Changes To Implement Derivation Proceedings, 7028-7041 [2012-2535]

Agencies

• DEPARTMENT OF COMMERCE
• Patent and Trademark Office

[Federal Register Volume 77, Number 28 (Friday, February 10, 2012)]
[Proposed Rules]
[Pages 7028-7041]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2535]


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DEPARTMENT OF COMMERCE

Patent and Trademark Office

37 CFR Part 42

[Docket No. PTO-P-2011-0086]
RIN 0651-AC74


Changes To Implement Derivation Proceedings

AGENCY: United States Patent and Trademark Office, Commerce.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The United States Patent and Trademark Office (Office or 
USPTO) proposes new rules to implement the provisions of the Leahy-
Smith America Invents Act that create a new derivation proceeding to be 
conducted before the Patent Trial and Appeal Board (Board). These 
provisions of the Leahy-Smith America Invents Act will take effect on 
March 16, 2013, eighteen months after the date of enactment, and apply 
to applications for patent, and any patent issuing thereon, that are 
subject to first-inventor-to-file provisions of the Leahy-Smith America 
Invents Act.

DATES: The Office solicits comments from the public on this proposed 
rulemaking. Written comments must be received on or before April 10, 
2012 to ensure consideration.

ADDRESSES: Comments should be sent by electronic mail message over the 
Internet addressed to: derivation@uspto.gov. Comments may also be 
submitted by postal mail addressed to: Mail Stop Patent Board, Director 
of the United States Patent and Trademark Office, P.O. Box 1450, 
Alexandria, VA 22313-1450, marked to the attention of ``Lead Judge 
Michael Tierney, Derivation Proposed Rules.''
    Comments may also be sent by electronic mail message over the 
Internet via the Federal eRulemaking Portal. See the Federal 
eRulemaking Portal Web site (https://www.regulations.gov) for additional 
instructions on providing comments via the Federal eRulemaking Portal.

[[Page 7029]]

    Although comments may be submitted by postal mail, the Office 
prefers to receive comments by electronic mail message over the 
Internet because sharing comments with the public is more easily 
accomplished. Electronic comments are preferred to be submitted in 
plain text, but also may be submitted in ADOBE[reg] portable document 
format or MICROSOFT WORD[supreg] format. Comments not submitted 
electronically should be submitted on paper in a format that 
facilitates convenient digital scanning into ADOBE[reg] portable 
document format.
    The comments will be available for public inspection at the Board 
of Patent Appeals and Interferences, currently located in Madison East, 
Ninth Floor, 600 Dulany Street, Alexandria, Virginia. Comments also 
will be available for viewing via the Office's Internet Web site 
(https://www.uspto.gov). Because comments will be made available for 
public inspection, information that the submitter does not desire to 
make public, such as an address or phone number, should not be included 
in the comments.

FOR FURTHER INFORMATION CONTACT: Michael Tierney, Lead Administrative 
Patent Judge, Richard Torczon, Administrative Patent Judge, Sally Lane, 
Administrative Patent Judge, and Sally Medley, Administrative Patent 
Judge, Board of Patent Appeals and Interferences, by telephone at (571) 
272-9797.

SUPPLEMENTARY INFORMATION: On September 16, 2011, the Leahy-Smith 
America Invents Act was enacted into law (Pub. L. 112-29, 125 Stat. 284 
(2011)). The purpose of the Leahy-Smith America Invents Act and these 
proposed regulations is to establish a more efficient and streamlined 
patent system. The preamble of this notice sets forth in detail the 
procedures by which the Board will conduct a new administrative 
proceeding called a derivation proceeding. Derivation proceedings were 
created to ensure that the first person to file the application is 
actually a true inventor. This new proceeding will ensure that a person 
will not be able to obtain a patent for the invention that he did not 
actually invent. If a dispute arises as to which of two applicants is a 
true inventor (as opposed to who invented it first), it will be 
resolved through derivation proceeding by the Board. The USPTO is 
engaged in a transparent process to create the procedures for 
derivation proceedings. The proposed rules would provide a set of rules 
relating to Board trial practice for derivation proceedings.
    Section 3(i) of the Leahy-Smith America Invents Act amends 35 
U.S.C. 135 to provide for derivation proceedings and to eliminate the 
interference practice as to applications and patents having an 
effective filing date on or after March 16, 2013 (with a few 
exceptions). Derivation proceedings will be conducted in a manner 
similar to inter partes reviews and post-grant reviews. Unlike patent 
interferences, derivations will be conducted in a single phase without 
the use of a ``count.'' An inventor seeking a derivation proceeding 
must file an application. 35 U.S.C. 135(a). An inventor, however, may 
copy an alleged deriver's application, make any necessary changes to 
reflect accurately what the inventor invented, and provoke a derivation 
proceeding by the timely filing of a petition and fee.
    In particular, 35 U.S.C. 135(a), as amended, will provide that an 
applicant for patent may file a petition to institute a derivation 
proceeding in the Office. 35 U.S.C. 135(a), as amended, will provide 
that the petition must state with particularity the basis for finding 
that a named inventor in the earlier application derived the claimed 
invention from an inventor named in the petitioner's application and, 
without authorization, filed the earlier application. 35 U.S.C. 135(a), 
as amended, also will provide that the petition must be filed within 
one year of the first publication by the earlier applicant of a claim 
to the same or substantially the same invention, made under oath, and 
be supported by substantial evidence. 35 U.S.C. 135(a), as amended, 
will also provide that if the Director determines that the petition 
demonstrates that the standards for instituting a derivation proceeding 
are met, the Director may institute a derivation proceeding and that 
the determination of whether to initiate a derivation proceeding is 
final and nonappealable. A derivation is unlikely to be declared even 
where the Director thinks the standard for instituting a derivation 
proceeding is met if the petitioner's claim is not otherwise in 
condition for allowance. Cf. Brenner v. Manson, 383 U.S. 519, 528 n.12 
(1966); accord Ewing v. Fowler Car Co., 244 U.S. 1, 7 (1917).
    35 U.S.C. 135(b), as amended, will provide that, once a derivation 
proceeding is initiated, the Patent Trial and Appeal Board will 
determine whether a named inventor in the earlier application derived 
the claimed invention from a named inventor in the petitioner's 
application and, without authorization, filed the earlier application. 
35 U.S.C. 135(b), as amended, will also provide that the Patent and 
Trial and Appeal Board may correct the naming of the inventor of any 
application or patent at issue in appropriate circumstances, and that 
the Director will prescribe regulations for the conduct of derivation 
proceedings, including requiring parties to provide sufficient evidence 
to prove and rebut a claim of derivation.
    35 U.S.C. 135(c), as amended, will provide that the Patent Trial 
and Appeal Board may defer action on a petition for derivation 
proceeding for up to three months after a patent is issued from the 
earlier application that includes a claim that is the subject of the 
petition. 35 U.S.C. 135(c), as amended, will further provide that the 
Patent Trial and Appeal Board also may defer action on a petition for a 
derivation proceeding or stay the proceeding after it has been 
initiated until the termination of a proceedings under chapter 30, 31, 
or 32 involving the patent of the earlier applicant.
    35 U.S.C. 135(d), as amended, will provide that a decision that is 
adverse to claims in an application constitutes the final refusal of 
the claims by the Office, while a decision adverse to claims in a 
patent constitutes cancellation of the claims, if no appeal or other 
review of the decision has been taken or had. 35 U.S.C. 135(d), as 
amended, will provide that a notice of cancellation must be endorsed on 
copies of the patent distributed after the cancellation.
    Section 3(i) of the Leahy-Smith America Invents Act further adds 
two new provisions, 35 U.S.C. 135(e) and (f). In particular, new 
paragraph (e) will provide that the parties to a derivation proceeding 
may terminate the proceeding by filing a written statement reflecting 
the agreement of the parties as to the correct inventors of the claimed 
invention in dispute. 35 U.S.C. 135(e) will provide that the Patent 
Trial and Appeal Board must take action consistent with the agreement, 
unless the Board finds the agreement to be inconsistent with the 
evidence of record. 35 U.S.C. 135(e) will further provide that the 
written settlement or understanding of the parties must be filed with 
the Director and, at the request of a party, will be treated as 
business confidential information, will be kept separate from the file 
of the involved patents or applications, and will be made available 
only to Government agencies on written request, or to any person on a 
showing of good cause.
    New paragraph (f) of 35 U.S.C. 135 will allow the parties to a 
derivation proceeding to determine the contest, or

[[Page 7030]]

any aspect thereof, by arbitration within a time specified by the 
Director, and will provide that the arbitration is governed by the 
provisions of title 9, to the extent that title is not inconsistent 
with 35 U.S.C. 135. 35 U.S.C. 135(f) will also provide that the parties 
must give notice of any arbitration award to the Director, that the 
award is not enforceable until such notice is given, and that the 
award, as between the parties to the arbitration, is dispositive of the 
issues to which it relates but does not preclude the Director from 
determining the patentability of the claimed inventions involved in the 
proceeding. The Director will delegate to the Board authority to 
resolve patentability issues that arise during derivation proceedings 
when there is good cause to do so.

Discussion of Specific Rules

    This notice proposes new rules to implement the provisions of the 
Leahy-Smith America Invents Act for instituting and conducting 
derivation proceedings before the Patent Trial and Appeal Board 
(Board). 35 U.S.C. 135(b), as amended, will provide that the Director 
will prescribe regulations setting forth standards for the conduct of 
derivation proceedings. This notice proposes to add a new subpart E to 
37 CFR part 42 to provide rules specific to derivation proceedings.
    Additionally, the Office in a separate rulemaking is proposing to 
add part 42, including subpart A, (RIN 0651-AC70) that would include a 
consolidated set of rules relating to Board trial practice. More 
specifically, the proposed subpart A of part 42 would set forth the 
policies, practices, and definitions common to all trial proceedings 
before the Board. The proposed rules in the instant notice and 
discussion below may reference the proposed rules in subpart A of part 
42. Furthermore, the Office in separate rulemakings proposes to add a 
new subpart B to 37 CFR part 42 (RIN 0651-AC71) to provide rules 
specific to inter partes review, a new subpart C to 37 CFR part 42 (RIN 
0651-AC72) to provide rules specific to post-grant review, and a new 
subpart D to 37 CFR part 42 (RIN 0651-AC73; RIN 0651-AC75) to provide 
rules specific to transitional program covered business method patents.
    Title 37 of the Code of Federal Regulations, Chapter I, Part 42, 
Subpart E, entitled ``Derivation'' is proposed to be added as follows:
    Section 42.400: Proposed Sec.  42.400 would set forth policy 
considerations for derivation proceedings.
    Proposed Sec.  42.400(a) would provide that a derivation proceeding 
is a trial and subject to the rules set forth in subpart A.
    Proposed Sec.  42.400(b) would delegate to the Board the Director's 
authority to resolve patentability issues when there is good cause to 
do so. See the last sentence of 35 U.S.C. 135(f), as amended. For 
example, an issue of claim indefiniteness (35 U.S.C. 112) might need to 
be resolved before derivation can be substantively addressed on the 
merits. Resolution of such issues promotes procedural efficiency, and 
may even encourage party settlement, by providing clear guidance on the 
scope of the contested issues.
    Section 42.401: Proposed Sec.  42.401 would set forth definitions 
specific to derivation proceedings, in addition to definitions set 
forth in Sec.  42.2 of this part.
    Definitions proposed:
    Agreement or understanding under 35 U.S.C. 135(e): The proposed 
definition would reflect the terminology used in 35 U.S.C. 135(e), as 
amended, to describe a settlement between parties to a derivation 
proceeding.
    Applicant: The proposed definition would make it clear that reissue 
applicants are considered applicants, and not patentees, for purposes 
of a derivation proceeding.
    Application: The proposed definition would make it clear that a 
reissue application is an application, not a patent, for purposes of a 
derivation proceeding. Specifically, the proposed definition includes 
both an application for an original patent and an application for a 
reissued patent.
    Petitioner: The proposed definition of petitioner incorporates the 
statutory requirement (35 U.S.C. 135(a), as amended) that the 
petitioner be an applicant.
    Respondent: The proposed definition of respondent identifies the 
respondent as the party other than the petitioner.
    Section 42.402: Proposed Sec.  42.402 would provide who may file a 
petition for a derivation proceeding.
    Section 42.403: Proposed Sec.  42.403 would provide that a petition 
for a derivation proceeding must be filed within one year after the 
first publication of a claim to an invention that is the same or 
substantially the same as the respondent's earlier application's claim 
to the invention. Such publication may be the publication by the USPTO 
of an application for patent or patent or by the World Intellectual 
Property Organization of an international application designating the 
United States. 35 U.S.C. 135(a), as amended, will provide that a 
petition for instituting a derivation proceeding may only be filed 
within the one-year period of the first publication to a claim to an 
invention that is the same or substantially the same as the earlier 
application's claim to the invention. The proposed rule is consistent 
with 35 U.S.C. 135(a), as amended, because the earlier application's 
first publication of the allegedly derived invention triggers the one-
year bar date. While the statute's use of the phrase ``a claim'' is 
ambiguous inasmuch as it could include the petitioner's claim as a 
trigger, such a broad construction could violate due process. For 
example, the petitioner could be barred by publication of its own claim 
before it had any knowledge of the respondent's application. Such 
problems may be avoided if the trigger for the deadline is publication 
of the respondent's claim.
    Section 42.404: Proposed Sec.  42.404 would provide that a fee must 
accompany the petition for a derivation proceeding and that no filing 
date will be accorded until payment is complete.
    Section 42.405: Proposed Sec.  42.405 would identify the content of 
a petition to institute a derivation proceeding. The proposed rule is 
consistent with 35 U.S.C. 135(b), as amended, which will allow the 
Director to prescribe regulations setting forth standards for the 
conduct of derivation proceedings, including requiring parties to 
provide sufficient evidence to prove and rebut a claim of derivation.
    Proposed Sec.  42.405(a) would require a petition to demonstrate 
that the petitioner has standing. To establish standing, a petitioner, 
at a minimum, must timely file a petition that demonstrates that the 
named inventor on the earlier filed application derived the claimed 
invention and filed the earlier application without authorization from 
the petitioner. This proposed requirement attempts to ensure that a 
party has standing to file the petition and would help prevent 
spuriously instituted derivation proceedings. This proposed rule also 
ensures that the petitioner has taken steps to obtain patent protection 
for the same or substantially same invention, thus promoting the useful 
arts. Facially improper standing would be a basis for denying the 
petition without proceeding to the merits of the decision.
    Proposed Sec.  42.405(b) would require that the petition identify 
the precise relief requested. The petition must provide sufficient 
information to identify the application or patent subject to a 
derivation proceeding. The petition must also demonstrate that the 
claimed invention in the subject application or patent was derived from

[[Page 7031]]

an inventor named in the petitioner's application and, without 
authorization, the earliest application claiming such invention was 
filed. The petitioner must further show why the claim is not patentably 
distinct from the invention disclosed to the respondent. For each of 
the respondent's targeted claims, the petitioner must likewise identify 
how the claim to the allegedly derived invention is to be construed. 
Where the claim to be construed contains a means-plus-function or step-
plus-function limitation as permited under 35 U.S.C. 112, sixth 
paragraph, the construction of the claim must identify the specific 
portions of the specification that describe the structure, material, or 
acts corresponding to each claimed function. The proposed rule would 
provide an efficient means for identifying the legal and factual basis 
supporting a prima facie case of relief and would provide the opponent 
with a minimum level of notice as to the basis for the allegations of 
derivation.
    Proposed Sec.  42.405(c) would provide that a derivation showing is 
not sufficient unless it is supported by substantial evidence and at 
least one affidavit addressing communication and lack of authorization, 
consistent with 35 U.S.C. 135(a), as amended. The showing of 
communication must be corroborated.
    Section 42.406: Proposed Sec.  42.406 would provide requirements 
for the service of a petition in addition to the requirements set forth 
in Sec.  42.6(e).
    Proposed Sec.  42.406(a) would require that the petitioner serve 
the respondent at the correspondence address of record. Petition may 
also attempt service at any other address known to the petitioner as 
likely to effect service. Once a patent has issued, communications 
between the Office and the patent owner often suffer. Ray v. Lehman, 55 
F.3d 606 (Fed. Cir. 1995) (patentee's failure to maintain 
correspondence address contributed to failure to pay maintenance fee 
and therefore expiration of the patent). While the proposed rule 
requires service at the correspondence address of record, in many 
cases, the petitioner will already be in communication with the owner 
of the earlier application at a better service address than the 
official correspondence address.
    Proposed Sec.  42.406(b) would address the situation where delivery 
to an earlier application's correspondence address does not result in 
actual service. When the petitioner becomes aware of a service problem, 
it would be required to promptly advise the Board of the problem. The 
Board may authorize other forms of service, such as service by 
publication in the Official Gazette of the United States Patent and 
Trademark Office. Cf. 37 CFR 1.47(c) (notice by publication).
    Section 42.407: Proposed Sec.  42.407(a) would provide requirements 
for a complete petition. 35 U.S.C. 135(b), as amended, will provide 
that the Director establish regulations concerning the standards for 
the conduct of derivation proceedings. 35 U.S.C. 135(a), as amended, 
will provide that a derivation proceeding may be instituted where the 
Director determines that a petition demonstrates that the standards for 
instituting a derivation proceeding are met. Consistent with statute, 
the proposed rule would require that a complete petition be filed along 
with the fee and that it be served at the correspondence address of 
record for the earlier application.
    Proposed Sec.  42.407(b) would provide petitioners a one month time 
frame to correct defective requests to institute a derivation 
proceeding, unless the statutory deadline in which to file a petition 
for derivation has expired. In determining whether to grant a filing 
date, the Board would review the requests for procedural compliance. 
Where a procedural defect is noted, e.g., failure to state the claims 
being challenged, the Board would notify the petitioner that the 
request was incomplete and identify any non-compliance issues.
    Section 42.408: Proposed Sec.  42.408 would provide that an 
administrative patent judge institutes and may reinstitute a derivation 
proceeding on behalf of the Director.
    Section 42.409: Proposed Sec.  42.409 would make it clear that an 
agreement or understanding filed under 35 U.S.C. 135(e) would be a 
settlement agreement for purposes of Sec.  42.74.
    Section 42.410: Proposed Sec.  42.410 would provide for arbitration 
of derivation proceedings. Proposed Sec.  42.410(a) will provide that 
parties to a derivation proceeding may determine such contest, or any 
aspect thereof, by arbitration, except that nothing shall preclude the 
Office from determining the patentability of the claimed inventions 
involved in the proceeding. The proposed rule is consistent with 35 
U.S.C. 135(f) because it would permit arbitration but would not 
preclude the Office from independently determining issues of 
patentability during the course of the proceeding. Proposed Sec.  
42.410(b) provides that the Board will not set a time for, or otherwise 
modify the proceeding for, an arbitration unless the listed procedural 
requirements are met.
    Section 42.411: Proposed Sec.  42.411 would provide that an 
administrative patent judge may decline to institute or continue a 
derivation proceeding between an application and a patent or another 
application that are commonly owned. Common ownership in a derivation 
proceeding is a concern because it can lead to manipulation of the 
process. The proposed rule would be stated permissively because not all 
cases of overlapping ownership would be cause for concern. The cases of 
principal concern involve a real party in interest with the ability to 
control the conduct of more than one party.
    Section 42.412: Proposed Sec.  42.412 would provide for public 
availability of Board records.

Rulemaking Considerations

    A. Administrative Procedure Act (APA): This notice proposes rules 
of practice concerning the procedure for requesting a derivation and 
the trial process after initiation of such a review. The changes being 
proposed in this notice do not change the substantive criteria of 
patentability. These proposed changes involve rules of agency practice 
and procedure and/or interpretive rules. See Bachow Commc'ns Inc. v. 
FCC, 237 F.3d 683, 690 (DC Cir. 2001) (rules governing an application 
process are procedural under the Administrative Procedure Act); Inova 
Alexandria Hosp. v. Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (rules 
for handling appeals were procedural where they did not change the 
substantive standard for reviewing claims); Nat'l Org. of Veterans' 
Advocates v. Sec'y of Veterans Affairs, 260 F.3d 1365, 1375 (Fed. Cir. 
2001) (a rule that clarifies interpretation of a statute is 
interpretive).
    Accordingly, prior notice and opportunity for public comment are 
not required pursuant to 5 U.S.C. 553(b) or (c) (or any other law), and 
thirty-day advance publication is not required pursuant to 5 U.S.C. 
553(d) (or any other law). See Cooper Techs. Co. v. Dudas, 536 F.3d 
1330, 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 
U.S.C. 2(b)(2)(B), does not require notice and comment rulemaking for 
``interpretative rules, general statements of policy, or rules of 
agency organization, procedure, or practice'') (quoting 5 U.S.C. 
553(b)(A)). The Office, however, is publishing these changes and the 
Initial Regulatory Flexibility Act analysis, below, for comment as it 
seeks the benefit of the public's views on the Office's proposed 
implementation of these provisions of the Leahy-Smith America Invents 
Act.
    B. Regulatory Flexibility Act: The Office estimates that no more 
than 50 petitions for derivation will be filed in fiscal year 2013. 
This will be the first fiscal year in which derivation petitions will 
be available.

[[Page 7032]]

    The Office has reviewed the percentage of applications and patents 
for which an interference was declared in fiscal year 2011. 
Applications and patents known to be owned by a small entity represent 
19.62% of applications and patents for which interference was declared 
in FY 2011. Based on the assumption that the same percentage of 
applications and patents owned by small entities will be involved in a 
derivation proceeding, 20 small entity owned applications or patents 
would be affected by derivation review of the 100 parties to the 50 
derivation proceedings.
    1. Description of the Reasons That Action by the Office Is Being 
Considered: On September 16, 2011, the Leahy-Smith America Invents Act 
was enacted into law (Pub. L. 112-29, 125 Stat. 284 (2011)). Section 
3(i) of the Leahy-Smith America Invents Act amends 35 U.S.C. 135 to 
provide for derivation proceedings and eliminate the interference 
practice as to applications and patents that have an effective filing 
date on or after March 16, 2013 (with a few exceptions). 35 U.S.C. 
135(b), as amended, will require that the Director prescribe 
regulations to set forth the standards for conducting derivation 
proceedings, including requiring parties to provide sufficient evidence 
to prove and rebut a claim of derivation.
    2. Succinct Statement of the Objectives of, and Legal Basis for, 
the Proposed Rules: The proposed rules seek to implement derivation 
proceedings as authorized by the Leahy-Smith America Invents Act.
    3. Description and Estimate of the Number of Affected Small 
Entities: The Small Business Administration (SBA) small business size 
standards applicable to most analyses conducted to comply with the 
Regulatory Flexibility Act are set forth in 13 CFR 121.201. These 
regulations generally define small businesses as those with fewer than 
a specified maximum number of employees or less than a specified level 
of annual receipts for the entity's industrial sector or North American 
Industry Classification System (NAICS) code. As provided by the 
Regulatory Flexibility Act, and after consultation with the Small 
Business Administration, the Office formally adopted an alternate size 
standard as the size standard for the purpose of conducting an analysis 
or making a certification under the Regulatory Flexibility Act for 
patent-related regulations. See Business Size Standard for Purposes of 
United States Patent and Trademark Office Regulatory Flexibility 
Analysis for Patent-Related Regulations, 71 FR 67109 (Nov. 20, 2006), 
1313 Off. Gaz. Pat. Office 60 (Dec. 12, 2006). This alternate small 
business size standard is SBA's previously established size standard 
that identifies the criteria entities must meet to be entitled to pay 
reduced patent fees. See 13 CFR 121.802. If patent applicants identify 
themselves on a patent application as qualifying for reduced patent 
fees, the Office captures this data in the Patent Application Location 
and Monitoring (PALM) database system, which tracks information on each 
patent application submitted to the Office.
    Unlike the SBA small business size standards set forth in 13 CFR 
121.201, the size standard for USPTO is not industry-specific. The 
Office's definition of a small business concern for Regulatory 
Flexibility Act purposes is a business or other concern that: (1) Meets 
the SBA's definition of a ``business concern or concern'' set forth in 
13 CFR 121.105; and (2) meets the size standards set forth in 13 CFR 
121.802 for the purpose of paying reduced patent fees, namely an 
entity: (a) Whose number of employees, including affiliates, does not 
exceed 500 persons; and (b) which has not assigned, granted, conveyed, 
or licensed (and is under no obligation to do so) any rights in the 
invention to any person who made it and could not be classified as an 
independent inventor, or to any concern which would not qualify as a 
non-profit organization or a small business concern under this 
definition. See Business Size Standard for Purposes of United States 
Patent and Trademark Office Regulatory Flexibility Analysis for Patent-
Related Regulations, 71 FR at 67112 (Nov 20, 2006), 1313 Off. Gaz. Pat. 
Office at 63 (Dec. 12, 2006).
    As discussed above, it is anticipated that 50 petitions for 
derivation will be filed in fiscal year 2013. The Office has reviewed 
the percentage of applications and patents for which an interference 
was declared in fiscal year 2011. Applications and patents known to be 
owned by a small entity represent 19.62% of applications and patents 
for which interference was declared in FY 2011. Based on the assumption 
that the same percentage of applications and patents owned by small 
entities will be involved in a derivation proceeding, 20 small entity 
owned applications or patents would be affected by derivation 
proceeding.
    The Office predicts that it will institute 10 derivation 
proceedings based on petitions seeking derivation filed in fiscal year 
2013. This estimate is based on the low number of interference 
proceedings declared as well as the limited number of eligible 
applications.
    During fiscal year 2011, the Office issued 21 decisions following a 
request for reconsideration of a decision on appeal in inter partes 
reexamination. The average time from original decision to decision on 
reconsideration was 4.4 months. Thus, the decisions on reconsideration 
were based on original decisions issued from July 2010 until June 2011. 
During this time period, the Office mailed 63 decisions on appeals in 
inter partes reexamination. See BPAI Statistics--Receipts and 
Dispositions by Technology Center, https://www.uspto.gov/ip/boards/bpai/stats/receipts/index.jsp (monthly data). Based on the assumption that 
the same rate of reconsideration (21 divided by 63 or 33.3%) will 
occur, the Office estimates that 2 requests for reconsideration will be 
filed. Based on the percentage of small entity owned patent 
applications or patents that were the subject of an interference 
declared in fiscal year 2010 (19.62%) it is estimated that 1 small 
entity will file a request for a reconsideration of a decision 
dismissing the petition for derivation in fiscal year 2013.
    The Office reviewed motions, oppositions, and replies in a number 
of contested trial proceedings before the trial section of the Board. 
The review included determining whether the motion, opposition and 
reply were directed to patentability grounds and non-priority non-
patentability grounds. Based on the review, it is anticipated that 
derivation proceedings will have an average of 23.4 motions, 
oppositions, and replies per trial after institution. Settlement is 
estimated to occur in 20% of instituted trials at various points of the 
trial. In the trials that are settled, it is estimated that only 50% of 
the noted motions, oppositions, and replies would be filed.
    After a trial has been instituted but prior to a final written 
decision, parties to a derivation proceeding may request an oral 
hearing. It is anticipated that 5 requests for oral hearings will be 
filed. Based on the percentage of small entity owned patent 
applications or patents that were the subject of an interference 
declared in fiscal year 2010 (19.62%), it is estimated that 2 small 
entities will file a request for oral hearing derivation proceedings 
instituted in fiscal year 2013.
    Parties to a review or derivation proceeding may file requests to 
treat a settlement as business confidential, request for adverse 
judgment, and arbitration agreements and awards. A written request to 
make a settlement agreement available may also be filed. Given the 
short time period set for conducting trials, it is anticipated that

[[Page 7033]]

the alternative dispute resolution options will be infrequently used. 
The Office estimates that 2 requests to treat a settlement as business 
confidential, 2 written requests to make a settlement agreement 
available, 2 requests for adverse judgment, default adverse judgment, 
or settlement notices and 2 arbitration agreements and awards will be 
filed. Based on the percentage of small entity owned patent 
applications or patents that were the subject of an interference 
declared in fiscal year 2010 (19.62%), it is estimated that 1 small 
entity will file a request to treat a settlement as business 
confidential, 1 small entity will file a request for adverse judgment, 
default adverse judgment notice, or settlement notice, and 1 small 
entity will file an arbitration agreement and award in the derivation 
proceedings instituted in fiscal year 2013.
    Parties to a derivation proceeding may seek judicial review of the 
final decision of the Board. The Office projects that no more than 5 
derivation proceedings filed in fiscal year 2013 will be appealed. 
Based on the percentage of small entity owned patent applications or 
patents that were the subject of an interference declared in fiscal 
year 2010 (19.62%), it is estimated that 2 small entities will seek 
judicial review of final decisions of the Board in the derivation 
proceedings instituted in fiscal year 2013.
    4. Description of the Reporting, Recordkeeping, and Other 
Compliance Requirements of the Proposed Rule, Including an Estimate of 
the Classes of Small Entities Which Will Be Subject to the Requirement 
and the Type of Professional Skills Necessary for Preparation of the 
Report or Record: Based on the trends of declared contested cases in 
fiscal year 2011, it is anticipated that petitions for derivation will 
be filed across all technologies with approximately 16% being filed in 
electrical technologies, approximately 17% in mechanical technologies, 
and the remaining 67% in chemical technologies and design. A derivation 
petition is likely to be filed by an entity practicing in the same or 
similar field as the patent. Therefore, it is anticipated that 16% of 
the petitions for review will be filed in the electronic field, 17% in 
the mechanical field, and 67% in the chemical or design fields.
    Preparation of the petition would require analyzing the patent 
claims, locating evidence supporting arguments of communication, and 
preparing the petition seeking review of the patent. The procedures for 
petitions to institute a derivation proceeding are proposed in 
Sec. Sec.  42.6, 42.8, 42.11, 42.13, 42.21, 42.22, 42.24(a)(4), 42.63, 
42.65, and 42.402 through 42.406.
    The skills necessary to prepare a petition seeking a derivation 
proceeding and to participate in a trial before the Patent Trial and 
Appeal Board would be similar to those needed to prepare a request for 
inter partes reexamination, and to represent a party in an inter partes 
reexamination before the Patent Trial and Appeal Board. The level of 
skill is typically possessed by a registered patent practitioner having 
devoted professional time to the particular practice area, typically 
under the supervision of a practitioner skilled in the particular 
practice area. Where authorized by the Board, a non-registered 
practitioner may be admitted pro hac vice, on a case-by-case basis 
based on the facts and circumstances of the trial and party, as well as 
the skill of the practitioner.
    The cost of preparing a petition for inter partes review is 
anticipated to be same as the cost for preparing a request for inter 
partes reexamination. The American Intellectual Property Law 
Association's AIPLA Report of the Economic Survey 2011 reported that 
the average cost of preparing a request for inter partes reexamination 
was $46,000. Based on the work required to file and prepare such 
request, the Office considers the reported cost as a reasonable 
estimate. Accordingly, the Office estimates that the cost of preparing 
a petition for inter partes review will be $46,000.
    The cost of preparing a petition for post-grant or covered business 
method patent review is estimated to be 33.333% higher than the cost of 
preparing a petition for inter partes review because the petition for 
post-grant or covered business method patent review may seek to 
institute a proceeding on additional grounds such as subject matter 
eligibility. Therefore, the Office estimates that the cost of preparing 
a petition for post-grant or covered business method patent review 
would be $61,333. It is expected that petitions for derivation would 
have the same complexity and cost as a petition for post-grant review 
because derivation proceedings raise issues of communication, which 
have similar complexity to the issues that can be raised in a post-
grant review, i.e., public use and sale and written description. Thus, 
the Office estimates that the cost of preparing a petition for 
derivation would also be $61,333.
    Following institution of a trial, the parties may be authorized to 
file various motions, e.g., motions to amend and motions for additional 
discovery. Where a motion is authorized, an opposition may be 
authorized, and where an opposition is authorized, a reply may be 
authorized. The procedures for filing a motion are proposed in 
Sec. Sec.  42.6, 42.8, 42.11, 42.13, 42.21, 42.22, 42.24(a)(5), 42.51, 
42.52, 42.53, 42.54, 42.63, 42.64, and 42.65. The procedures for filing 
an opposition are proposed in Sec. Sec.  42.6, 42.8, 42.11, 42.13, 
42.21, 42.23, 42.24(b), 42.51, 42.52, 42.53, 42.54, 42.63, 42.64, and 
42.65. The procedures for filing a reply are proposed in Sec. Sec.  
42.6, 42.8, 42.11, 42.13, 42.21, 42.23, 42.24(c), 42.51, 42.52, 42.53, 
42.54, 42.63, and 42.65. As discussed previously, the Office estimates 
that the average derivation proceeding is anticipated to have 23.4 
motions, oppositions, and replies after institution.
    The AIPLA Report of the Economic Survey 2011 reported that the 
average cost in contested cases before the trial section of the Board 
prior to the priority phase was $322,000 per party. Because of the 
overlap of issues in patentability grounds, it is expected that the 
cost per motion will decline as more motions are filed in a proceeding. 
It is estimated that a motion, opposition, or reply in a derivation is 
estimated at $34,000, which is estimated by dividing the total public 
cost for all motions in current contested cases divided by the 
estimated number of motions in derivations under 35 U.S.C. 135, as 
amended. Based on the work required to file and prepare such briefs, 
the Office considers the reported cost as a reasonable estimate.
    After a trial has been instituted but prior to a final written 
decision, parties to a review or derivation proceeding may request an 
oral hearing. The procedure for filing requests for oral argument is 
proposed in Sec.  42.70. The AIPLA Report of the Economic Survey 2011 
reported that the third quartile cost of an ex parte appeal with an 
oral argument is $12,000, while the third quartile cost of an ex parte 
appeal without an oral argument is $6,000. In view of the reported 
costs, which the Office finds reasonable, and the increased complexity 
of an oral hearing with multiple parties, it is estimated that the cost 
per party for oral hearings would be $6,800 or $800 more than the 
reported third quartile cost for an ex parte oral hearing.
    Parties to a derivation proceeding may file requests to treat a 
settlement as business confidential, request for adverse judgment, and 
arbitration agreements and awards. A written request to make a 
settlement agreement available may also be filed. The procedures to 
file requests that a settlement be treated as business confidential are 
proposed in Sec. Sec.  42.74(c)

[[Page 7034]]

and 42.409. The procedures to file requests for adverse judgment are 
proposed in Sec.  42.73(b). The procedures to file arbitration 
agreements and awards are proposed in Sec.  42.410. The procedures to 
file requests to make a settlement agreement available are proposed in 
Sec.  42.74(c)(2). It is anticipated that requests to treat a 
settlement as business confidential will require 2 hours of 
professional time or $680. It is anticipated that requests for adverse 
judgment will require 1 hour of professional time or $340. It is 
anticipated that arbitration agreements and awards will require 4 hours 
of professional time or $1,360. It is anticipated that requests to make 
a settlement agreement available will require 1 hour of professional 
time or $340. The requests to make a settlement agreement available 
will also require payment of a fee of $400 specified in proposed Sec.  
42.15(d). The fee proposed would be the same as currently set forth in 
Sec.  41.20(a) for petitions to the Chief Administrative Patent Judge.
    Parties to a review proceeding may seek judicial review of the 
judgment of the Board. The procedures to file notices of judicial 
review of a Board decision, including notices of appeal and notices of 
election provided for in 35 U.S.C. 141, 142, 145, and 146, are proposed 
in Sec. Sec.  90.1 through 90.3. The submission of a copy of a notice 
of appeal or a notice of election is anticipated to require 6 minutes 
of professional time at a cost of $34.
    5. Description of Any Significant Alternatives to the Proposed 
Rules Which Accomplish the Stated Objectives of Applicable Statutes and 
Which Minimize Any Significant Economic Impact of the Rules on Small 
Entities:
    Size of petitions and motions: The Office considered whether to 
apply a page limit and what an appropriate page limit would be. The 
Office does not currently have a page limit on inter partes 
reexamination requests. The inter partes reexamination requests from 
October 1, 2010 to June 30, 2011, averaged 246 pages. Based on the 
experience of processing inter partes reexamination requests, the 
Office finds that the very large size of the requests has created a 
burden on the Office that hinders the efficiency and timeliness of 
processing the requests, and creates a burden on patent owners. The 
quarterly reported average processing time from the filing of a request 
to the publication of a reexamination certificate ranged from 28.9 
months to 41.7 months in fiscal year 2009, from 29.5 months to 37.6 
months in fiscal year 2010, and from 31.9 to 38.0 months in fiscal year 
2011. See Reexaminations--FY 2011, https://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf.
    By contrast, the Office has a page limit on the motions filed in 
contested cases, except where parties are specificially authorized to 
exceed the limitation. The typical contested case proceeding is subject 
to a standing order that sets a 50 page limit for motions and 
oppositions on priority, a 15 page limit for miscellaneous motions 
(Sec.  41.121(a)(3)) and oppositions (Sec.  41.122), and a 25 page 
limit for other motions (Sec.  41.121(a)(2)) and oppositions to other 
motions. In typical proceedings, replies are subject to a 15 page limit 
if directed to priority, 5 page limit for miscellaneous issue, and 10 
page limit for other motions. The average contested case was terminated 
in 10.1 months in fiscal year 2009, in 12 months in fiscal year 2010, 
and 9 months in fiscal year 2011. The percentage of contested cases 
terminated within 2 years was 93.7% in fiscal year 2009, 88.0% in 
fiscal year 2010, and 94.0% in fiscal year 2011. See BPAI Statistics--
Performance Measures, https://www.uspto.gov/ip/boards/bpai/stats/perform/index.jsp.
    Comparing the average time period for terminating a contested case, 
10.0 to 12.0 months, with the average time period, during fiscal years 
2009 through 2011, for completing an inter partes reexamination, 28.9 
to 41.7 months, indicates that the average interference takes from 24% 
(10.0/41.7) to 42% (12.0/28.9) of the time of the average inter partes 
reexamination. While several factors contribute to the reduction in 
time, limiting the size of the requests and motions is considered a 
significant factor. Proposed Sec.  42.24 would provide page limits for 
petitions, motions, oppositions, and replies.
    Federal courts routinely use page limits in managing motions 
practice as ``[e]ffective writing is concise writing.'' Spaziano v. 
Singletary, 36 F.3d 1028, 1031 n.2 (11th Cir. 1994). Many district 
courts restrict the number of pages that may be filed in a motion 
including, for example, the District of Delaware, the District of New 
Jersey, the Eastern District of Texas, the Northern, Central, and 
Southern Districts of California, and the Eastern District of Virginia.
    Federal courts have found that page limits ease the burden on both 
the parties and the courts, and patent cases are no exception. Eolas 
Techs., Inc. v. Adobe Sys., Inc., No. 6:09-CV-446, at 1 (E.D. Tex. 
Sept. 2, 2010) (``The Local Rules' page limits ease the burden of 
motion practice on both the Court and the parties.''); Blackboard, Inc. 
v. Desire2Learn, Inc., 521 F. Supp. 2d 575, 576 (E.D. Tex. 2007) (The 
parties ``seem to share the misconception, popular in some circles, 
that motion practice exists to require federal judges to shovel through 
steaming mounds of pleonastic arguments in Herculean effort to uncover 
a hidden gem of logic that will ineluctably compel a favorable ruling. 
Nothing could be farther from the truth.''); Broadwater v. Heidtman 
Steel Prods., Inc., 182 F. Supp. 2d 705, 710 (S.D. Ill. 2002) 
(``Counsel are strongly advised, in the future, to not ask this Court 
for leave to file any memoranda (supporting or opposing dispositive 
motions) longer than 15 pages. The Court has handled complicated patent 
cases and employment discrimination cases in which the parties were 
able to limit their briefs supporting and opposing summary judgment to 
10 or 15 pages.'' (Emphasis omitted)).
    The Board's contested cases experience with page limits in motions 
practice is consistent with that of the federal courts. The Board's use 
of page limits has shown it to be beneficial without being unduly 
restrictive for the parties. Page limits have encouraged the parties to 
focus on dispositive issues, easing the burden of motions practice on 
the parties and on the Board.
    The Board's contested cases experience with page limits is informed 
by its use of different approaches over the years. In the early 1990s, 
page limits were not routinely used for motions, and the practice 
suffered from lengthy and unacceptable delays. To reduce the burden on 
the parties and on the Board and thereby reduce the time to decision, 
the Board instituted page limits in the late 1990s for every motion. 
Page limit practice was found to be effective in reducing the burdens 
on the parties and improving decision times at the Board. In 2006, the 
Board revised the page limit practice and allowed unlimited findings of 
fact and generally limited the number of pages containing argument. Due 
to abuses of the system, the Board recently reverted back to page 
limits for the entire motion (both argument and findings of fact).
    The Board's current page limits are consistent with the 25 page 
limits in the Northern, Central, and Southern Districts of California, 
and the Middle District of Florida and exceed the limits in the 
District of Delaware (20), the Northern District of Illinois (15), the 
District of Massachusetts (20), the Eastern District of Michigan (20), 
the Southern District of Florida (20), and the Southern District of 
Illinois (20).
    In a typical proceeding before the Board, a party may be authorized 
to file a single motion for unpatentability based on prior art, a 
single motion for

[[Page 7035]]

unpatentability based upon failure to comply with 35 U.S.C. 112, lack 
of written description, and/or enablement, and potentially another 
motion for lack of compliance with 35 U.S.C. 101, although a 35 U.S.C. 
101 motion may be required to be combined with the 35 U.S.C. 112 
motion. Each of these motions is currently limited to 25 pages in 
length, unless good cause is shown that the page limits are unduly 
restrictive for a particular motion.
    A petition requesting the institution of a trial proceeding would 
be similar to motions currently filed with the Board. Specifically, 
petitions to institute a trial seek a final written decision that the 
challenged claims are unpatentable, where derivation is a form of 
unpatentability. Accordingly, a petition to institute a trial based on 
prior art would, under current practice, be limited to 25 pages, and by 
consequence, a petition raising unpatentability based on prior art and 
unpatentability under 35 U.S.C. 101 and/or 112 would be limited to 50 
pages.
    Petitions to institute derivation proceedings, while distinct from 
interference practice, raise similar issues to those that may be raised 
in interferences in a motion for judgment on priority of invention. 
Currently, motions for judgment on priority of invention, including 
issues such as conception, corroboration, and diligence, are generally 
limited to 50 pages. Thus, the proposed 50 page limit is considered 
sufficient in all but exceptional cases.
    The proposed rule would provide that petitions to institute a trial 
must comply with the stated page limits, but may be accompanied by a 
motion that seeks to waive the page limits. The petitioner must show in 
the motion how a waiver of the page limits is in the interests of 
justice. A copy of the desired non-page limited petition must accompany 
the motion. Generally, the Board would decide the motion prior to 
deciding whether to institute the trial.
    Current Board practice provides a limit of 25 pages for other 
motions and 15 pages for miscellaneous motions. The Board's experience 
is that such page limits are sufficient for the parties filing them and 
do not unduly burden the opposing party or the Board. Petitions to 
institute a trial would generally replace the current practice of 
filing motions for unpatentability, as most motions for relief are 
expected to be similar to the current contested cases miscellaneous 
motion practice. Accordingly, the proposed 15 page limit is considered 
sufficient for most motions but may be adjusted where the limit is 
determined to be unduly restrictive for the relief requested.
    Proposed Sec.  42.24(b) would provide page limits for oppositions 
filed in response to motions. Current contested case practice provides 
an equal number of pages for an opposition as its corresponding motion. 
This is generally consistent with motions practice in federal courts. 
The proposed rule would continue the current practice.
    Proposed Sec.  42.24(c) would provide page limits for replies. 
Current contested case practice provides a 15 page limit for priority 
motion replies, a 5 page limit for miscellaneous (procedural) motion 
replies, and a 10 page limit for all other motions. The proposed rule 
is consistent with current contested case practice for procedural 
motions. The proposed rule would provide a 15 page limit for reply to 
petitions requesting a trial, which the Office believes is sufficient 
based on current practice. Current contested case practice has shown 
that such page limits do not unduly restrict the parties and, in fact, 
have provided sufficient flexibility to parties to not only reply to 
the motion but also help to focus on the issues. Thus, it is 
anticipated that default page limits would minimize the economic impact 
on small entities by focusing on the issues in the trials.
    Discovery: The Office considered a procedure for discovery similar 
to the one available during district court litigation. Discovery of 
that scope has been criticized sharply particularly when attorneys use 
discovery tools as tactical weapons, which hinder the ``just, speedy, 
and inexpensive determination of every action and proceedings.'' See 
Introduction to An E-Discovery Model Order available at https://www.cafc.uscourts.gov/images/stories/announcements/Ediscovery_Model_Order.pdf. Accordingly, this alternative would have been inconsistent 
with objective of the Leahy-Smith America Invents Act that the 
Director, in prescribing rules for the inter partes, post-grant and 
covered business method patent reviews, consider the effect of the 
rules on the economy, the integrity of the patent system, the efficient 
administration of the Office, and the ability of the Office to complete 
timely the instituted proceedings. Prescribing the same standard for 
derivations allows for efficient proceedings using practices that are 
consistent as possible. It is envisioned that the public burden would 
be reduced by setting discover standards consistently across all trial 
proceedings at the Board.
    Additional discovery increases trial costs and increases the 
expenditures of time by the parties and the Board. To promote effective 
discovery, the proposed rule would require a showing that the 
additional requested discovery is in the interests of justice, placing 
an affirmative burden upon a party seeking the discovery to show how 
the proposed discovery would be productive. The Board's experience in 
conducted contested cases, however, is that such showings are often 
lacking and authorization for additional discovery is expected to be 
rare.
    The Office is proposing a default scheduling order to provide 
limited discovery as a matter of right and provide parties with the 
ability to seek additional discovery on a case-by-case basis. In 
weighing the need for additional discovery, should a request be made, 
the Board would consider the economic impact on the opposing party. 
This would tend to limit additional discovery where a party is a small 
entity.
    Pro Hac Vice: The Office considered whether to allow counsel to 
appear pro hac vice. In certain cases, highly skilled, but non-
registered attorneys have appeared satisfactorily before the Board in 
contested cases. The Board may recognize counsel pro hac vice during a 
proceeding upon a showing of good cause. Proceedings before the Office 
can be technically complex. Consequently, the grant of a motion to 
appear pro hac vice is a discretionary action taking into account the 
specifics of the proceedings. Similarly, the revocation of pro hac vice 
is a discretionary action taking into account various factors, 
including incompetence, unwillingness to abide by the Office's Rules of 
Professional Conduct, prior findings of misconduct before the Office in 
other proceedings, and incivility.
    The Board's past practice has required the filing of a motion by a 
registered patent practitioner seeking pro hac vice representation 
based upon a showing of: (1) How qualified the unregistered 
practitioner is to represent the party in the proceeding when measured 
against a registered practitioner, and, (2) whether the party has a 
genuine need to have the particular unregistered practitioner represent 
it during the proceeding. This practice has proven effective in the 
limited number of contested cases where such requests have been 
granted. The proposed rule, if adopted, would allow for this practice 
in the new proceedings authorized by the Leahy-Smith America Invents 
Act.
    The proposed rules would provide a limited delegation to the Board 
under 35 U.S.C. 2(b)(2) and 32 to regulate the conduct of counsel in 
Board proceedings. The proposed rule would

[[Page 7036]]

delegate to the Board the authority to conduct counsel disqualification 
proceedings while the Board has jurisdiction over a proceeding. The 
rule would also delegate to the Chief Administrative Patent Judge the 
authority to make final a decision to disqualify counsel in a 
proceeding before the Board for the purposes of judicial review. This 
delegation would not derogate from the Director the prerogative to make 
such decisions, nor would it prevent the Chief Administrative Patent 
Judge from further delegating authority to an administrative patent 
judge.
    The Office considered broadly permitting practitioners not 
registered to practice by the Office to represent parties in trial as 
well as categorically prohibiting such practice. A prohibition on the 
practice would be inconsistent with the Board's experience, and more 
importantly, might result in increased costs particularly where a small 
entity has selected its district court litigation team for 
representation before the Board, and has a patent review filed after 
litigation efforts have commenced. Alternatively, broadly making the 
practice available would create burdens on the Office in administering 
the trials and in completing the trial within the established 
timeframe, particularly if the selected practitioner does not have the 
requisite skill. In weighing the desirability of admitting a 
practitioner pro hac vice, the economic impact on the party in interest 
would be considered which would tend to increase the likelihood that a 
small entity could be represented by a non-registered practitioner. 
Accordingly, the alternatives to eliminate pro hac vice practice or to 
permit it more broadly would have been inconsistent with the efficient 
administration of the Office and the integrity of the patent system.
    Default Electronic Filing: The Office considered a paper filing 
system and a mandatory electronic filing system (without any 
exceptions) as alternatives to the proposed requirement that all papers 
are to be electronically filed, unless otherwise authorized.
    Based on the Office's experience, a paper based filing system 
increases delay in processing papers, delay in public availability, and 
the chance that a paper may be misplaced or made available to an 
improper party if confidential. Accordingly, the alternative of a paper 
based filing system would have been inconsistent with the efficient 
administration of the Office.
    An electronic filing system (without any exceptions) that is 
rigidly applied would result in unnecessary cost and burdens, 
particularly where a party lacks the ability to file electronically. By 
contrast, if the proposed option is adopted, it is expected that the 
entity size and sophistication would be considered in determining 
whether alternative filing methods would be authorized.
    6. Identification, to the Extent Practicable, of All Relevant 
Federal Rules Which May Duplicate, Overlap, or Conflict With the 
Proposed Rules:
    37 CFR 1.99 provides for the submission of information after 
publication of a patent application during examination by third 
parties.
    37 CFR 1.171-1.179 provide for applications to reissue a patent to 
correct errors, including where a claim in a patent is overly broad.
    37 CFR 1.291 provides for the protest against the issuance of a 
patent during examination.
    37 CFR 1.321 provides for the disclaimer of a claim by a patentee.
    37 CFR 1.501 and 1.502 provide for ex parte reexamination of 
patents. Under these rules, a person may submit to the Office prior art 
consisting of patents or printed publications that are pertinent to the 
patentability of any claim of a patent, and request reexamination of 
any claim in the patent on the basis of the cited prior art patents or 
printed publications. Consistent with 35 U.S.C. 302-307, ex parte 
reexamination rules provide a different threshold for initiation, 
require the proceeding to be conducted by an examiner with a right of 
appeal to the Patent Trial and Appeal Board, and allow for limited 
participation by third parties.
    37 CFR 1.902-1.997 provide for inter partes reexamination of 
patents. Similar to ex parte reexamination, inter partes reexamination 
provides a procedure in which a third party may request reexamination 
of any claim in a patent on the basis of the cited prior art patents 
and printed publication. The inter partes reexamination practice will 
be eliminated, except for requests filed before the effective date of 
September 16, 2012. See Sec.  6(c)(3)(C) of the Leahy-Smith America 
Invents Act.
    Other countries have their own patent laws, and an entity desiring 
a patent in a particular country must make an application for patent in 
that country, in accordance with the applicable law. Although the 
potential for overlap exists internationally, this cannot be avoided 
except by treaty (such as the Paris Convention for the Protection of 
Industrial Property, or the Patent Cooperation Treaty (PCT)). 
Nevertheless, the Office believes that there are no other duplicative 
or overlapping foreign rules.
    C. Executive Order 12866 (Regulatory Planning and Review): This 
rulemaking has been determined to be significant for purposes of 
Executive Order 12866 (Sept. 30, 1993), as amended by Executive Order 
13258 (Feb. 26, 2002) and Executive Order 13422 (Jan. 18, 2007).
    Based on the petition and other filing requirements for initiating 
a derivation review proceeding, the USPTO estimates the burden of the 
proposed rules on the public to be $11,865,210 in fiscal year 2013, 
which represents the sum of the estimated total annual (hour) 
respondent cost burden ($11,844,410) plus the estimated total annual 
non-hour respondent cost burden ($20,800) provided in Part O, Section 
II, of this notice, infra.
    D. Executive Order 13563 (Improving Regulation and Regulatory 
Review): The Office has complied with Executive Order 13563. 
Specifically, the Office has to the extent feasible and applicable: (1) 
Made a reasoned determination that the benefits justify the costs of 
the rule; (2) tailored the rule to impose the least burden on society 
consistent with obtaining the regulatory objectives; (3) selected a 
regulatory approach that maximizes net benefits; (4) specified 
performance objectives; (5) identified and assessed available 
alternatives; (6) involved the public in an open exchange of 
information and perspectives among experts in relevant disciplines, 
affected stakeholders in the private sector, and the public as a whole, 
and provided online access to the rulemaking docket; (7) attempted to 
promote coordination, simplification, and harmonization across 
government agencies and identified goals designed to promote 
innovation; (8) considered approaches that reduce burdens and maintain 
flexibility and freedom of choice for the public; and (9) ensured the 
objectivity of scientific and technological information and processes.
    E. Executive Order 13132 (Federalism): This rulemaking does not 
contain policies with federalism implications sufficient to warrant 
preparation of a Federalism Assessment under Executive Order 13132 
(Aug. 4, 1999).
    F. Executive Order 13175 (Tribal Consultation): This rulemaking 
will not: (1) Have substantial direct effects on one or more Indian 
tribes; (2) impose substantial direct compliance costs on Indian tribal 
governments; or (3) preempt tribal law. Therefore, a tribal summary 
impact statement is not required under Executive Order 13175 (Nov. 6, 
2000).

[[Page 7037]]

    G. Executive Order 13211 (Energy Effects): This rulemaking is not a 
significant energy action under Executive Order 13211 because this 
rulemaking is not likely to have a significant adverse effect on the 
supply, distribution, or use of energy. Therefore, a Statement of 
Energy Effects is not required under Executive Order 13211 (May 18, 
2001).
    H. Executive Order 12988 (Civil Justice Reform): This rulemaking 
meets applicable standards to minimize litigation, eliminate ambiguity, 
and reduce burden as set forth in sections 3(a) and 3(b)(2) of 
Executive Order 12988 (Feb. 5, 1996).
    I. Executive Order 13045 (Protection of Children): This rulemaking 
does not concern an environmental risk to health or safety that may 
disproportionately affect children under Executive Order 13045 (Apr. 
21, 1997).
    J. Executive Order 12630 (Taking of Private Property): This 
rulemaking will not effect a taking of private property or otherwise 
have taking implications under Executive Order 12630 (Mar. 15, 1988).
    K. Congressional Review Act: Under the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801-808), prior to issuing any final rule, the United 
States Patent and Trademark Office will submit a report containing the 
final rule and other required information to the U.S. Senate, the U.S. 
House of Representatives, and the Comptroller General of the Government 
Accountability Office. The changes in this notice are not expected to 
result in an annual effect on the economy of 100 million dollars or 
more, a major increase in costs or prices, or significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or the ability of United States-based enterprises to 
compete with foreign based enterprises in domestic and export markets. 
Therefore, this notice is not expected to result in a ``major rule'' as 
defined in 5 U.S.C. 804(2).
    L. Unfunded Mandates Reform Act of 1995: The changes proposed in 
this notice do not involve a Federal intergovernmental mandate that 
will result in the expenditure by State, local, and tribal governments, 
in the aggregate, of 100 million dollars (as adjusted) or more in any 
one year, or a Federal private sector mandate that will result in the 
expenditure by the private sector of 100 million dollars (as adjusted) 
or more in any one year, and will not significantly or uniquely affect 
small governments. Therefore, no actions are necessary under the 
provisions of the Unfunded Mandates Reform Act of 1995. See 2 U.S.C. 
1501-1571.
    M. National Environmental Policy Act: This rulemaking will not have 
any effect on the quality of the environment and is thus categorically 
excluded from review under the National Environmental Policy Act of 
1969. See 42 U.S.C. 4321-4370h.
    N. National Technology Transfer and Advancement Act: The 
requirements of section 12(d) of the National Technology Transfer and 
Advancement Act of 1995 (15 U.S.C. 272 note) are not applicable because 
this rulemaking does not contain provisions which involve the use of 
technical standards.
    O. Paperwork Reduction Act: The Paperwork Reduction Act of 1995 (44 
U.S.C. 3501-3549) requires that the USPTO consider the impact of 
paperwork and other information collection burdens imposed on the 
public. This proposed rulemaking involves information collection 
requirements which are subject to review by the Office of Management 
and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3549). The collection of information involved in this notice has 
been submitted to OMB under OMB control number 0651-00xx. In the Notice 
``Rules of Practice for Trials before the Patent Trial and Appeal Board 
and Judicial Review of Patent Trial and Appeal Board Decisions,'' RIN 
0651-AC70, the information collection for all of the new trials 
authorized by the Leahy-Smith America Invents Act were provided. This 
notice also provides the subset of burden created by the derivation 
provisions. The proposed collection will be available at the OMB's 
Information Collection Review Web site (www.reginfo.gov/public/do/PRAMain).
    The USPTO is submitting the information collection to OMB for its 
review and approval because this notice of proposed rulemaking will add 
the following to a collection of information:
    (1) Petitions to institute a derivation proceeding (Sec. Sec.  
42.6, 42.8, 42.11, 42.13, 42.21, 42.22, 42.24(a)(4),42.63, 42.65, and 
42.402 through 42.406);
    (2) Motions (Sec. Sec.  42.6, 42.8, 42.11, 42.13, 42.21, 42.22, 
42.24(a)(5), 42.51, 42.52, 42.53, 42.54, 42.63, 42.64, and 42.65);
    (3) Oppositions (Sec. Sec.  42.6, 42.8, 42.11, 42.13, 42.21, 42.23, 
42.24(b), 42.51, 42.52, 42.53, 42.54, 42.63, 42.64, and 42.65); and
    (4) Replies (Sec. Sec.  42.6, 42.8, 42.11, 42.13, 42.21, 42.23, 
42.24(c), 42.51, 42.52, 42.53, 42.54, 42.63, and 42.65).
    The proposed rules also permit filing requests for oral argument 
(Sec.  42.70), requests for rehearing (Sec.  42.71(c)), requests for 
adverse judgment (Sec.  42.73(b)), requests that a settlement be 
treated as business confidential (Sec.  42.74(b) and 42.409), and 
arbitration agreements and awards (Sec.  42.410) to a collection of 
information.
    I. Abstract: The USPTO is required by 35 U.S.C. 131 and 151 to 
examine applications and, when appropriate, issue applications as 
patents.
    35 U.S.C. 135 in effect on March 16, 2013, will provide for 
petitions to institute a derivation proceeding at the USPTO for certain 
applications. The new rules for initiating and conducting these 
proceedings are proposed in this notice as a new subpart E of new part 
42 of title 37 of the Code of Federal Regulations.
    In estimating the number of hours necessary for preparing a 
petition to institute a derivation proceeding, the USPTO considered the 
estimated cost of preparing a request for inter partes reexamination 
($46,000), the median billing rate ($340/hour), and the observation 
that the cost of inter partes reexamination has risen the fastest of 
all litigation costs since 2009 in the AIPLA Report of the Economic 
Survey 2011. It was estimated that a petition for an inter partes 
review and an inter partes reexamination request would cost the same to 
the preparing party ($46,000). The cost of preparing a petition for 
post-grant or covered business method patent review is estimated to be 
33.333% higher than that cost of preparing an inter partes review 
petition because the petition for post-grant or covered business method 
patent review may seek to institute a proceeding on additional grounds 
such as subject matter eligibility. It is expected that petitions for 
derivation will have the same complexity and cost as a petition for 
post-grant review because derivation proceedings raise issues of 
communication, which have similar complexity to the public use and sale 
and written description issues that can be raised in a post-grant 
review. Thus, the Office estimates that the cost of preparing a 
petition for derivation will be $61,333.
    In estimating the number of hours necessary for preparing motions 
after instituting and participating in the review, the USPTO considered 
the AIPLA Report of the Economic Survey 2011 which reported the average 
cost of a party to a two-party interference to the end of the 
preliminary motion phase ($322,000) and inclusive of all costs 
($631,000). The preliminary motion phase is a good proxy for 
patentability reviews since that is the period of current contested 
cases before the trial

[[Page 7038]]

section of the Board where most patentability motions are currently 
filed.
    The USPTO also reviewed recent contested cases before the trial 
section of the Board to collect data on the average number of motions 
for any matter including priority, the subset of those motions directed 
to non-priority issues, the subset of those motions directed to non-
priority patentability issues, and the subset of those motions directed 
to patentability issues based on a patent or printed publication on the 
basis of 35 U.S.C. 102 or 103. The review of current contested cases 
before the trial section of the Board indicated that approximately 15% 
of motions were directed to prior art grounds, 18% of motions were 
directed to other patentability grounds, 27% were directed to 
miscellaneous issues, and 40% were directed to priority issues. It was 
estimated that the cost per motion to a party in current contested 
cases before the trial section of the Board declines because of overlap 
in subject matter, expert overlap, and familiarity with the technical 
subject matter. Given the overlap of subject matter, a proceeding with 
fewer motions will have a somewhat less than proportional decrease in 
costs since the overlapping costs will be spread over fewer motions.
    Derivations will be more like current contested cases before the 
trial section of the Board inasmuch as they may have a period which 
sets the stage for determining derivation and a derivation period. One 
half of derivations are anticipated to end in the preliminary motion 
period, while the other half are anticipated to proceed to decision on 
derivation. While it is recognized that fewer than half of all current 
contested cases before the trial section of the Board proceed to a 
priority decision, derivation contests are often more protracted than 
other current contested cases before the trial section of the Board. 
The costs associated with derivations through the preliminary motion 
period and through the derivation period should be comparable to the 
corresponding costs of current contested cases before the trial section 
of the Board.
    The title, description, and respondent description of the 
information collection are shown below with an estimate of the annual 
reporting burdens. Included in this estimate is the time for reviewing 
instructions, gathering and maintaining the data needed, and completing 
and reviewing the collection of information. The principal impact of 
the proposed changes in this notice of proposed rulemaking is to 
implement the changes to Office practice necessitated by Sec.  3(i) of 
the Leahy-Smith America Invents Act.
    The public uses this information collection to request review and 
derivation proceedings and to ensure that the associated fees and 
documentation are submitted to the USPTO.

II. Data

    Needs and Uses: The information supplied to the USPTO by a petition 
to institute a derivation proceeding as well as the motions authorized 
following the institution is used by the USPTO to determine whether to 
initiate a derivation proceeding under 35 U.S.C. 135, as amended, and 
to prepare a final decision under 35 U.S.C. 135, as amended.
    OMB Number: 0651-00xx.
    Title: Patent Review and Derivation Proceedings.
    Form Numbers: None.
    Type of Review: New Collection.
    Likely Respondents/Affected Public: Individuals or households, 
businesses or other for profit, not-for-profit institutions, farms, 
Federal Government, and state, local, or tribal governments.
    Estimated Number of Respondents/Frequency of Collection: 100 
respondents and 288 responses per year.
    Estimated Time per Response: The USPTO estimates that it will take 
the public from 0.1 to 180.4 hours to gather the necessary information, 
prepare the documents, and submit the information to the USPTO.
    Estimated Total Annual Respondent Burden Hours: 34,836.5 hours per 
year.
    Estimated Total Annual (Hour) Respondent Cost Burden: $11,844,410 
per year. The USPTO expects that the information in this collection 
will be prepared by attorneys. Using the professional rate of $340 per 
hour for attorneys in private firms, the USPTO estimates that the 
respondent cost burden for this collection will be approximately 
$11,844,410 per year (34,836.5 hours per year multiplied by $340 per 
hour).
    Estimated Total Annual Non-hour Respondent Cost Burden: $20,800 per 
year. There are no capital start-up or maintenance costs associated 
with this information collection. However, this collection does have 
annual (non-hour) costs in the form of filing fees. There are filing 
fees associated with petitions for derivation proceedings and for 
requests to treat a settlement as business confidential. The total fees 
for this collection are calculated in the accompanying table. The USPTO 
estimates that the total fees associated with this collection will be 
approximately $20,800 per year.
    Therefore, the total cost burden in fiscal year 2013 is estimated 
to be $11,865,210 (the sum of the estimated total annual (hour) 
respondent cost burden ($11,844,410) plus the estimated total annual 
non-hour respondent cost burden ($20,800)).

----------------------------------------------------------------------------------------------------------------
                                                             Estimated time
                           Item                               for response    Estimated annual  Estimated annual
                                                                 (hours)          responses       burden hours
----------------------------------------------------------------------------------------------------------------
Petition for derivation...................................             180.4                50           9,020
Request for Reconsideration...............................              80                   5             400
Motions, replies and oppositions in derivation proceeding.             120                 210          25,200
Request for oral hearing..................................              20                  10             200
Request to treat a settlement as business confidential....               2                   2               4
Request for adverse judgment, default adverse judgment or                1                   2               2
 settlement...............................................
Arbitration agreement and award...........................               4                   2               8
Request to make a settlement agreement available..........               1                   2               2
Notice of judicial review of a Board decision (e.g.,                     0.1                 5                .5
 notice of appeal under 35 U.S.C. 142)....................
                                                           -----------------------------------------------------
    Totals................................................  ................               288          34,836.5
----------------------------------------------------------------------------------------------------------------


[[Page 7039]]


----------------------------------------------------------------------------------------------------------------
                                                            Estimated annual                    Estimated annual
                           Item                                 responses        Fee amount       filing costs
----------------------------------------------------------------------------------------------------------------
Petition for derivation...................................                50              $400           $20,000
Request for Reconsideration...............................                 5                 0                 0
Motions, replies and oppositions in derivation proceeding.               210                 0                 0
Request for oral hearing..................................                10                 0                 0
Request to treat a settlement as business confidential....                 2                 0                 0
Request for adverse judgment, default adverse judgment or                  2                 0                 0
 settlement...............................................
Arbitration agreement and awards..........................                 2                 0                 0
Request to make a settlement agreement available..........                 2               400               800
Notice of judicial review of a Board decision (e.g.,                       5                 0                 0
 notice of appeal under 35 U.S.C. 142)....................
                                                           -----------------------------------------------------
    Totals................................................               288  ................            20,800
----------------------------------------------------------------------------------------------------------------

III. Solicitation

    The agency is soliciting comments to: (1) Evaluate whether the 
proposed information requirement is necessary for the proper 
performance of the functions of the agency, including whether the 
information will have practical utility; (2) evaluate the accuracy of 
the agency's estimate of the burden; (3) enhance the quality, utility, 
and clarity of the information to be collected; and (4) minimize the 
burden of collecting the information on those who are to respond, 
including by using appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology.
    Interested persons are requested to send comments regarding this 
information collection by April 10, 2012, to: (1) The Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
New Executive Office Building, Room 10202, 725 17th Street NW., 
Washington, DC 20503, Attention: Nicholas A. Fraser, the Desk Officer 
for the United States Patent and Trademark Office, and via email at 
nfraser@omb.eop.gov; and (2) The Board of Patent Appeals and 
Interferences by electronic mail message over the Internet addressed to 
derivation@uspto.gov, or by mail addressed to: Mail Stop Patent Board, 
Director of the United States Patent and Trademark Office, P.O. Box 
1450, Alexandria, VA 22313-1450, marked to the attention of ``Lead 
Judge Michael Tierney, Derivation Proposed Rules.''
    Notwithstanding any other provision of law, no person is required 
to respond to nor shall a person be subject to a penalty for failure to 
comply with a collection of information subject to the requirements of 
the Paperwork Reduction Act unless that collection of information 
displays a currently valid OMB control number.

List of Subjects in 37 CFR Part 42

    Administrative practice and procedure, Inventions and patents, 
Lawyers.

Proposed Amendments to the Regulatory Text

    For the reasons stated in the preamble, the Under Secretary of 
Commerce for Intellectual Property and Director of the United States 
Patent and Trademark Office propose to amend 37 CFR part 42 as proposed 
to be added in the February 9, 2012, issue of the Federal Register as 
follows:

PART 42--TRIAL PRACTICE BEFORE THE PATENT TRIAL AND APPEAL BOARD

    1. The authority citation for 37 CFR part 42 continues to read as 
follows:

    Authority:  35 U.S.C. (2)(b)(2), 6, 21, 23, 41, 135, 311, 312, 
316, 321-326 and Leahy-Smith America Invents Act, Pub. L. 112-29, 
sections 6(c), 6(f) and 18, 125 Stat. 284, 304, 311, and 329 (2011).

    2. A new subpart E is added to read as follows:
Subpart E--Derivation

General

Sec.
42.400 Procedure; pendency.
42.401 Definitions.
42.402 Who may file a petition for a derivation proceeding.
42.403 Time for filing.
42.404 Derivation fee.
42.405 Content of petition.
42.406 Service of petition.
42.407 Filing date.

Instituting Derivation Proceeding

42.408 Institution of derivation proceeding.

After Institution of Derivation Proceeding

42.409 Settlement agreements.
42.410 Arbitration.
42.411 Common interests in the invention.
42.412 Public availability of Board records.

Subpart E--Derivation

General


Sec.  42.400  Procedure; pendency

    (a) A derivation proceeding is a trial subject to the procedures 
set forth in subpart A of this part.
    (b) The Board may for good cause authorize or direct the parties to 
address patentability issues that arise in the course of the derivation 
proceeding.


Sec.  42.401  Definitions.

    In addition to the definitions in Sec.  42.2, the following 
additional definitions apply to proceedings under this subpart:
    Agreement or understanding under 35 U.S.C. 135(e) means settlement 
for the purposes of Sec.  42.74.
    Applicant includes a reissue applicant.
    Application includes both an application for an original patent and 
an application for a reissued patent.
    Petitioner means a patent applicant who petitions for a 
determination that another party named in an earlier-filed patent 
application allegedly derived a claimed invention from an inventor 
named in the petitioner's application and filed the earlier application 
without authorization.
    Respondent means a party other than the petitioner.


Sec.  42.402  Who may file a petition for a derivation proceeding.

    An applicant for patent may file a petition to institute a 
derivation proceeding in the Office.


Sec.  42.403  Time for filing.

    A petition for a derivation proceeding must be filed within one 
year after the first publication of a claim to an invention that is the 
same or substantially the same as the earlier application's claim to 
the allegedly derived invention.

[[Page 7040]]

Sec.  42.404  Derivation fee.

    (a) A derivation fee set forth in Sec.  42.15(c) must accompany the 
petition.
    (b) No filing date will be accorded to the petition until payment 
is complete.


Sec.  42.405  Content of petition.

    (a) Grounds for standing. The petition must:
    (1) Demonstrate compliance with Sec. Sec.  42.402 and 42.403; and
    (2) Show that the petitioner has at least one claim that is:
    (i) The same or substantially the same as the respondent's claimed 
invention; and
    (ii) Not patentably distinct from the invention disclosed to the 
respondent.
    (b) In addition to the requirements of Sec. Sec.  42.8 and 42.22, 
the petition must:
    (1) Provide sufficient information to identify the application or 
patent for which the petitioner seeks a derivation proceeding;
    (2) Demonstrate that an invention was derived from an inventor 
named in the petitioner's application and, without authorization, the 
earliest application claiming such invention was filed; and
    (3) For each of the respondent's claims to the derived invention,
    (i) Show why the claimed invention is not patentably distinct from 
the invention disclosed to the respondent, and
    (ii) Identify how the claim is to be construed. Where the claim to 
be construed contains a means-plus-function or step-plus-function 
limitation as permited under 35 U.S.C. 112, sixth paragraph, the 
construction of the claim must identify the specific portions of the 
specification that describe the structure, material, or acts 
corresponding to each claimed function.
    (c) Sufficiency of showing. A derivation showing is not sufficient 
unless it is supported by substantial evidence, including at least one 
affidavit addressing communication of the derived invention and lack of 
authorization that, if unrebutted, would support a determination of 
derivation. The showing of communication must be corroborated.


Sec.  42.406  Service of petition.

    In addition to the requirements of Sec.  42.6, the petitioner must 
serve the petition and exhibits relied upon in the petition as follows:
    (a) The petition and supporting evidence must be served at the 
correspondence address of record for the earlier application. The 
petitioner may additionally serve the petition and supporting evidence 
on the respondent at any other address known to the petitioner as 
likely to effect service.
    (b) If the petitioner cannot effect service of the petition and 
supporting evidence at the correspondence address of record for the 
subject application or patent, the petitioner must immediately contact 
the Board to discuss alternate modes of service.


Sec.  42.407  Filing date.

    (a) Complete petition. A petition to institute a derivation 
proceeding will not be accorded a filing date until the petition 
satisfies all of the following requirements:
    (1) Complies with Sec.  42.405,
    (2) Service of the petition on the correspondence address of record 
as provided in Sec.  42.406, and
    (3) Is accompanied by the fee to institute required in Sec.  
42.15(c).
    (b) Incomplete request. Where the petitioner files an incomplete 
request, no filing date will be accorded, and the Office will dismiss 
the request if the deficiency in the request is not corrected within 
the earlier of either one month from notice of the incomplete request, 
or the expiration of the statutory deadline in which to file a petition 
for derivation.

Instituting Derivation Proceeding


Sec.  42.408  Institution of derivation proceeding.

    (a) An administrative patent judge institutes, and may as necessary 
reinstitute, the derivation proceeding on behalf of the Director.
    (b) Additional derivation proceeding. The petitioner may suggest 
the addition of a patent or application to the derivation proceeding. 
The suggestion should make the showings required under Sec.  42.405 of 
this part and explain why the suggestion could not have been made in 
the original petition.

After Institution of Derivation Proceeding


Sec.  42.409  Settlement agreements.

    An agreement or understanding under 35 U.S.C. 135(e) is a 
settlement for the purposes of Sec.  42.74.


Sec.  42.410  Arbitration.

    (a) Parties may resort to binding arbitration to determine any 
issue. The Office is not a party to the arbitration. The Board is not 
bound by, and may independently determine, any question of 
patentability.
    (b) The Board will not set a time for, or otherwise modify the 
proceeding for, an arbitration unless:
    (1) It is to be conducted according to Title 9 of the United States 
Code;
    (2) The parties notify the Board in writing of their intention to 
arbitrate;
    (3) The agreement to arbitrate:
    (i) Is in writing;
    (ii) Specifies the issues to be arbitrated;
    (iii) Names the arbitrator, or provides a date not more than 30 
days after the execution of the agreement for the selection of the 
arbitrator;
    (iv) Provides that the arbitrator's award shall be binding on the 
parties and that judgment thereon can be entered by the Board;
    (v) Provides that a copy of the agreement is filed within 20 days 
after its execution; and
    (vi) provides that the arbitration is completed within the time the 
Board sets.
    (c) The parties are solely responsible for the selection of the 
arbitrator and the conduct of the arbitration.
    (d) The Board may determine issues the arbitration does not 
resolve.
    (e) The Board will not consider the arbitration award unless it:
    (1) Is binding on the parties;
    (2) Is in writing;
    (3) States in a clear and definite manner each issue arbitrated and 
the disposition of each issue; and
    (4) Is filed within 20 days of the date of the award.
    (f) Once the award is filed, the parties to the award may not take 
actions inconsistent with the award. If the award is dispositive of the 
contested subject matter for a party, the Board may enter judgment as 
to that party.


Sec.  42.411  Common interests in the invention.

    The Board may decline to institute, or if already instituted the 
Board may issue judgment in, a derivation proceeding between an 
application and a patent or another application that are commonly 
owned.


Sec.  42.412  Public availability of Board records

    (a) Publication-(1) Generally. Any Board decision is available for 
public inspection without a party's permission if rendered in a file 
open to the public pursuant to Sec.  1.11 of this chapter or in an 
application that has been published in accordance with Sec. Sec.  1.211 
to 1.221 of this chapter. The Office may independently publish any 
Board decision that is available for public inspection.
    (2) Determination of special circumstances. Any Board decision not 
publishable under paragraph (a)(1) of this section may be published or 
made available for public inspection if the Director believes that 
special circumstances warrant publication and a party does not petition 
within two months after being notified of the

[[Page 7041]]

intention to make the decision public, objecting in writing on the 
ground that the decision discloses the objecting party's trade secret 
or other confidential information and stating with specificity that 
such information is not otherwise publicly available.
    (b) Record of proceeding. (1) The record of a Board proceeding is 
available to the public, unless a patent application not otherwise 
available to the public is involved.
    (2) Notwithstanding paragraph (b)(1) of this section, after a final 
Board decision in or judgment in a Board proceeding, the record of the 
Board proceeding will be made available to the public if any involved 
file is or becomes open to the public under Sec.  1.11 of this title or 
an involved application is or becomes published under Sec. Sec.  1.211 
to 1.221 of this chapter.

    Dated: January 31, 2012.
David J. Kappos,
Under Secretary of Commerce for Intellectual Property and Director of 
the United States Patent and Trademark Office.
[FR Doc. 2012-2535 Filed 2-9-12; 8:45 am]
BILLING CODE 3510-16-P