Patent Reform Deja Vu

William Hunter article

As we approach the end of 2009, many wonder if Congress will finally get its act together and pass effective patent reform legislation. Our new USPTO Director, David Kappos, has tried to spur them along, noting on Sept. 14 that, “The time is now to get patent reform done.” But will Congress be able to find the time and political will to reach consensus on how to improve our patent system? Given the importance of intellectual property to our economy and our future, hopefully they will act sooner, rather than later.

Currently, our patent system is suffering from an unacceptable backlog of applications and questionable examination quality. Interestingly, way back in 1922, we apparently had a similar problem. The founder of my law firm, Frederick P. Fish, as reported in a Jan. 8, 1922 New York Times article, indicated that the “deplorable condition” in the Patent Office is due to neglect by Congress. Mr. Fish demanded reform, noting that “the industrial progress of this country is to a great extent based upon its patent system, which is considered to be the best in the world and largely responsible for the country’s remarkable industrial development.” Congress did finally take action to address the problems in 1922. Unfortunately, many of those problems are back again today.

Our patent system represents a bargain in which we grant a limited commercial monopoly in exchange for inventors disclosing their ideas to the public. Our founding fathers recognized the importance of this bargain by expressly giving Congress the power to create the patent system in Article 1, Section 8, of the Constitution. And for many years, the Patent Office has done a good job, and actually generated a profit from the fees it charges patent applicants.

Unfortunately, in 1992, Congress began diverting money from these fees to pay for unrelated government projects. This continued for over a decade, resulting in a significant impairment of the Patent Office’s ability to hire and train new examiners. Many of our representatives in Congress now recognize how shortsighted this fee diversion was, and hopefully any reform legislation that is passed will include an end to fee diversion. The increasing cost of patent litigation has focused Congress’s attention, and Congress has been trying to pass patent reform legislation for years now. But I wonder if they realize that our problems with patent litigation are often linked to the initial examination by the Patent Office.

The Patent Office is tasked with examining patent applications in light of that which is already known in the various fields of art. The goal of each examination is to insure (to the extent possible) that an issued patent is only granted for a real invention, where the issued claims clearly cover the exact invention made by the inventor. Admittedly, this process will never be perfect, but at noted by Mr. Fish in 1922, “If the examination by the Patent Office is so defective that the claims allowed on an application are invalid, too broad or too narrow, or so ambiguous as not clearly to define the subject matter of the real invention, both inventor and the public are necessarily uncertain as to their respective rights. In such cases the real status of the patent can be determined only by expensive and protracted litigation, which is a serious hardship to the owner of the patent and to the public.”

Ineffective examination by the Patent Office leads to increased costs for patent applicants and has a significant negative impact on new ventures and new products. Whether due to inexperience or lack of sufficient time to examine a case, a poor rejection by an examiner is a lose-lose situation. The applicant must spend money addressing the rejection, regardless of its merits. If the applicant decides to amend the claims to satisfy the examiner and get the patent to issue, even when not necessary in view of the art, this can create ambiguities in the claims and increase the cost of litigating the patent. Alternatively, if the applicant decides to stand her ground on the original claims by pursuing an appeal, this leads to increased prosecution costs and delay in getting the patent to issue.

Delay in patent issuance can be a critical problem. As product life cycles decrease, it is not unheard of for an invention to become obsolete by the time the patent issues. In other cases, a new idea never gets off the ground because investors are unwilling to commit money to develop a product that can immediately be copied by others once commercial feasibility is demonstrated. This means that many valuable inventions never get the chance to benefit the public because no one is willing to commit the capital to make it happen. Thus, our current patent system often fails the Constitution’s directive to promote “useful Arts.”

Back in 1922, Mr. Fish indicated that a delay of one year before the first Office action was unacceptable. Today, the Patent Office frequently takes more than two years to issue a first action and more than three years to issue a patent. This has to change if the United States is going to maintain its leading position in the innovation economy of the future.

Thankfully, our new USPTO Director recognizes the problem and is ready to take action. He has admitted that the quality of examination is not where it should be. He has acknowledged that the Patent Office should develop “a nationwide work force, which will allow us to hire the best candidates across the country[.]” Moreover, he has already proposed a significant, albeit incremental change to the examiner count system to encourage effective and compact prosecution. These are all very good signs. But we still need Congress to take action. Hopefully Congress will heed the call of Kappos, who has noted, “The patent system is a key driver of innovation and prosperity for our country. Innovation industries create jobs, which means a well-functioning patent system creates jobs.”

This article does not reflect the opinions of Fish & Richardson.

William E. Hunter is a principal with the Southern California office of Fish & Richardson. His practice emphasizes U.S. and international patent prosecution and portfolio management, as well as general client counseling.