep. Xavier Becerra (D-CA); Rep. Chris Van Hollen (D-MD).  Some have expressed hope that Sen. Kyl and Rep. Portman may stand up for the PTO to permit it to keep its fees.  We can hope, but don’t count on it.

PTO Seeks Comments on Patent Reform Implementation

Meanwhile, the PTO is so confident in quick passage of the bill in September, that it is seeking rule-making comments regarding its implementation before it has the authority to do so.  Some of the provisions of the Act would take effect immediately upon enactment, so the PTO will have a great deal of work to implement those portions immediately.  You have to give the PTO credit for being on top of it.  Comments can be sent to aia_implementation@uspto.gov.

Another Huge Spike in Application Filings?

Some provisions of the Patent Reform Act will take effect 18 months after its enactment, most notably the change from first-to-invent to first-to-file.  Assuming September passage, this would put the 18 month date at March 2013. 

As Prof. Crouch at Patently-O and others have noted, the last change to patent application procedure of this magnitude occured on June 8, 1995.  Patents issuing from applications filed prior to that date had a term of the longer of 17 years from issuance or 20 years from earliest filing; patents issuing from applications filed after that date had a term of 20 years from earliest filing only.  An enormous spike in filings occurred leading up to that date.  A similar or even greater spike can be expected in the time leading up to March 2013.  This can only further contribute to the PTO’s backlog.

Now that Congress has finally resolved the crisis over the debt ceiling, it’s time for them to go on their annual month-long vacation.  When they return, they plan to take up the House patent reform bill first.  From the sound of it, they plan to simply vote on the problem-filled bill passed by the House in June.

Senate Majority Leader Harry Reid (D-NV) planned to file cloture on the bill on Tuesday, thereby permitting floor action when the Senate reconvenes on September 6.  This would seem to limit debate on the measure and only permit consideration of the House bill.

Meanwhile, President Obama also continues to push for passage.

Through patent reform, we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses—which holds our whole economy back.

Sen. Reid and Sen. Patrick Leahy (D-VT) said the patent reform bill will create 200,000 jobs.  I’d love to see where that number comes from.

After two days of debate that included the issues of the constitutionality of the first-to-file regime and PTO funding provisions, the America Invents Act overwhelmingly passed the House of Representatives yesterday, 304-117.

Earlier in the day, the House had passed Judiciary Committee Chairman Lamar Smith’s (R-TX) Manager’s Amendment, 283-140.  The Manager’s Amendment stripped the original bill of the PTO’s fee-setting authority.  Although Chairman Smith argued that the newly worded fee provision requires PTO collections be placed in a specific fund that can only be used by the PTO, the fact is that the provision is very similar to the status quo.  The fees the PTO collects must still be appropriated by Congress.  House members promised not to steal any more funds from the PTO, but we all know how much congressional promises are worth.

Patent Docs has a recap of the voting on various proposed amendments to the bill.

Now, the House bill must be reconciled with the Senate bill before anything is sent to Pres. Obama for signature.  The leading proponent in the Senate for ending fee diversion, Sen. Tom Coburn (R-OK), issued a press release urging the House to reject the bill that lacks the provisions to end fee diversion.  He argued that without this safeguard, there is no reason to believe that the Appropriations Committee will not continue to steal funds from the PTO.

Meanwhile, the Aministration, through Director Kappos, issued a statement praising passage of the bill and encouraging expeditious final passage.  Director Kappos seems more confident in a promise from the Appropriations Committee than seems warranted given that that committee is responsible for the current mess that siphoned off close to $1 billion from the PTO over the last 20 years.

Will the Senate accept the removal of the fee diversion prohibition language?  What about the House’s broad prior use rights?  Let’s hope not.  The bill that passed the House is a far cry worse than the one that passed the Senate.