Patent law provisions pondered by Congress

Increased fees and provisions of section 18 are among the major concerns stakeholders have regarding the Leahy-Smith America Invents Act.

Section 18, which goes into effect Sept. 16, involves the transitional program for covered business method patents and provides a post-grant review of patents issued before the law was enacted.

David Kappos, director of the U.S. Patent and Trademark Office, last week told members of the House Committee on the Judiciary that seven of the 20 provisions of the act have been implemented so far and that his agency is working to implement nine additional provisions, with final rules to be issued on them Aug. 16.

“With adoption of the America Invents Act, Congress has enabled the U.S. Patent and Trademark Office to promote a new vision of an (intellectual property) world in which national and regional patent systems are coordinated to create an optimal environment for technical innovation globally,” Kappos said.

He and six other men, representing various companies and intellectual property law associations, discussed implementation of the act, which was signed into law Sept. 16 by President Barack Obama and is being phased in through Sept. 16, 2015.

Kappos said the AIA implementation team continues to review hundreds of comments received from individuals, IP organizations and practitioners, other government entities, and academic institutions to produce rules that will best meet the needs of America’s innovation community.

He testified that the act is important for job creation and the economic well-being of the nation.

Rep. Lamar Smith, who chairs the committee, said 75 industries qualify as IP intensive, directly employing 27 million people with another 13 million employed through indirect activities, representing 28 percent of the nation’s jobs and more than one-third of its gross domestic product. The new act is named after him and Sen. Patrick Leahy, D-Vt., chair of the Senate Committee on the Judiciary.

Smith said American inventors have lead the world in innovation from Ben Franklin to the Wright Brothers to Steve Jobs, but frivolous lawsuits were preventing legitimate inventors from inventing and providing jobs.

Smith asked the first question, which had to do with a 15 percent fee increase announced in February. He noted patent fees will generate $2.93 billion for the PTO in fiscal 2013 and wanted to know how the agency might use the additional revenue

Kappos said he believes the fees may come down somewhat and that the money is going toward hiring more examiners to get the backlog of cases under control by 2015. He said when the law was approved, there were more than 750,000 patent applications pending. That is down to 640,000 and Kappos said it will be further reduced to 600,000 by the end of the financial year.

The goal is to have it down to 330,000 applications by the end of 2015 at which point he projected first-office actions will be processed in about 10 months after filing and completed in about 20 months instead of the current rate of nearly three years.

Committee member Rep. F. James Sensenbrenner, R-Wis., noted he was opposed to the act and indicated the committee was considering secretly changing the legislation, as opposed to discussing technical corrections.

“Don’t play ‘I’ve got a secret’ with the changes proposed,” he said. “Let’s keep it technical. Let’s debate substantive things in separate legislation. When you don’t expose massive legislation to the full light of day and have a full debate on it, there will be mistakes that require technical corrections. Strike one on you folks. Let’s not have strike two and strike three.”

Smith said there was no technical bill pending and that everyone would be made aware of one if one should come up.

Rep. Howard Coble, R-N.C., asked how talks with European nations and Japan were proceeding toward patent harmonization, including adoption of a one-year grace period.

“We’re making considerable progress on harmonization,” Kappos replied, noting Japan needs to extend its grace period to one year, South Korea has adopted such as part of its recent trade agreement and that work is proceeding with European nations.

Rep. Zoe Lofgren, D-Calif., expressed concerns about section 18. She said Claudio Ballard, chairman and CEO of Datatreasury Corp., explained to the committee how he had created the process to replace paper checks with a digital process, one which he claimed the financial services industry took extraordinary steps to invalidate and have used their power and influence to get section 18 inserted into the new law.

Kappos said the PTO has looked at the section carefully and its job is to implement it along the lines of the law and legislative history.

Eliot D. Williams, a partner in the New York City office of Baker Botts LLP, said the importance of the transitional review program for covered business methods cannot be overstated; that it offers a less costly and more efficient alternative to litigation so businesses acting in good faith do not have to spend millions of dollars litigating the validity of a questionable patent.

Speaking on behalf of several banking and financial institutions, he said the burden for whether a technological exception applies should be on a patentee and the economy will benefit by the PTO making sure potentially invalid patents do not escape review.

Williams said Sen. Charles E. Schumer, one of the sponsors of the provision, cautioned that the term technological invention should not provide a haven for clever lawyers to draft patent claims that would escape review under the program.

Carl D. Horton, chief intellectual property counsel for General Electric, speaking on behalf of the Coalition for 21st Century Patent Reform, said the post-grant and inter partes reviews are not nearly as streamlined as they could be and lack procedural safeguards. He also said the 15 percent fee hike is already impacting a number of companies that cannot afford to file and maintain patents and that draft rules are overly burdensome and the relaxation of some requirements is in order.

Remaining speakers were Kevin H. Rhodes, president and chief IP counsel, 3M Innovative Properties Co., speaking on behalf of the Intellectual Property Owners Association; Richard A. Brandon, associate general counsel, University of Michigan, on behalf of the Association of American Universities; and Timothy Molino, director, government relations, Business Software Alliance.

Smith said the committee expected some tweaks would be made to the legislation.

The more than two-hour hearing may be viewed on the committee’s website at http://judiciary.house.gov.