Transitional Program for Covered Business Method Patents-Definition of Technological Invention, 7095-7108 [2012-2538]
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Federal Register / Vol. 77, No. 28 / Friday, February 10, 2012 / Proposed Rules
business method patent review of the
patent unless the petitioner, the
petitioner’s real party in interest, or a
privy of the petitioner has been sued for
infringement of the patent or has been
charged with infringement under that
patent.
(b) A petitioner may not file a petition
to institute a covered business method
patent review of the patent where the
petitioner, the petitioner’s real party in
interest, or a privy of the petitioner is
estopped from challenging the claims on
the grounds identified in the petition.
§ 42.303
Time for filing.
A petition requesting a covered
business method patent review may be
filed any time except during the period
in which a petition for a post-grant
review of the patent would satisfy the
requirements of 35 U.S.C. 321(c).
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§ 42.304
Content of petition.
In addition to any other notices
required by subparts A and C of this
part, a petition must request judgment
against one or more claims of a patent
identified by patent number. In addition
to the requirements of § 42.22, the
petition must set forth:
(a) Grounds for standing. The
petitioner must demonstrate that the
patent for which review is sought is a
covered business method patent, and
that the petitioner meets the eligibility
requirements of § 42.302.
(b) Identification of challenge. Provide
a statement of the precise relief
requested for each claim challenged.
The statement must identify the
following:
(1) The claim;
(2) The specific statutory grounds
permitted under paragraph (2) or (3) of
35 U.S.C. 282(b) on which the challenge
to the claim is based;
(3) How the challenged claim is to be
construed. Where the claim to be
construed contains a means-plusfunction or step-plus-function limitation
as permitted under 35 U.S.C. 112,
paragraph 6, 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;
(4) How the construed claim is
unpatentable under the statutory
grounds identified in paragraph (b)(2) of
this section. Where the grounds for
unpatentability are based on prior art,
the petition must specify where each
element of the claim is found in the
prior art. For all other grounds of
unpatentability, the petition must
identify the specific part of the claim
that fails to comply with the statutory
grounds raised and state how the
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identified subject matter fails to comply
with the statute; and
(5) The exhibit number of supporting
evidence relied upon to support the
challenge and state the relevance of the
evidence to the challenge raised
including identifying specific portions
of the evidence that support the
challenge. The Board may exclude or
give no weight to evidence where a
party has failed to state its relevance or
to identify specific portions of the
evidence that support the challenge.
(c) A motion may be filed that seeks
to correct a mistake in the petition
where the mistake is of a clerical or
typographical nature. The grant of such
a motion does not change the filing date
of the petition.
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. 2012–2532 Filed 2–9–12; 8:45 am]
BILLING CODE 3510–16–P
DEPARTMENT OF COMMERCE
Patent and Trademark Office
37 CFR Part 42
[Docket No. PTO–P–2011–0087]
RIN 0651–AC75
Transitional Program for Covered
Business Method Patents—Definition
of Technological Invention
United States Patent and
Trademark Office, Commerce.
ACTION: Notice of proposed rulemaking.
AGENCY:
The United States Patent and
Trademark Office (Office or USPTO)
proposes a new rule to implement the
provision of the Leahy-Smith America
Invents Act that requires the Office to
issue regulations for determining
whether a patent is for a technological
invention in a transitional post-grant
review proceeding for covered business
method patents. The provision of the
Leahy-Smith America Invents Act will
take effect on September 16, 2012, one
year after the date of enactment. The
provision and any regulations issued
under the provision will be repealed on
September 16, 2020, with respect to any
new petitions under the transitional
program.
SUMMARY:
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.
DATES:
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7095
Comments should be sent
by electronic mail message over the
Internet addressed to:
TPCBMP_Definition@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, Covered
Business Method Patent Review
Proposed Definition for Technological
Invention.’’
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.
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® portable
document format or MICROSOFT
WORD® format. Comments not
submitted electronically should be
submitted on paper in a format that
facilitates convenient digital scanning
into ADOBE® 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:
Sally Medley, Administrative Patent
Judge, Robert Clarke, Administrative
Patent Judge, Michael Tierney, Lead
Administrative Patent Judge, and Joni
Chang, 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 the proposed
regulations is to establish a more
ADDRESSES:
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efficient and streamlined patent system
that will improve patent quality and
limit unnecessary and
counterproductive litigation costs. The
preamble of this notice sets forth in
detail the definition of technological
invention that the Board will use in
conducting transitional covered
business method patent review
proceedings. The USPTO is engaged in
a transparent process to create a timely,
cost-effective alternative to litigation.
Moreover, the rulemaking process is
designed to ensure the integrity of the
trial procedures. See 35 U.S.C. 326(b).
The proposed rules would provide a
definition of technological invention
that the Board will use in conducting
transitional covered business method
review proceedings.
Section 18 of the Leahy-Smith
America Invents Act provides that the
Director may institute a transitional
proceeding only for a patent that is a
covered business method patent.
Section 18(d)(1) of the Leahy-Smith
America Invents Act specifies that a
covered business method patent is a
patent that claims a method or
corresponding apparatus for performing
data processing or other operations used
in the practice, administration, or
management of a financial product or
service, except that the term does not
include patents for technological
inventions. Section 18(d)(2) provides
that the Director will issue regulations
for determining whether a patent is for
a technological invention. This
rulemaking provides regulations for
determining whether a patent is for a
technological invention. The LeahySmith America Invents Act provides
that the transitional program for the
review of covered business method
patents will take effect on September 16,
2012, one year after the date of
enactment, and applies to any covered
business method patent issued before,
on, or after September 16, 2012. Section
18 of the Leahy-Smith America Invents
Act and the regulations issued under
§ 18 will be repealed on September 16,
2020. Section 18 and the regulations
issued will continue to apply after
September 16, 2020, to any petition for
a transitional proceeding that is filed
before September 16, 2020.
Discussion of Specific Rules
This notice proposes a new rule to
implement the provisions of Section
18(d)(2) of the Leahy-Smith America
Invents Act that provides that the
Director will issue regulations for
determining whether a patent is for a
technological invention. A separate
notice proposes new rules to implement
the provisions of the Leahy-Smith
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America Invents Act for the transitional
program for covered business method
patents (RIN 0651–AC73). The separate
notice proposes to add a new subpart D
to 37 CFR part 42 to provide rules
specific to transitional post-grant review
of covered business method patents,
including the definition for covered
business method patent in proposed
§ 42.301(a).
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.
Furthermore, the Office in separate
rulemakings is proposing 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 E to 37 CFR
part 42 (0651–AC74) to provide rules
specific to derivation. The notices of
proposed rulemaking are available on
the USPTO Internet Web site at
www.uspto.gov.
Pursuant to § 18(d)(2) of the LeahySmith America Invents Act, the Office is
proposing the definition of a
technological invention in this
rulemaking. This notice proposes to add
the definition of technological invention
to new subpart D of 37 CFR 42,
specifically to proposed § 42.301(b).
Title 37 of the Code of Federal
Regulations, Part 42, Subpart D, the
definition for technological invention is
proposed to be added to Section 42.301
as follows:
Section 42.301: Proposed § 42.301(b)
would set forth the definition for
technological invention for covered
business method patent review
proceedings. The proposed definition of
technological invention would provide
that in determining whether a patent is
for a technological invention the
following will be considered on a caseby-case basis: Whether the claimed
subject matter as a whole (1) recites a
technological feature that is novel and
unobvious over the prior art; and (2)
solves a technical problem using a
technical solution. The Office
recognizes that, in prescribing a
regulation to define technological
invention, the Office must consider the
efficient administration of the
proceedings by the Office, and its ability
to timely complete them, consistent
with 35 U.S.C. 326(b).
The proposed definition is consistent
with the legislative history of the Leahy-
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Smith America Invents Act. See, e.g.,
157 Cong. Rec. S1364 (daily ed. Mar. 8,
2011) (statement of Sen. Schumer)
(‘‘The ‘patents for technological
inventions’ exception only excludes
those patents whose novelty turns on a
technological innovation over the prior
art and are concerned with a technical
problem which is solved with a
technical solution and which requires
the claims to state the technical features
which the inventor desires to protect.’’);
157 Cong. Rec. H4497 (daily ed. June 23,
2011) (statement of Rep. Smith)
(‘‘Patents for technological inventions
are those patents whose novelty turns
on a technological innovation over the
prior art and are concerned with a
technical problem which is solved with
a technical solution.’’); 157 Cong. Rec.
S5428 (daily ed. Sept. 8, 2011)
(statement of Sen. Coburn) (‘‘Patents for
technological inventions are those
patents whose novelty turns on a
technological innovation over the prior
art and are concerned with a technical
problem which is solved with a
technical solution.’’).
Rulemaking Considerations
A. Administrative Procedure Act
(APA): This notice proposes rules of
practice concerning the procedure for
requesting a covered business method
patent review, 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 interpretive rules. See Cooper
Tech. Co. v. Dudas, 536 F.3d 1330,
1336–37 (Fed. Cir. 2008) (explaining
that ‘‘a rule that merely clarifies or
explains existing law or regulations is
‘interpretive’ ’’ and holding USPTO’s
rules implementing inter partes
reexamination proceedings to be
interpretive rules not subject to the
notice and comment requirements of the
Administrative Procedures Act); Nat’l
Org. of Veterans’ Advocates v. Sec’y of
Veterans Affairs, 260 F.3d 1365, 1375
(Fed. Cir. 2001) (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.SC. 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’’)
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(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 50 petitions for
covered business method patent review
will be filed in fiscal year 2013. This
will be the first fiscal year in which the
review proceeding will be available for
an entire fiscal year.
The estimated number of covered
business method patent review petitions
is based on the number of inter partes
reexamination requests filed in fiscal
year 2011 for patents having an original
classification in class 705 of the United
States Patent Classification System.
Class 705 is the classification for patents
directed to data processing in the
following areas: Financial, business
practice, management, or cost/price
determination. See https://
www.uspto.gov/web/patents/
classification/uspc705/sched705.pdf.
The following is the class definition
and description for Class 705:
This is the generic class for apparatus and
corresponding methods for performing data
processing operations, in which there is a
significant change in the data or for
performing calculation operations wherein
the apparatus or method is uniquely
designed for or utilized in the practice,
administration, or management of an
enterprise, or in the processing of financial
data.
This class also provides for apparatus and
corresponding methods for performing data
processing or calculating operations in which
a charge for goods or services is determined.
This class additionally provides for subject
matter described in the two paragraphs above
in combination with cryptographic apparatus
or method.
Subclasses 705/300–348 were established
prior to complete reclassification of all
project documents. Documents that have not
yet been reclassified have been placed in
705/1.1. Until reclassification is finished a
complete search of 705/300–348 should
include a search of 705/1.1. Once the project
documents in 705/1.1 have been reclassified
they will be moved to the appropriate
subclasses and this note will be removed.
Scope of the Class
1. The arrangements in this class are
generally used for problems relating to
administration of an organization,
commodities or financial transactions.
2. Mere designation of an arrangement as
a ‘‘business machine’’ or a document as a
‘‘business form’’ or ‘‘business chart’’ without
any particular business function will not
cause classification in this class or its
subclasses.
3. For classification herein, there must be
significant claim recitation of the data
processing system or calculating computer
and only nominal claim recitation of any
external art environment. Significantly
claimed apparatus external to this class,
claimed in combination with apparatus
under the class definition, which perform
data processing or calculation operations are
classified in the class appropriate to the
external device unless specifically excluded
therefrom.
4. Nominally claimed apparatus external to
this class in combination with apparatus
under the class definition is classified in this
class unless provided for in the appropriate
external class.
5. In view of the nature of the subject
matter included herein, consideration of the
classification schedule for the diverse art or
environment is necessary for proper search.
See Classification Definitions (Feb.
2011) available at https://www.uspto.gov/
web/patents/classification/uspc705/
defs705.htm.
Accordingly, patents subject to
covered business method patent review
are anticipated to be typically
classifiable in Class 705. It is anticipated
that the number of patents in Class 705
that do not qualify as covered business
method patents would approximate the
number of patents classified in other
classes that do qualify.
The Office received 20 requests for
inter partes reexamination of patents
classified in Class 705 in fiscal year
2011. The Office in estimating the
number of petitions for covered
business method patent review to be
higher than 20 requests due to an
expansion of the grounds for which
review may be requested including
subject matter eligibility grounds, the
greater coordination with litigation, and
the provision that patents will be
eligible for the proceeding regardless of
filing date of the application which
resulted in the patent.
The Office has reviewed the entity
status of patents for which inter partes
reexamination was requested from
October 1, 2000, to September 23, 2011.
This data only includes filings granted
a filing date rather than filings in which
a request was received. The first inter
partes reexamination was filed on July
27, 2001. A summary of that review is
provided in Table 1 below. As shown by
Table 1, patents known to be owned by
a small entity represented 32.79% of
patents for which inter partes
reexamination was requested. Based on
an assumption that the same percentage
of patents owned by small entities will
be subject to covered business method
patent review, it is estimated that 16
petitions for covered business method
patent review would be filed to seek
review of patents owned by a small
entity in fiscal year 2013, the first full
fiscal year that these proceedings will be
available.
TABLE 1—INTER PARTES REEXAMINATION REQUESTS FILED WITH PARENT ENTITY TYPE *
Inter partes reexamination
requests filed
Number filed
where parent
patent is small
entity type
Percent small
entity type of
total
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
329
255
240
155
127
61
59
26
21
4
1
123
94
62
52
35
17
18
5
12
1
0
37.39
36.86
25.83
33.55
27.56
27.87
30.51
19.23
57.14
25.00
0.00
Totals ....................................................................................................................................
1,278
419
32.79
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Fiscal year
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
* Small entity status determined by reviewing preexamination small entity indicator for the parent patent.
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Based on the number of patents
issued during fiscal years 1995 through
1999 that paid the small entity third
stage maintenance fee, the number of
patents issued during fiscal years 2000
through 2003 that paid the small entity
second stage maintenance fee, the
number of patents issued during fiscal
years 2004 through 2007 that paid the
first stage maintenance fee, and the
number of patents issued during fiscal
years 2008 through 2011 that paid a
small entity issue fee, there are no less
than 375,000 patents owned by small
entities in force as of October 1, 2011.
Furthermore, the Office recognizes
that there would be an offset to this
number for patents that expire earlier
than 20 years from their filing date due
to a benefit claim to an earlier
application or due to a filing of a
terminal disclaimer. The Office likewise
recognizes that there would be an offset
in the opposite manner due to the
accrual of patent term extension and
adjustment. The Office, however, does
not maintain data on the date of
expiration by operation of a terminal
disclaimer. Therefore, the Office has not
adjusted the estimate of 375,000 patents
owned by small entities in force as of
October 1, 2011. While the Office
maintains information regarding patent
term extension and adjustment accrued
by each patent, the Office does not
collect data on the expiration date of
patents that are subject to a terminal
disclaimer. As such, the Office has not
adjusted the estimated of 375,000
patents owned by small entities in force
as of October 1, 2011, for accrual of
patent term extension and adjustment,
because in view of the incomplete
terminal disclaimer data issue, would be
incomplete and any estimate adjustment
would be administratively burdensome.
Thus, it is estimated that the number of
small entity patents in force in fiscal
year 2013 will be at least 375,000.
Based on the estimated number of
patents in force, the number of small
entity owned patents impacted by
covered business method patent review
in fiscal year 2013 (16 patents) would be
less than 0.005% (16/375,000) of all
patents in force that are owned by small
entities. The USPTO nonetheless has
undertaken an Initial Regulatory
Flexibility Act Analysis of the proposed
rule.
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 18 of the
Leahy-Smith America Invents Act
provides for a transitional program for
covered business method patents which
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will employ the standards and
procedures of the post-grant review
proceeding with a few exceptions. For
the implementation, § 6(f) of the LeahySmith America Invents Act requires that
the Director issue regulations to carry
out chapter 32 of title 35, United States
Code, within one year after the date of
enactment. Public Law 112–29, § 6(f),
125 Stat. 284, 311 (2011).
2. Succinct Statement of the
Objectives of, and Legal Basis for, the
Proposed Rules: The proposed rules
seek to implement covered business
method patent review as authorized by
the Leahy-Smith America Invents Act.
The Leahy-Smith America Invents Act
requires that the Director prescribe rules
for the covered business method patent
reviews that result in a final
determination not later than one year
after the date on which the Director
notices the institution of a proceeding.
The one-year period may be extended
for not more than 6 months if good
cause is shown. See 35 U.S.C.
326(a)(11). The Leahy-Smith America
Invents Act also requires that the
Director, in prescribing rules for 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. See 35 U.S.C. 326(b).
Consistent with the time periods
provided in 35 U.S.C. 326(a)(11), the
proposed rules are designed to, except
where good cause is shown to exist,
result in a final determination by the
Patent Trial and Appeal Board within
one year of the notice of initiation of the
review. This one-year review will
enhance the effect on the economy, and
improve the integrity of the patent
system and the efficient administration
of the Office.
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
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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 covered business
method patent review will be filed in
fiscal year 2013. The Office has
reviewed the percentage of patents for
which inter partes reexamination was
requested from October 1, 2000 to
September 23, 2011. A summary of that
review is provided in Table 1 above. As
demonstrated by Table 1, patents known
to be owned by a small entity represent
32.79% of patents for which inter partes
reexamination was requested. Based on
an assumption that the same percentage
of patents owned by small entities will
be subject to the new review
proceedings, it is estimated that 16
patents owned by small entities would
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be affected by covered business method
patent review.
The USPTO estimates that 2.5% of
patent owners will file a request for
adverse judgment prior to a decision to
institute and that another 2.5% will file
a request for adverse judgment or fail to
participate after initiation. Specifically,
an estimated 2 patent owners will file a
request for adverse judgment or fail to
participate after institution in covered
business method proceedings. Based on
the percentage of small entity owned
patents that were the subject of inter
partes reexamination (32.79%) from
October 1, 2000 to September 23, 2011,
it is estimated that 1 small entity will
file such request or fail to participate in
covered business method patent review.
Under the proposed rules, prior to
determining whether to institute a
review, the patent owner may file an
optional patent owner preliminary
response to the petition. Given the new
time period requirements to file a
petition for review before the Board
relative to patent enforcement
proceedings and the desirability to
avoid the cost of a trial and delays to
related infringement actions, it is
anticipated that 90% of petitions, other
than those for which a request for
adverse judgment is filed, will result in
the filing of a patent owner preliminary
response. Specifically, the Office
estimates that 45 patent owners will file
a preliminary response to a covered
business method patent petition. Based
on the percentage of small entity owned
patents that were the subject of inter
partes reexamination (32.79%), it is
estimated that 15 small entities will file
a preliminary response to a covered
business method patent review petition
filed in fiscal year 2013.
Under the proposed rules, the Office
will determine whether to institute a
trial within three months after the
earlier of: (1) The submission of a patent
owner preliminary response, (2) the
waiver of filing a patent owner
preliminary response, or (3) the
expiration of the time period for filing
a patent owner preliminary response. If
the Office decides not to institute a trial,
the petitioner may file a request for
reconsideration of the Office’s decision.
In estimating the number of requests for
reconsideration, the Office considered
the percentage of inter partes
reexaminations that were denied
relative to those that were ordered (24
divided by 342, or 7%) in fiscal year
2011. See Reexamination—FY 2011,
https://www.uspto.gov/patents/
Reexamination_operational_statistic_
through_FY2011Q4.pdf. The Office also
considered the impact of: (1) patent
owner preliminary responses under
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newly authorized in 35 U.S.C. 323, (2)
the enhanced thresholds for instituting
reviews set forth in 35 U.S.C. 324(a),
which would tend to increase the
likelihood of dismissing a petition for
review, and (3) the more restrictive time
period for filing a petition for review in
35 U.S.C. 325(b), which would tend to
reduce the likelihood of dismissing a
petition. Based on these considerations,
it is estimated that 10% of the petitions
for review (5 divided by 49) would be
dismissed.
Thus, the Office estimates that no
more than 5 entities (2 small entities)
would be subject to a denial of the
petition to initiate covered business
method review. This estimate is based
upon either the patent failing to meet
the proposed definition for
technological invention or because the
petitioner failed to meet the likelihood
of success standard. Of the remaining
90% of petitions that proceed to trial, all
entities (large or small) could be subject
to the proposed definition for
technological invention since
jurisdictional issues may be raised at
any time.
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
33.333%) will occur, the Office
estimates that 2 requests for
reconsideration will be filed. Based on
the percentage of small entity owned
patents that were the subject of inter
partes reexamination (32.79%), it is
estimated that 1 small entity will file a
request for a reconsideration of a
decision dismissing the petition for
post-grant or covered business method
patent review filed 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 covered business method patent
reviews will have an average of 8.89
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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 covered business method patent
review may request an oral hearing. It is
anticipated that 45 requests for oral
hearings will be filed based on the
number of requests for oral hearings in
inter partes reexamination, the stated
desirability for oral hearings during the
legislative process, and the public input
received prior to this notice of proposed
rulemaking. Based on the percentage of
small entity owned patents that were
the subject of inter partes reexamination
(32.79%), it is estimated that 15 small
entities will file a request for oral
hearing in the covered business method
patent reviews instituted in fiscal year
2013.
Parties to a covered business method
patent review may file requests to treat
a settlement as business confidential,
and request for adverse judgment. 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
the alternative dispute resolution
options will be infrequently used. The
Office estimates that 2 requests to treat
a settlement as business confidential,
and 10 requests for adverse judgment,
default adverse judgment, or settlement
notices will be filed. The Office also
estimates that 2 requests to make a
settlement available will be filed. Based
on the percentage of small entity owned
patents that were the subject of inter
partes reexamination (32.79%), it is
estimated that 1 small entity will file a
request to treat a settlement as business
confidential and 3 small entities will
file a request for adverse judgment,
default adverse judgment notices, or
settlement notices in the reviews
instituted in fiscal year 2013.
Parties to a covered business method
patent review may seek judicial review
of the final decision of the Board.
Historically, 33% of examiner’s
decisions in inter partes reexamination
proceedings have been appealed to the
Board. It is anticipated that 16% of final
decisions of the Board would be
appealed. The reduction in appeal rate
is based on the higher threshold for
institution, the focused process, and the
experience of the Board in conducted
contested cases. Therefore, it is
estimated that 5 parties would seek
judicial review of the final decisions of
the Board in covered business method
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patent reviews instituted in fiscal year
2013. Furthermore, based on the
percentage of small entity owned
patents that were the subject of inter
partes reexamination (32.79%), it is
estimated that 2 small entities would
seek judicial review of final decisions of
the Board in the covered business
method patent reviews 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:
Covered business method patent
reviews would be limited to business
method patents that are not patents for
technological inventions. Under the
proposed rules, a person who is not the
owner of a patent may file a petition to
institute a review of the patent, with a
few exceptions. Given this, it is
anticipated that a petition for review is
likely to be filed by an entity practicing
in the business method field for covered
business methods.
Preparation of the petition would
require analyzing the patent claims,
locating evidence supporting arguments
of unpatentability, and preparing the
petition seeking review of the patent.
This notice provides the proposed
procedural requirements that are
common for the new trials. Additional
requirements are provided in
contemporaneous trial specific
proposed rulemaking. The procedures
for petitions to institute a covered
business method patent review are
proposed in §§ 42.5, 42.6, 42.8, 42.11,
42.13, 42.20, 42.21, 42.22, 42.24(a)(3),
42.63, 42.65, 42.203, 42.205, and 42.302
through 42.304.
The skills necessary to prepare a
petition for review 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, to represent a
party in an inter partes reexamination,
and to represent a party in an
interference proceeding 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 nonregistered 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.
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The cost of preparing a petition for
covered business method patent review
is estimated to be 33.333% higher than
the cost of preparing an inter partes
review petition because the petition for
covered business method patent review
may seek to institute a proceeding on
additional grounds such as subject
matter eligibility. 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 Office’s consideration of the work
required to prepare and file such a
request, the Office estimates that the
cost of preparing a petition for covered
business method patent review would
be $61,333 (including expert costs).
The filing of a petition for review
would also require payment by the
petitioner of the appropriate petition fee
to recover the aggregate cost for
providing the review. The appropriate
petition fee would be determined by the
number of claims for which review is
sought and the type of review. The
proposed fees for filing a petition for
covered business method patent review
would be: $35,800 to request review of
20 or fewer claims, $44,750 to request
review of 21 to 30 claims, $53,700 to
request review of 31 to 40 claims,
$71,600 to request review of 41 to 50
claims, $89,500 to request review of 51
to 60 claims, and an additional $35,800
to request review of additional groups of
10 claims.
In setting fees, the estimated
information technology cost to establish
the process and maintain the filing and
storage system through 2017 is to be
recovered by charging each petition
$2,270. The remainder of the fee is to
recover the cost for judges to determine
whether to institute a review and
conduct the review, together with a
proportionate share of indirect costs,
e.g., rent, utilities, additional support,
and administrative costs. Based on the
direct and indirect costs, the fully
burdened cost per hour for judges to
decide a petition and conduct a review
is estimated to be $258.32.
For a petition for covered business
method patent review with 20 or fewer
challenged claims, it is anticipated that
121 hours of judge time would be
required. For 21 to 30 challenged
claims, an additional 30 hours is
anticipated for a total of 151 hours of
judge time. For 31 to 40 challenged
claims, an additional 60 hours is
anticipated for a total of 181 hours of
judge time. For 41 to 50 challenged
claims, an additional 121 hours is
anticipated for a total of 242 hours of
judge time. For 51 to 60 challenged
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claims, an additional 181 hours is
anticipated for a total of 302 hours of
judge time. The increase in adjustment
reflects the added complexity that
typically occurs as more claims are in
dispute.
The proposed rules would permit the
patent owner to file a preliminary
response to the petition setting forth the
reasons why no review should be
initiated. The procedures for a patent
owner to file a preliminary response as
an opposition are proposed in §§ 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, 42.65, 42.107, 42.120,
42.207, and 42.220. The patent owner is
not required to file a preliminary
response. The Office estimates that the
preparation and filing of a patent owner
preliminary response would require 100
hours of professional time and cost
$34,000 (including expert costs). The
AIPLA Report of the Economic Survey
2011 reported that the average cost for
inter partes reexamination including of
the request ($46,000), the first patent
owner response, and third party
comments was $75,000 (see I–175) and
the median billing rate for professional
time of $340 per hour for attorneys in
private firms (see 8). Thus, the cost of
the first patent owner reply and the
third party statement is $29,000. The
Office finds these costs to be reasonable
estimates. The patent owner reply and
third party statement, however, occur
after the examiner has made an initial
threshold determination and made only
the appropriate rejections. Accordingly,
it is anticipated that filing a patent
owner preliminary response to a
petition for review would cost more
than the initial reply in a reexamination,
or an estimated $34,000 (including
expert costs).
The Office will determine whether to
institute a trial within three months
after the earlier of: (1) The submission
of a patent owner preliminary response,
(2) the waiver of filing a patent owner
preliminary response, or (3) the
expiration of the time period for filing
a patent owner preliminary response. If
the Office decides not to institute a trial,
the petitioner may file a request for
reconsideration of the Office’s decision.
It is anticipated that a request for
reconsideration will require 80 hours of
professional time to prepare and file, at
a cost of $340 per hour, for a total
estimated cost of $27,200. This estimate
is based on the complexity of the issues
and desire to avoid time bars imposed
by 35 U.S.C. 325(b).
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
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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 §§ 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,
42.65, 42.221, and 42.223. The
procedures for filing an opposition are
proposed in §§ 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, 42.65, 42.207,
and 42.220. The procedures for filing a
reply are proposed in §§ 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
covered business method patent review
will have 8.89 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 would cost $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. The cost of a
motion, opposition, or reply in a
covered business method patent review
is estimated at $44,200 (including
expert costs), reflecting the reduction in
overlap between motions relative to
derivation. 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 covered business method patent
review may request an oral hearing. The
procedure for filing requests for oral
argument is proposed in § 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 covered business method
patent review may file requests to treat
a settlement as business confidential, or
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file a request for adverse judgment. 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 § 42.74(c).
The procedures to file requests for
adverse judgment are proposed in
§ 42.73(b). The procedures to file
requests to make a settlement agreement
available are proposed in § 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 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 § 42.15(d).
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
§§ 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:
Definition of Technological Invention:
The definition proposed is consistent
with the legislative history of the LeahySmith America Invents Act. See, e.g.,
157 Cong. Rec. S1364 (daily ed. Mar. 8,
2011) (statement of Sen. Schumer)
(‘‘The ‘patents for technological
inventions’ exception only excludes
those patents whose novelty turns on a
technological innovation over the prior
art and are concerned with a technical
problem which is solved with a
technical solution and which requires
the claims to state the technical features
which the inventor desires to protect.’’).
The Office considered proposing that a
technological invention be defined as
any claimed invention in any patent
having an original classification in any
class other than Class 705 of the United
States Patent Classification System.
Adoption of the alternative definition as
applied to certain patents would have
been either overly narrow or overly
broad. For example, there are patents
that are originally classified in Class 705
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7101
which solve technical problems with
technical solutions and which are
patentable over the prior art based on a
technological innovation. Similarly
there are patents that are originally
classified in classes other than Class 705
which fail to solve a technical problem
with a technical solution and fail to be
patentable over the prior art based on a
technological innovation. For those
reasons, the other considered definition
was not adopted in view of the
legislative history.
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
specifically 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
(§ 41.121(a)(3)) and oppositions
(§ 41.122), and a 25 page limit for other
motions (§ 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 issues, 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
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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 § 42.24
would provide page limits for petitions,
motions, oppositions, and replies. 35
U.S.C. 326(b) provides considerations
that are to be taken into account when
prescribing regulations including the
integrity of the patent system, the
efficient administration of the Office,
and the ability to complete timely the
trials. The page limits proposed in these
rules are consistent with these
considerations.
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
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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
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
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unpatentability based on prior art and
unpatentability under 35 U.S.C. 101
and/or 112 would be limited to 50
pages.
Under the proposed rules, a covered
business method patent review petition
would be based upon any grounds
identified in 35 U.S.C. 321(b), e.g.,
failure to comply with 35 U.S.C. 101,
102 (based on certain references), 103,
and 112 (except best mode). Under
current practice, a party would be
limited to filing two or three motions,
each limited to 25 pages, for a maximum
of 75 pages. Where there is more than
one motion for unpatentability based
upon different statutory grounds, the
Board’s experience is that the motions
contain similar discussions of
technology and claim constructions.
Such overlap is unnecessary where a
single petition for unpatentability is
filed. Thus, the proposed 70 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 interference 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 § 42.24(b) would provide
page limits for oppositions filed in
response to motions. Current contested
cases 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 § 42.24(c) would provide
page limits for replies. Current
contested cases practice provides a 15
page limit for priority motion replies, a
5 page limit for miscellaneous
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(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 cases
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.
The Leahy-Smith America Invents Act
requires that the Director, in prescribing
rules for 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. See 35
U.S.C. 326(b). In view of the actual
results of the duration of proceedings in
inter partes reexamination (without
page limits) and contested cases (with
page limits), proposing procedures with
reasonable page limits would be
consistent with the objectives set forth
in the Leahy-Smith America Invents
Act. Based on our experience on the
time needed to complete a non-page
limited proceeding, the option of nonpage limited proceedings was not
adopted.
Fee Setting: 35 U.S.C. 321(a) requires
the Director to establish fees to be paid
by the person requesting the review in
such amounts as the Director
determines to be reasonable,
considering the aggregate costs of the
review. In contrast to current 35 U.S.C.
311(b) and 312(c), the Leahy-Smith
America Invents Act requires the
Director to establish more than one fee
for reviews based on the total cost of
performing the reviews, and does not
provide for refund of any part of the fee
when the Director determines that the
review should not be initiated.
35 U.S.C. 322(a)(1) further requires
that the fee established by the Director
under 35 U.S.C. 321 accompany the
petition on filing. Accordingly, in
interpreting the fee setting authority in
35 U.S.C. 321(a), it is reasonable that the
Director should set a number of fees for
filing a petition based on the anticipated
aggregate cost of conducting the review
depending on the complexity of the
review, and require payment of the fee
upon filing of the petition.
Based on experience with contested
cases and inter partes reexamination
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proceedings, the following
characteristics of requests were
considered as potential factors for fee
setting as each would likely impact the
cost of providing the new services. The
Office also considered the relative
difficulty in administrating each option
in selecting the characteristics for which
different fees should be paid for
requesting review.
I. Adopted Option. Number of claims
for which review is requested. The
number of claims often impacts the
complexity of the request and increases
the demands placed on the deciding
officials. Cf. In re Katz Interactive Call
Processing Patent Litig., 639 F.3d 1303,
1309 (Fed. Cir. 2011) (limiting number
of asserted claims is appropriate to
efficiently manage a case). Moreover,
the number of claims for which review
is requested can be easily determined
and administered, which avoids delays
in the Office and the impact on the
economy or patent system that would
occur if an otherwise meritorious
request is refused due to improper fee
payment. Any subsequent petition
would be time barred in view of 35
U.S.C. 325.
II. Alternative Option I. Number of
grounds for which review is requested.
The Office has experience with large
numbers of cumulative grounds being
presented in inter partes reexaminations
which often add little value to the
proceedings. Allowing for a large
number of grounds to be presented on
payment of an additional fee(s) is not
favored. Determination of the number of
grounds in a request may be contentious
and difficult and may result in a large
amount of high-level petition work. As
such, the option would have a negative
impact on small entities. Moreover,
interferences instituted in the 1980s and
early 1990s suffered from this problem
as there was no page limit for motions
and the parties had little incentive to
focus the issues for decision. The
resulting interference records were often
a collection of disparate issues and
evidence. This led to lengthy and
unwarranted delays in deciding
interference cases as well as increased
costs for parties and the Office.
Accordingly, this alternative is
inconsistent with objectives of the
Leahy-Smith America Invents Act that
the Director, in prescribing rules for the
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 timely complete
the instituted proceedings.
III. Alternative Option II. Pages of
argument. The Office has experience
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with large requests in inter partes
reexamination in which the merits of
the proceedings could have been
resolved in a shorter request. Allowing
for unnecessarily large requests on
payment of an additional fee(s) is not
favored. Moreover, determination of
what should be counted as ‘‘argument’’
as compared with ‘‘evidence’’ has often
proven to be contentious and difficult as
administered in the current inter partes
reexamination appeal process.
In addition, the trial section of the
Board recently experimented with
motions having a fixed page limit for the
argument section and an unlimited
number of pages for the statement of
facts. Unlimited pages for the statement
of facts led to a dramatic increase in the
number of alleged facts and pages
associated with those facts. For
example, one party used approximately
10 pages for a single ‘‘fact’’ that merely
cut and pasted a portion of a declarant’s
cross-examination. Based upon the trial
section’s experience with unlimited
pages of facts, the Board recently
reverted back to a fixed page limit for
the entire motion (argument and facts).
Accordingly, this alternative is
inconsistent with objectives of the
Leahy-Smith America Invents Act that
the Director, in prescribing rules for the
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.
IV. Alternative Option III. The Office
considered an alternative fee setting
regime in which fees would be charged
at various steps in the review process,
a first fee on filing of the petition, a
second fee if instituted, a third fee on
filing a motion in opposition to
amended claims, etc. The alternative fee
setting regime would hamper the ability
of the Office to complete timely reviews,
would result in dismissal of pending
proceedings with patentability in doubt
due to non-payment of required fees by
third parties, and would be inconsistent
with 35 U.S.C. 322 that requires the fee
established by the Director be paid at
the time of filing the petition.
Accordingly, this alternative is
inconsistent with objectives of the
Leahy-Smith America Invents Act that
the Director, in prescribing rules for
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.
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V. Alternative Option IV. The Office
considered setting reduced fees for
small and micro entities and to provide
refunds if a review is not instituted. The
Office may set the fee to recover the cost
of providing the services under 35
U.S.C. 41(d)(2)(a). Fees set under this
authority are not reduced for small
entities, see 35 U.S.C. 42(h)(1), as
amended. Moreover, the Office does not
have authority to refund fees that were
not paid by mistake or in excess of that
owed. See 35 U.S.C. 42(d).
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 objectives
of the Leahy-Smith America Invents Act
that the Director, in prescribing rules for
the 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.
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
of good cause to authorize additional
requested discovery. To show good
cause, a party must make a particular
and specific demonstration of fact. The
moving party must also show that it was
fully diligent in seeking discovery, and
that there is no undue prejudice to the
non-moving party.
The Office has proposed a default
scheduling order to provide limited
discovery as a matter of right and also
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 economic impact
on the opposing party would be
considered which 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
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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
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
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and in completing the trial within the
established time frame, 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 nonregistered practitioner. Accordingly, the
alternatives to eliminate pro hac vice
practice or to permit more broadly it
would have been inconsistent with
objectives of the Leahy-Smith America
Invents Act that the Director, in
prescribing rules for the 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.
Threshold for Instituting a Review:
The Office considered whether the
threshold for instituting a review could
be set as low as or lower than the
threshold for ex parte reexamination.
This alternative could not be adopted in
view of the statutory requirements in 35
U.S.C. 324.
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 objectives of the Leahy-Smith
America Invent Act that the Director, in
prescribing rules for the 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.
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.
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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, required 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, September 16,
2012. See § 6(c)(3)(C) of the LeahySmith 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).
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Based on the petition and other filing
requirements for initiating a review
proceeding, the USPTO estimates the
burden of the proposed rules on the
public to be $22,761,410 in fiscal year
2013, which represents the sum of the
estimated total annual (hour)
respondent cost burden ($20,405,610)
plus the estimated total annual nonhour respondent cost burden
($2,355,800) provided in Part O, Section
II, of this notice, infra.
The USPTO expect several benefits to
flow from the Leahy-Smith America
Invents Act and these proposed rules. It
is anticipated that the proposed rules
will reduce the time for reviewing
patents at the USPTO. Specifically, 35
U.S.C. 326(a) provides that the Director
prescribe regulations requiring a final
determination by the Board within one
year of initiation, which may be
extended for up to six months for good
cause. In contrast, currently for inter
partes reexamination, the average time
from the filing to the publication of a
certificate ranged from 28.9 to 41.7
months during fiscal years 2009–2011.
See Reexaminations—FY 2011, https://
www.uspto.gov/patents/Reexamination_
operational_statistic_through_
FY2011Q4.pdf.
Likewise, it is anticipated that the
proposed rules will minimize
duplication of efforts. In particular, the
Leahy-Smith America Invents Act
provides more coordination between
district court infringement litigation and
covered business method patent review
to reduce duplication of efforts and
costs.
The AIPLA Report of the Economic
Survey 2011 reports that the total cost of
patent litigation where the damages at
risk are less than $1,000,000 average
$916,000, where the damages at risk are
between $1,000,000 and $25,000,000
average $2,769,000, and where the
damages at risk exceed $25,000,000
average $6,018,000. There may be a
significant reduction in overall burden
if, as intended, the Leahy-Smith
America Invents Act and the proposed
rules reduce the overlap between review
at the USPTO of issued patents and
validity determination during patent
infringement actions. Data from the
United States district courts reveals that
2,830 patent cases were filed in 2006,
2,896 in 2007, 2,909 in 2008, 2,792 in
2009, and 3,301 in 2010. See U.S.
Courts, Judicial Business of the United
States Courts, www.uscourts.gov/
uscourts/Statistics/JudicialBusiness/
2010/appendices/C02ASep10.pdf (last
visited Nov. 11, 2011) (hosting annual
reports for 1997 through 2010). Thus,
the Office estimates that no more than
3,300 (the highest number of yearly
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filings between 2006 and 2010 rounded
to the nearest 100) patent cases are
likely to be filed annually. The aggregate
burden estimate above ($22,761,410)
was not offset by a reduction in burden
based on improved coordination
between district court patent litigation
and the new inter partes review
proceedings.
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).
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
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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). This rulemaking
carries out a statute designed to lessen
litigation. See H.R. Rep. No. 112–98, at
45–48.
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.
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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. In the Notice ‘‘Changes to
Implement Transitional Program for
Covered Business Method Patents,’’ RIN
0651–AC73, the information collection
for covered business methods
authorized by the Leahy-Smith America
Invents Act were provided. This notice
also provides the subset of burden
created by the covered business method
patent review 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 covered
business method patent review (§§ 42.5,
42.6, 42.8, 42.11, 42.13, 42.20, 42.21,
42.22, 42.24(a)(3), 42.63, 42.65, 42.203,
42.205, and 42.302 through 42.304);
(2) motions (§§ 42.6, 42.8, 42.11,
42.13, 42.21, 42.22, 42.24(a)(5), 42.51
through 42.54, 42.63, 42.64, 42.65,
42.221, 42.123, and 42.223);
(3) oppositions (§§ 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, 42.65,
42.207, and 42.220);
(4) replies provided for in 35 U.S.C.
321–329 (§§ 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 (§ 42.70)
provided for in 35 U.S.C. 326(a)(10),
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Sfmt 4702
requests for rehearing (§ 42.71(c)),
requests for adverse judgment
(§ 42.73(b)), and requests that a
settlement be treated as business
confidential (§ 42.74(b)) provided for in
35 U.S.C. 327.
I. Abstract: The USPTO is required by
35 U.S.C. 131 and 151 to examine
applications and, when appropriate,
issue applications as patents.
Chapter 32 of title 35 U.S.C. in effect
on September 16, 2012, provides for
post-grant review proceedings allowing
third parties to petition the USPTO to
review the patentability of an issued
patent under any ground authorized
under 35 U.S.C. 282(b)(2). If a trial is
initiated by the USPTO based on the
petition, as authorized by the USPTO,
additional motions may be filed by the
petitioner. A patent owner may file a
response to the petition and if a trial is
instituted, as authorized by the USPTO,
may file additional motions.
Section 18 of the Leahy-Smith
America Invents Act provides for a
transitional program for covered
business method patents which will
employ the standards and procedures of
the post-grant review proceeding with a
few exceptions.
In estimating the number of hours
necessary for preparing a petition to
institute a covered business method
patent review, 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. Since additional grounds
are provided in covered business
method patent review, the Office
estimates the cost of preparing a petition
to institute a review will be 33.333%
more than the estimated cost of
preparing a request for inter partes
reexamination, or $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 Office considered that
the preliminary motion phase is a good
proxy for patentability reviews since
that is the period of current contested
cases before the trial 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 make estimates on the
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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.
It is estimated that the cost of an inter
partes review would be 60% of the cost
of current contested cases before the
trial section of the Board to the end of
the preliminary motion period. An inter
partes review should have many fewer
motions since only one party will have
a patent that is the subject of the
proceeding (compared with each party
having at least a patent or an application
in current contested cases before the
trial section of the Board). Moreover,
fewer issues can be raised since inter
partes review will not have priorityrelated issues that must be addressed in
current contested cases before the trial
section of the Board. Consequently, a
60% weighting factor should capture
the typical costs of an inter partes
review.
It is estimated that the cost of a
covered business method patent review
would be 75% of the cost of current
contested cases before the trial section
of the Board to the end of the
preliminary motion period. A covered
business method patent review should
have many fewer motions since only
one party will have a patent that is the
subject of the proceeding (compared
with each party having at least a patent
or an application in current contested
cases before the trial section of the
Board). Moreover, fewer issues can be
raised since covered business method
patent reviews will not have the
priority-related issues that must be
addressed in current contested cases
before the trial section of the Board
before the priority phase. Again, a 75%
weighting factor should capture the
typical costs of a covered business
method patent review.
The title, description, and respondent
description of the information collection
are shown below with an estimate of the
annual reporting burdens for the
covered business method patent review
provisions. 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 §§ 6(d)
and 18 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 review as well as the motions
authorized following the institution is
used by the USPTO to determine
whether to initiate a review under 35
U.S.C. 324 and to prepare a final
decision under 35 U.S.C. 328.
OMB Number: 0651–00xx.
Title: Patent Review and Derivation
Proceedings.
Form Numbers: None.
Estimated time
for response
(hours)
Item
mstockstill on DSK4VPTVN1PROD with PROPOSALS
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 515 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: 60,016.5 hours per year.
Estimated Total Annual (hour)
Respondent Cost Burden: $20,405,610
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 $20,405,610 per year
(60,016.5 hours per year multiplied by
$340 per hour).
Estimated Total Annual Non-hour
Respondent Cost Burden: $2,355,800
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
covered business method patent review
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 $2,355,800 per year.
Therefore, the total estimated cost
burden in fiscal year 2013 is estimated
to be $22,761,410 (the sum of the
estimated total annual (hour)
respondent cost burden ($20,405,610)
plus the estimated total annual nonhour respondent cost burden
($2,355,800)).
Estimated
annual
responses
Estimated
annual
burden hours
Petition for covered business method patent review ..................................................................
Reply to initial covered business method patent review .............................................................
Request for Reconsideration .......................................................................................................
Motions, replies and oppositions after institution in covered business method patent review ...
Request for oral hearing ..............................................................................................................
Request to treat a settlement as business confidential ..............................................................
Request for adverse judgment, default adverse judgment or settlement ...................................
Request to make a settlement agreement available ...................................................................
Notice of judicial review of a Board decision (e.g., notice of appeal under 35 U.S.C. 142) ......
180.4
100
80
130
20
2
1
1
0.1
50
45
14
342
45
2
10
2
5
9,020
4,500
1,120
44,460
900
4
10
2
0.5
Totals ....................................................................................................................................
........................
515
60,016.5
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E:\FR\FM\10FEP1.SGM
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Federal Register / Vol. 77, No. 28 / Friday, February 10, 2012 / Proposed Rules
Estimated
annual
responses
Item
Fee amount
Estimated
annual
filing costs
Petition for covered business method patent review ..................................................................
Reply to covered business method patent review petition .........................................................
Request for Reconsideration .......................................................................................................
Motions, replies and oppositions after initiation in covered business method patent review .....
Request for oral hearing ..............................................................................................................
Request to treat a settlement as business confidential ..............................................................
Request for adverse judgment, default adverse judgment or settlement ...................................
Request to make a settlement agreement available ...................................................................
Notice of judicial review of a Board decision (e.g., notice of appeal under 35 U.S.C. 142) ......
50
45
14
342
45
2
10
2
5
$47,100
0
0
0
0
0
0
400
0
$2,355,000
0
0
0
0
0
0
800
0
Totals ....................................................................................................................................
515
........................
2,355,800
mstockstill on DSK4VPTVN1PROD with PROPOSALS
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,
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:
TPCBMP_Definition@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, Covered Business
Method Patent Review Proposed
Definition for Technological Invention.’’
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.
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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:
prior art; and solves a technical problem
using a technical solution.
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. 2012–2538 Filed 2–9–12; 8:45 am]
BILLING CODE 3510–16–P
DEPARTMENT OF LABOR
Office of Federal Contract Compliance
Programs
PART 42—TRIAL PRACTICE BEFORE
THE PATENT TRIAL AND APPEAL
BOARD
41 CFR Part 60–741
1. The authority citation for 37 CFR
part 42 continues to read as follows:
Affirmative Action and
Nondiscrimination Obligations of
Contractors and Subcontractors
Regarding Individuals With Disabilities
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, §§ 6(c),
6(f), and 18, 125 Stat. 284, 304, 311, and 329
(2011).
RIN 1250–AA02
2. Add § 42.301 to subpart D to read
as follows:
Office of Federal Contract
Compliance Programs, Labor.
ACTION: Notice of proposed rulemaking
and extension of comment period.
§ 42.301
SUMMARY:
Definitions.
In addition to the definitions in
§ 42.2, the following definitions apply to
proceedings under this subpart D:
(a) Covered business method patent
means a patent that claims a method or
corresponding apparatus for performing
data processing or other operations used
in the practice, administration, or
management of a financial product or
service, except that the term does not
include patents for technological
inventions.
(b) Technological invention. In
determining whether a patent is for a
technological invention solely for
purposes of the Transitional Program for
Covered Business Methods (section
42.301(a)), the following will be
considered on a case-by-case basis:
whether the claimed subject matter as a
whole recites a technological feature
that is novel and unobvious over the
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AGENCY:
On December 9, 2011, the
Office of Federal Contract Compliance
Programs (OFCCP) published a Federal
Register notice of proposed rulemaking
(NPRM). This NPRM (76 FR 77056)
proposes revising the regulations
implementing the nondiscrimination
and affirmative action regulations of
section 503 of the Rehabilitation Act of
1973, as amended. This document
extends the comment period for the
proposed rule for fourteen (14) days. If
you have already commented on the
proposed rule, you do not need to
resubmit your comment. OFCCP will
consider all comments received from
the date of publication of the proposed
rule through the close of the extended
comment period.
DATES: The comment period for the
NPRM published on December 9, 2011,
scheduled to close on February 7, 2012,
is extended until February 21, 2012.
E:\FR\FM\10FEP1.SGM
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Agencies
[Federal Register Volume 77, Number 28 (Friday, February 10, 2012)]
[Proposed Rules]
[Pages 7095-7108]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2538]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
Patent and Trademark Office
37 CFR Part 42
[Docket No. PTO-P-2011-0087]
RIN 0651-AC75
Transitional Program for Covered Business Method Patents--
Definition of Technological Invention
AGENCY: United States Patent and Trademark Office, Commerce.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The United States Patent and Trademark Office (Office or
USPTO) proposes a new rule to implement the provision of the Leahy-
Smith America Invents Act that requires the Office to issue regulations
for determining whether a patent is for a technological invention in a
transitional post-grant review proceeding for covered business method
patents. The provision of the Leahy-Smith America Invents Act will take
effect on September 16, 2012, one year after the date of enactment. The
provision and any regulations issued under the provision will be
repealed on September 16, 2020, with respect to any new petitions under
the transitional program.
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: TPCBMP_Definition@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, Covered Business Method Patent Review Proposed
Definition for Technological Invention.''
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.
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[supreg] 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[supreg] 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: Sally Medley, Administrative Patent
Judge, Robert Clarke, Administrative Patent Judge, Michael Tierney,
Lead Administrative Patent Judge, and Joni Chang, 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 the
proposed regulations is to establish a more
[[Page 7096]]
efficient and streamlined patent system that will improve patent
quality and limit unnecessary and counterproductive litigation costs.
The preamble of this notice sets forth in detail the definition of
technological invention that the Board will use in conducting
transitional covered business method patent review proceedings. The
USPTO is engaged in a transparent process to create a timely, cost-
effective alternative to litigation. Moreover, the rulemaking process
is designed to ensure the integrity of the trial procedures. See 35
U.S.C. 326(b). The proposed rules would provide a definition of
technological invention that the Board will use in conducting
transitional covered business method review proceedings.
Section 18 of the Leahy-Smith America Invents Act provides that the
Director may institute a transitional proceeding only for a patent that
is a covered business method patent. Section 18(d)(1) of the Leahy-
Smith America Invents Act specifies that a covered business method
patent is a patent that claims a method or corresponding apparatus for
performing data processing or other operations used in the practice,
administration, or management of a financial product or service, except
that the term does not include patents for technological inventions.
Section 18(d)(2) provides that the Director will issue regulations for
determining whether a patent is for a technological invention. This
rulemaking provides regulations for determining whether a patent is for
a technological invention. The Leahy-Smith America Invents Act provides
that the transitional program for the review of covered business method
patents will take effect on September 16, 2012, one year after the date
of enactment, and applies to any covered business method patent issued
before, on, or after September 16, 2012. Section 18 of the Leahy-Smith
America Invents Act and the regulations issued under Sec. 18 will be
repealed on September 16, 2020. Section 18 and the regulations issued
will continue to apply after September 16, 2020, to any petition for a
transitional proceeding that is filed before September 16, 2020.
Discussion of Specific Rules
This notice proposes a new rule to implement the provisions of
Section 18(d)(2) of the Leahy-Smith America Invents Act that provides
that the Director will issue regulations for determining whether a
patent is for a technological invention. A separate notice proposes new
rules to implement the provisions of the Leahy-Smith America Invents
Act for the transitional program for covered business method patents
(RIN 0651-AC73). The separate notice proposes to add a new subpart D to
37 CFR part 42 to provide rules specific to transitional post-grant
review of covered business method patents, including the definition for
covered business method patent in proposed Sec. 42.301(a).
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. Furthermore, the Office in separate rulemakings is
proposing 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 E to 37 CFR part 42 (0651-AC74) to provide
rules specific to derivation. The notices of proposed rulemaking are
available on the USPTO Internet Web site at www.uspto.gov.
Pursuant to Sec. 18(d)(2) of the Leahy-Smith America Invents Act,
the Office is proposing the definition of a technological invention in
this rulemaking. This notice proposes to add the definition of
technological invention to new subpart D of 37 CFR 42, specifically to
proposed Sec. 42.301(b).
Title 37 of the Code of Federal Regulations, Part 42, Subpart D,
the definition for technological invention is proposed to be added to
Section 42.301 as follows:
Section 42.301: Proposed Sec. 42.301(b) would set forth the
definition for technological invention for covered business method
patent review proceedings. The proposed definition of technological
invention would provide that in determining whether a patent is for a
technological invention the following will be considered on a case-by-
case basis: Whether the claimed subject matter as a whole (1) recites a
technological feature that is novel and unobvious over the prior art;
and (2) solves a technical problem using a technical solution. The
Office recognizes that, in prescribing a regulation to define
technological invention, the Office must consider the efficient
administration of the proceedings by the Office, and its ability to
timely complete them, consistent with 35 U.S.C. 326(b).
The proposed definition is consistent with the legislative history
of the Leahy-Smith America Invents Act. See, e.g., 157 Cong. Rec. S1364
(daily ed. Mar. 8, 2011) (statement of Sen. Schumer) (``The `patents
for technological inventions' exception only excludes those patents
whose novelty turns on a technological innovation over the prior art
and are concerned with a technical problem which is solved with a
technical solution and which requires the claims to state the technical
features which the inventor desires to protect.''); 157 Cong. Rec.
H4497 (daily ed. June 23, 2011) (statement of Rep. Smith) (``Patents
for technological inventions are those patents whose novelty turns on a
technological innovation over the prior art and are concerned with a
technical problem which is solved with a technical solution.''); 157
Cong. Rec. S5428 (daily ed. Sept. 8, 2011) (statement of Sen. Coburn)
(``Patents for technological inventions are those patents whose novelty
turns on a technological innovation over the prior art and are
concerned with a technical problem which is solved with a technical
solution.'').
Rulemaking Considerations
A. Administrative Procedure Act (APA): This notice proposes rules
of practice concerning the procedure for requesting a covered business
method patent review, 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
interpretive rules. See Cooper Tech. Co. v. Dudas, 536 F.3d 1330, 1336-
37 (Fed. Cir. 2008) (explaining that ``a rule that merely clarifies or
explains existing law or regulations is `interpretive' '' and holding
USPTO's rules implementing inter partes reexamination proceedings to be
interpretive rules not subject to the notice and comment requirements
of the Administrative Procedures Act); Nat'l Org. of Veterans'
Advocates v. Sec'y of Veterans Affairs, 260 F.3d 1365, 1375 (Fed. Cir.
2001) (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.SC.
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'')
[[Page 7097]]
(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 50
petitions for covered business method patent review will be filed in
fiscal year 2013. This will be the first fiscal year in which the
review proceeding will be available for an entire fiscal year.
The estimated number of covered business method patent review
petitions is based on the number of inter partes reexamination requests
filed in fiscal year 2011 for patents having an original classification
in class 705 of the United States Patent Classification System. Class
705 is the classification for patents directed to data processing in
the following areas: Financial, business practice, management, or cost/
price determination. See https://www.uspto.gov/web/patents/classification/uspc705/sched705.pdf.
The following is the class definition and description for Class
705:
This is the generic class for apparatus and corresponding
methods for performing data processing operations, in which there is
a significant change in the data or for performing calculation
operations wherein the apparatus or method is uniquely designed for
or utilized in the practice, administration, or management of an
enterprise, or in the processing of financial data.
This class also provides for apparatus and corresponding methods
for performing data processing or calculating operations in which a
charge for goods or services is determined.
This class additionally provides for subject matter described in
the two paragraphs above in combination with cryptographic apparatus
or method.
Subclasses 705/300-348 were established prior to complete
reclassification of all project documents. Documents that have not
yet been reclassified have been placed in 705/1.1. Until
reclassification is finished a complete search of 705/300-348 should
include a search of 705/1.1. Once the project documents in 705/1.1
have been reclassified they will be moved to the appropriate
subclasses and this note will be removed.
Scope of the Class
1. The arrangements in this class are generally used for
problems relating to administration of an organization, commodities
or financial transactions.
2. Mere designation of an arrangement as a ``business machine''
or a document as a ``business form'' or ``business chart'' without
any particular business function will not cause classification in
this class or its subclasses.
3. For classification herein, there must be significant claim
recitation of the data processing system or calculating computer and
only nominal claim recitation of any external art environment.
Significantly claimed apparatus external to this class, claimed in
combination with apparatus under the class definition, which perform
data processing or calculation operations are classified in the
class appropriate to the external device unless specifically
excluded therefrom.
4. Nominally claimed apparatus external to this class in
combination with apparatus under the class definition is classified
in this class unless provided for in the appropriate external class.
5. In view of the nature of the subject matter included herein,
consideration of the classification schedule for the diverse art or
environment is necessary for proper search.
See Classification Definitions (Feb. 2011) available at https://www.uspto.gov/web/patents/classification/uspc705/defs705.htm.
Accordingly, patents subject to covered business method patent
review are anticipated to be typically classifiable in Class 705. It is
anticipated that the number of patents in Class 705 that do not qualify
as covered business method patents would approximate the number of
patents classified in other classes that do qualify.
The Office received 20 requests for inter partes reexamination of
patents classified in Class 705 in fiscal year 2011. The Office in
estimating the number of petitions for covered business method patent
review to be higher than 20 requests due to an expansion of the grounds
for which review may be requested including subject matter eligibility
grounds, the greater coordination with litigation, and the provision
that patents will be eligible for the proceeding regardless of filing
date of the application which resulted in the patent.
The Office has reviewed the entity status of patents for which
inter partes reexamination was requested from October 1, 2000, to
September 23, 2011. This data only includes filings granted a filing
date rather than filings in which a request was received. The first
inter partes reexamination was filed on July 27, 2001. A summary of
that review is provided in Table 1 below. As shown by Table 1, patents
known to be owned by a small entity represented 32.79% of patents for
which inter partes reexamination was requested. Based on an assumption
that the same percentage of patents owned by small entities will be
subject to covered business method patent review, it is estimated that
16 petitions for covered business method patent review would be filed
to seek review of patents owned by a small entity in fiscal year 2013,
the first full fiscal year that these proceedings will be available.
Table 1--Inter partes Reexamination Requests Filed With Parent Entity Type *
----------------------------------------------------------------------------------------------------------------
Number filed
Inter partes where parent Percent small
Fiscal year reexamination patent is entity type of
requests filed small entity total
type
----------------------------------------------------------------------------------------------------------------
2011............................................................ 329 123 37.39
2010............................................................ 255 94 36.86
2009............................................................ 240 62 25.83
2008............................................................ 155 52 33.55
2007............................................................ 127 35 27.56
2006............................................................ 61 17 27.87
2005............................................................ 59 18 30.51
2004............................................................ 26 5 19.23
2003............................................................ 21 12 57.14
2002............................................................ 4 1 25.00
2001............................................................ 1 0 0.00
-----------------------------------------------
Totals...................................................... 1,278 419 32.79
----------------------------------------------------------------------------------------------------------------
* Small entity status determined by reviewing preexamination small entity indicator for the parent patent.
[[Page 7098]]
Based on the number of patents issued during fiscal years 1995
through 1999 that paid the small entity third stage maintenance fee,
the number of patents issued during fiscal years 2000 through 2003 that
paid the small entity second stage maintenance fee, the number of
patents issued during fiscal years 2004 through 2007 that paid the
first stage maintenance fee, and the number of patents issued during
fiscal years 2008 through 2011 that paid a small entity issue fee,
there are no less than 375,000 patents owned by small entities in force
as of October 1, 2011.
Furthermore, the Office recognizes that there would be an offset to
this number for patents that expire earlier than 20 years from their
filing date due to a benefit claim to an earlier application or due to
a filing of a terminal disclaimer. The Office likewise recognizes that
there would be an offset in the opposite manner due to the accrual of
patent term extension and adjustment. The Office, however, does not
maintain data on the date of expiration by operation of a terminal
disclaimer. Therefore, the Office has not adjusted the estimate of
375,000 patents owned by small entities in force as of October 1, 2011.
While the Office maintains information regarding patent term extension
and adjustment accrued by each patent, the Office does not collect data
on the expiration date of patents that are subject to a terminal
disclaimer. As such, the Office has not adjusted the estimated of
375,000 patents owned by small entities in force as of October 1, 2011,
for accrual of patent term extension and adjustment, because in view of
the incomplete terminal disclaimer data issue, would be incomplete and
any estimate adjustment would be administratively burdensome. Thus, it
is estimated that the number of small entity patents in force in fiscal
year 2013 will be at least 375,000.
Based on the estimated number of patents in force, the number of
small entity owned patents impacted by covered business method patent
review in fiscal year 2013 (16 patents) would be less than 0.005% (16/
375,000) of all patents in force that are owned by small entities. The
USPTO nonetheless has undertaken an Initial Regulatory Flexibility Act
Analysis of the proposed rule.
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 18
of the Leahy-Smith America Invents Act provides for a transitional
program for covered business method patents which will employ the
standards and procedures of the post-grant review proceeding with a few
exceptions. For the implementation, Sec. 6(f) of the Leahy-Smith
America Invents Act requires that the Director issue regulations to
carry out chapter 32 of title 35, United States Code, within one year
after the date of enactment. Public Law 112-29, Sec. 6(f), 125 Stat.
284, 311 (2011).
2. Succinct Statement of the Objectives of, and Legal Basis for,
the Proposed Rules: The proposed rules seek to implement covered
business method patent review as authorized by the Leahy-Smith America
Invents Act. The Leahy-Smith America Invents Act requires that the
Director prescribe rules for the covered business method patent reviews
that result in a final determination not later than one year after the
date on which the Director notices the institution of a proceeding. The
one-year period may be extended for not more than 6 months if good
cause is shown. See 35 U.S.C. 326(a)(11). The Leahy-Smith America
Invents Act also requires that the Director, in prescribing rules for
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. See 35 U.S.C. 326(b). Consistent
with the time periods provided in 35 U.S.C. 326(a)(11), the proposed
rules are designed to, except where good cause is shown to exist,
result in a final determination by the Patent Trial and Appeal Board
within one year of the notice of initiation of the review. This one-
year review will enhance the effect on the economy, and improve the
integrity of the patent system and the efficient administration of the
Office.
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 covered
business method patent review will be filed in fiscal year 2013. The
Office has reviewed the percentage of patents for which inter partes
reexamination was requested from October 1, 2000 to September 23, 2011.
A summary of that review is provided in Table 1 above. As demonstrated
by Table 1, patents known to be owned by a small entity represent
32.79% of patents for which inter partes reexamination was requested.
Based on an assumption that the same percentage of patents owned by
small entities will be subject to the new review proceedings, it is
estimated that 16 patents owned by small entities would
[[Page 7099]]
be affected by covered business method patent review.
The USPTO estimates that 2.5% of patent owners will file a request
for adverse judgment prior to a decision to institute and that another
2.5% will file a request for adverse judgment or fail to participate
after initiation. Specifically, an estimated 2 patent owners will file
a request for adverse judgment or fail to participate after institution
in covered business method proceedings. Based on the percentage of
small entity owned patents that were the subject of inter partes
reexamination (32.79%) from October 1, 2000 to September 23, 2011, it
is estimated that 1 small entity will file such request or fail to
participate in covered business method patent review.
Under the proposed rules, prior to determining whether to institute
a review, the patent owner may file an optional patent owner
preliminary response to the petition. Given the new time period
requirements to file a petition for review before the Board relative to
patent enforcement proceedings and the desirability to avoid the cost
of a trial and delays to related infringement actions, it is
anticipated that 90% of petitions, other than those for which a request
for adverse judgment is filed, will result in the filing of a patent
owner preliminary response. Specifically, the Office estimates that 45
patent owners will file a preliminary response to a covered business
method patent petition. Based on the percentage of small entity owned
patents that were the subject of inter partes reexamination (32.79%),
it is estimated that 15 small entities will file a preliminary response
to a covered business method patent review petition filed in fiscal
year 2013.
Under the proposed rules, the Office will determine whether to
institute a trial within three months after the earlier of: (1) The
submission of a patent owner preliminary response, (2) the waiver of
filing a patent owner preliminary response, or (3) the expiration of
the time period for filing a patent owner preliminary response. If the
Office decides not to institute a trial, the petitioner may file a
request for reconsideration of the Office's decision. In estimating the
number of requests for reconsideration, the Office considered the
percentage of inter partes reexaminations that were denied relative to
those that were ordered (24 divided by 342, or 7%) in fiscal year 2011.
See Reexamination--FY 2011, https://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf. The
Office also considered the impact of: (1) patent owner preliminary
responses under newly authorized in 35 U.S.C. 323, (2) the enhanced
thresholds for instituting reviews set forth in 35 U.S.C. 324(a), which
would tend to increase the likelihood of dismissing a petition for
review, and (3) the more restrictive time period for filing a petition
for review in 35 U.S.C. 325(b), which would tend to reduce the
likelihood of dismissing a petition. Based on these considerations, it
is estimated that 10% of the petitions for review (5 divided by 49)
would be dismissed.
Thus, the Office estimates that no more than 5 entities (2 small
entities) would be subject to a denial of the petition to initiate
covered business method review. This estimate is based upon either the
patent failing to meet the proposed definition for technological
invention or because the petitioner failed to meet the likelihood of
success standard. Of the remaining 90% of petitions that proceed to
trial, all entities (large or small) could be subject to the proposed
definition for technological invention since jurisdictional issues may
be raised at any time.
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 33.333%) will
occur, the Office estimates that 2 requests for reconsideration will be
filed. Based on the percentage of small entity owned patents that were
the subject of inter partes reexamination (32.79%), it is estimated
that 1 small entity will file a request for a reconsideration of a
decision dismissing the petition for post-grant or covered business
method patent review filed 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
covered business method patent reviews will have an average of 8.89
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 covered business method patent review may
request an oral hearing. It is anticipated that 45 requests for oral
hearings will be filed based on the number of requests for oral
hearings in inter partes reexamination, the stated desirability for
oral hearings during the legislative process, and the public input
received prior to this notice of proposed rulemaking. Based on the
percentage of small entity owned patents that were the subject of inter
partes reexamination (32.79%), it is estimated that 15 small entities
will file a request for oral hearing in the covered business method
patent reviews instituted in fiscal year 2013.
Parties to a covered business method patent review may file
requests to treat a settlement as business confidential, and request
for adverse judgment. 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 the alternative dispute
resolution options will be infrequently used. The Office estimates that
2 requests to treat a settlement as business confidential, and 10
requests for adverse judgment, default adverse judgment, or settlement
notices will be filed. The Office also estimates that 2 requests to
make a settlement available will be filed. Based on the percentage of
small entity owned patents that were the subject of inter partes
reexamination (32.79%), it is estimated that 1 small entity will file a
request to treat a settlement as business confidential and 3 small
entities will file a request for adverse judgment, default adverse
judgment notices, or settlement notices in the reviews instituted in
fiscal year 2013.
Parties to a covered business method patent review may seek
judicial review of the final decision of the Board. Historically, 33%
of examiner's decisions in inter partes reexamination proceedings have
been appealed to the Board. It is anticipated that 16% of final
decisions of the Board would be appealed. The reduction in appeal rate
is based on the higher threshold for institution, the focused process,
and the experience of the Board in conducted contested cases.
Therefore, it is estimated that 5 parties would seek judicial review of
the final decisions of the Board in covered business method
[[Page 7100]]
patent reviews instituted in fiscal year 2013. Furthermore, based on
the percentage of small entity owned patents that were the subject of
inter partes reexamination (32.79%), it is estimated that 2 small
entities would seek judicial review of final decisions of the Board in
the covered business method patent reviews 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: Covered business method patent reviews would be
limited to business method patents that are not patents for
technological inventions. Under the proposed rules, a person who is not
the owner of a patent may file a petition to institute a review of the
patent, with a few exceptions. Given this, it is anticipated that a
petition for review is likely to be filed by an entity practicing in
the business method field for covered business methods.
Preparation of the petition would require analyzing the patent
claims, locating evidence supporting arguments of unpatentability, and
preparing the petition seeking review of the patent. This notice
provides the proposed procedural requirements that are common for the
new trials. Additional requirements are provided in contemporaneous
trial specific proposed rulemaking. The procedures for petitions to
institute a covered business method patent review are proposed in
Sec. Sec. 42.5, 42.6, 42.8, 42.11, 42.13, 42.20, 42.21, 42.22,
42.24(a)(3), 42.63, 42.65, 42.203, 42.205, and 42.302 through 42.304.
The skills necessary to prepare a petition for review 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, to represent a party in an inter partes reexamination,
and to represent a party in an interference proceeding 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 covered business method patent
review is estimated to be 33.333% higher than the cost of preparing an
inter partes review petition because the petition for covered business
method patent review may seek to institute a proceeding on additional
grounds such as subject matter eligibility. 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 Office's consideration of the
work required to prepare and file such a request, the Office estimates
that the cost of preparing a petition for covered business method
patent review would be $61,333 (including expert costs).
The filing of a petition for review would also require payment by
the petitioner of the appropriate petition fee to recover the aggregate
cost for providing the review. The appropriate petition fee would be
determined by the number of claims for which review is sought and the
type of review. The proposed fees for filing a petition for covered
business method patent review would be: $35,800 to request review of 20
or fewer claims, $44,750 to request review of 21 to 30 claims, $53,700
to request review of 31 to 40 claims, $71,600 to request review of 41
to 50 claims, $89,500 to request review of 51 to 60 claims, and an
additional $35,800 to request review of additional groups of 10 claims.
In setting fees, the estimated information technology cost to
establish the process and maintain the filing and storage system
through 2017 is to be recovered by charging each petition $2,270. The
remainder of the fee is to recover the cost for judges to determine
whether to institute a review and conduct the review, together with a
proportionate share of indirect costs, e.g., rent, utilities,
additional support, and administrative costs. Based on the direct and
indirect costs, the fully burdened cost per hour for judges to decide a
petition and conduct a review is estimated to be $258.32.
For a petition for covered business method patent review with 20 or
fewer challenged claims, it is anticipated that 121 hours of judge time
would be required. For 21 to 30 challenged claims, an additional 30
hours is anticipated for a total of 151 hours of judge time. For 31 to
40 challenged claims, an additional 60 hours is anticipated for a total
of 181 hours of judge time. For 41 to 50 challenged claims, an
additional 121 hours is anticipated for a total of 242 hours of judge
time. For 51 to 60 challenged claims, an additional 181 hours is
anticipated for a total of 302 hours of judge time. The increase in
adjustment reflects the added complexity that typically occurs as more
claims are in dispute.
The proposed rules would permit the patent owner to file a
preliminary response to the petition setting forth the reasons why no
review should be initiated. The procedures for a patent owner to file a
preliminary response as 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, 42.65, 42.107, 42.120, 42.207, and 42.220. The patent
owner is not required to file a preliminary response. The Office
estimates that the preparation and filing of a patent owner preliminary
response would require 100 hours of professional time and cost $34,000
(including expert costs). The AIPLA Report of the Economic Survey 2011
reported that the average cost for inter partes reexamination including
of the request ($46,000), the first patent owner response, and third
party comments was $75,000 (see I-175) and the median billing rate for
professional time of $340 per hour for attorneys in private firms (see
8). Thus, the cost of the first patent owner reply and the third party
statement is $29,000. The Office finds these costs to be reasonable
estimates. The patent owner reply and third party statement, however,
occur after the examiner has made an initial threshold determination
and made only the appropriate rejections. Accordingly, it is
anticipated that filing a patent owner preliminary response to a
petition for review would cost more than the initial reply in a
reexamination, or an estimated $34,000 (including expert costs).
The Office will determine whether to institute a trial within three
months after the earlier of: (1) The submission of a patent owner
preliminary response, (2) the waiver of filing a patent owner
preliminary response, or (3) the expiration of the time period for
filing a patent owner preliminary response. If the Office decides not
to institute a trial, the petitioner may file a request for
reconsideration of the Office's decision. It is anticipated that a
request for reconsideration will require 80 hours of professional time
to prepare and file, at a cost of $340 per hour, for a total estimated
cost of $27,200. This estimate is based on the complexity of the issues
and desire to avoid time bars imposed by 35 U.S.C. 325(b).
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
[[Page 7101]]
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,
42.65, 42.221, and 42.223. 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, 42.65, 42.207, and
42.220. 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 covered business method patent review will have 8.89
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
would cost $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. The cost of a motion, opposition, or reply in a covered
business method patent review is estimated at $44,200 (including expert
costs), reflecting the reduction in overlap between motions relative to
derivation. 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 covered business method patent review 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 covered business method patent review may file
requests to treat a settlement as business confidential, or file a
request for adverse judgment. 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. 42.74(c). The procedures to file requests for adverse judgment
are proposed in Sec. 42.73(b). 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 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).
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:
Definition of Technological Invention: The definition proposed is
consistent with the legislative history of the Leahy-Smith America
Invents Act. See, e.g., 157 Cong. Rec. S1364 (daily ed. Mar. 8, 2011)
(statement of Sen. Schumer) (``The `patents for technological
inventions' exception only excludes those patents whose novelty turns
on a technological innovation over the prior art and are concerned with
a technical problem which is solved with a technical solution and which
requires the claims to state the technical features which the inventor
desires to protect.''). The Office considered proposing that a
technological invention be defined as any claimed invention in any
patent having an original classification in any class other than Class
705 of the United States Patent Classification System. Adoption of the
alternative definition as applied to certain patents would have been
either overly narrow or overly broad. For example, there are patents
that are originally classified in Class 705 which solve technical
problems with technical solutions and which are patentable over the
prior art based on a technological innovation. Similarly there are
patents that are originally classified in classes other than Class 705
which fail to solve a technical problem with a technical solution and
fail to be patentable over the prior art based on a technological
innovation. For those reasons, the other considered definition was not
adopted in view of the legislative history.
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 specifically 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 issues, 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
[[Page 7102]]
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. 35 U.S.C. 326(b) provides
considerations that are to be taken into account when prescribing
regulations including the integrity of the patent system, the efficient
administration of the Office, and the ability to complete timely the
trials. The page limits proposed in these rules are consistent with
these considerations.
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 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.
Under the proposed rules, a covered business method patent review
petition would be based upon any grounds identified in 35 U.S.C.
321(b), e.g., failure to comply with 35 U.S.C. 101, 102 (based on
certain references), 103, and 112 (except best mode). Under current
practice, a party would be limited to filing two or three motions, each
limited to 25 pages, for a maximum of 75 pages. Where there is more
than one motion for unpatentability based upon different statutory
grounds, the Board's experience is that the motions contain similar
discussions of technology and claim constructions. Such overlap is
unnecessary where a single petition for unpatentability is filed. Thus,
the proposed 70 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 interference 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 cases 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 cases practice provides a 15 page limit for priority
motion replies, a 5 page limit for miscellaneous
[[Page 7103]]
(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 cases 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.
The Leahy-Smith America Invents Act requires that the Director, in
prescribing rules for 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. See 35 U.S.C.
326(b). In view of the actual results of the duration of proceedings in
inter partes reexamination (without page limits) and contested cases
(with page limits), proposing procedures with reasonable page limits
would be consistent with the objectives set forth in the Leahy-Smith
America Invents Act. Based on our experience on the time needed to
complete a non-page limited proceeding, the option of non-page limited
proceedings was not adopted.
Fee Setting: 35 U.S.C. 321(a) requires the Director to establish
fees to be paid by the person requesting the review in such amounts as
the Director determines to be reasonable, considering the aggregate
costs of the review. In contrast to current 35 U.S.C. 311(b) and
312(c), the Leahy-Smith America Invents Act requires the Director to
establish more than one fee for reviews based on the total cost of
performing the reviews, and does not provide for refund of any part of
the fee when the Director determines that the review should not be
initiated.
35 U.S.C. 322(a)(1) further requires that the fee established by
the Director under 35 U.S.C. 321 accompany the petition on filing.
Accordingly, in interpreting the fee setting authority in 35 U.S.C.
321(a), it is reasonable that the Director should set a number of fees
for filing a petition based on the anticipated aggregate cost of
conducting the review depending on the complexity of the review, and
require payment of the fee upon filing of the petition.
Based on experience with contested cases and inter partes
reexamination proceedings, the following characteristics of requests
were considered as potential factors for fee setting as each would
likely impact the cost of providing the new services. The Office also
considered the relative difficulty in administrating each option in
selecting the characteristics for which different fees should be paid
for requesting review.
I. Adopted Option. Number of claims for which review is requested.
The number of claims often impacts the complexity of the request and
increases the demands placed on the deciding officials. Cf. In re Katz
Interactive Call Processing Patent Litig., 639 F.3d 1303, 1309 (Fed.
Cir. 2011) (limiting number of asserted claims is appropriate to
efficiently manage a case). Moreover, the number of claims for which
review is requested can be easily determined and administered, which
avoids delays in the Office and the impact on the economy or patent
system that would occur if an otherwise meritorious request is refused
due to improper fee payment. Any subsequent petition would be time
barred in view of 35 U.S.C. 325.
II. Alternative Option I. Number of grounds for which review is
requested. The Office has experience with large numbers of cumulative
grounds being presented in inter partes reexaminations which often add
little value to the proceedings. Allowing for a large number of grounds
to be presented on payment of an additional fee(s) is not favored.
Determination of the number of grounds in a request may be contentious
and difficult and may result in a large amount of high-level petition
work. As such, the option would have a negative impact on small
entities. Moreover, interferences instituted in the 1980s and early
1990s suffered from this problem as there was no page limit for motions
and the parties had little incentive to focus the issues for decision.
The resulting interference records were often a collection of disparate
issues and evidence. This led to lengthy and unwarranted delays in
deciding interference cases as well as increased costs for parties and
the Office. Accordingly, this alternative is inconsistent with
objectives of the Leahy-Smith America Invents Act that the Director, in
prescribing rules for the 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 timely complete the instituted proceedings.
III. Alternative Option II. Pages of argument. The Office has
experience with large requests in inter partes reexamination in which
the merits of the proceedings could have been resolved in a shorter
request. Allowing for unnecessarily large requests on payment of an
additional fee(s) is not favored. Moreover, determination of what
should be counted as ``argument'' as compared with ``evidence'' has
often proven to be contentious and difficult as administered in the
current inter partes reexamination appeal process.
In addition, the trial section of the Board recently experimented
with motions having a fixed page limit for the argument section and an
unlimited number of pages for the statement of facts. Unlimited pages
for the statement of facts led to a dramatic increase in the number of
alleged facts and pages associated with those facts. For example, one
party used approximately 10 pages for a single ``fact'' that merely cut
and pasted a portion of a declarant's cross-examination. Based upon the
trial section's experience with unlimited pages of facts, the Board
recently reverted back to a fixed page limit for the entire motion
(argument and facts). Accordingly, this alternative is inconsistent
with objectives of the Leahy-Smith America Invents Act that the
Director, in prescribing rules for the 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.
IV. Alternative Option III. The Office considered an alternative
fee setting regime in which fees would be charged at various steps in
the review process, a first fee on filing of the petition, a second fee
if instituted, a third fee on filing a motion in opposition to amended
claims, etc. The alternative fee setting regime would hamper the
ability of the Office to complete timely reviews, would result in
dismissal of pending proceedings with patentability in doubt due to
non-payment of required fees by third parties, and would be
inconsistent with 35 U.S.C. 322 that requires the fee established by
the Director be paid at the time of filing the petition. Accordingly,
this alternative is inconsistent with objectives of the Leahy-Smith
America Invents Act that the Director, in prescribing rules for 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.
[[Page 7104]]
V. Alternative Option IV. The Office considered setting reduced
fees for small and micro entities and to provide refunds if a review is
not instituted. The Office may set the fee to recover the cost of
providing the services under 35 U.S.C. 41(d)(2)(a). Fees set under this
authority are not reduced for small entities, see 35 U.S.C. 42(h)(1),
as amended. Moreover, the Office does not have authority to refund fees
that were not paid by mistake or in excess of that owed. See 35 U.S.C.
42(d).
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 objectives of the Leahy-Smith America Invents Act that the
Director, in prescribing rules for the 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.
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 of good cause to
authorize additional requested discovery. To show good cause, a party
must make a particular and specific demonstration of fact. The moving
party must also show that it was fully diligent in seeking discovery,
and that there is no undue prejudice to the non-moving party.
The Office has proposed a default scheduling order to provide
limited discovery as a matter of right and also 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 economic impact on
the opposing party would be considered which 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 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 time
frame, 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 more broadly it would have been inconsistent with objectives of
the Leahy-Smith America Invents Act that the Director, in prescribing
rules for the 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.
Threshold for Instituting a Review: The Office considered whether
the threshold for instituting a review could be set as low as or lower
than the threshold for ex parte reexamination. This alternative could
not be adopted in view of the statutory requirements in 35 U.S.C. 324.
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 objectives of the
Leahy-Smith America Invent Act that the Director, in prescribing rules
for the 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.
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.
[[Page 7105]]
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,
required 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,
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 review proceeding, the USPTO estimates the burden of the proposed
rules on the public to be $22,761,410 in fiscal year 2013, which
represents the sum of the estimated total annual (hour) respondent cost
burden ($20,405,610) plus the estimated total annual non-hour
respondent cost burden ($2,355,800) provided in Part O, Section II, of
this notice, infra.
The USPTO expect several benefits to flow from the Leahy-Smith
America Invents Act and these proposed rules. It is anticipated that
the proposed rules will reduce the time for reviewing patents at the
USPTO. Specifically, 35 U.S.C. 326(a) provides that the Director
prescribe regulations requiring a final determination by the Board
within one year of initiation, which may be extended for up to six
months for good cause. In contrast, currently for inter partes
reexamination, the average time from the filing to the publication of a
certificate ranged from 28.9 to 41.7 months during fiscal years 2009-
2011. See Reexaminations--FY 2011, https://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf.
Likewise, it is anticipated that the proposed rules will minimize
duplication of efforts. In particular, the Leahy-Smith America Invents
Act provides more coordination between district court infringement
litigation and covered business method patent review to reduce
duplication of efforts and costs.
The AIPLA Report of the Economic Survey 2011 reports that the total
cost of patent litigation where the damages at risk are less than
$1,000,000 average $916,000, where the damages at risk are between
$1,000,000 and $25,000,000 average $2,769,000, and where the damages at
risk exceed $25,000,000 average $6,018,000. There may be a significant
reduction in overall burden if, as intended, the Leahy-Smith America
Invents Act and the proposed rules reduce the overlap between review at
the USPTO of issued patents and validity determination during patent
infringement actions. Data from the United States district courts
reveals that 2,830 patent cases were filed in 2006, 2,896 in 2007,
2,909 in 2008, 2,792 in 2009, and 3,301 in 2010. See U.S. Courts,
Judicial Business of the United States Courts, www.uscourts.gov/uscourts/Statistics/JudicialBusiness/2010/appendices/C02ASep10.pdf
(last visited Nov. 11, 2011) (hosting annual reports for 1997 through
2010). Thus, the Office estimates that no more than 3,300 (the highest
number of yearly filings between 2006 and 2010 rounded to the nearest
100) patent cases are likely to be filed annually. The aggregate burden
estimate above ($22,761,410) was not offset by a reduction in burden
based on improved coordination between district court patent litigation
and the new inter partes review proceedings.
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).
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
[[Page 7106]]
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). This rulemaking carries out a statute
designed to lessen litigation. See H.R. Rep. No. 112-98, at 45-48.
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. In the
Notice ``Changes to Implement Transitional Program for Covered Business
Method Patents,'' RIN 0651-AC73, the information collection for covered
business methods authorized by the Leahy-Smith America Invents Act were
provided. This notice also provides the subset of burden created by the
covered business method patent review 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 covered business method patent review
(Sec. Sec. 42.5, 42.6, 42.8, 42.11, 42.13, 42.20, 42.21, 42.22,
42.24(a)(3), 42.63, 42.65, 42.203, 42.205, and 42.302 through 42.304);
(2) motions (Sec. Sec. 42.6, 42.8, 42.11, 42.13, 42.21, 42.22,
42.24(a)(5), 42.51 through 42.54, 42.63, 42.64, 42.65, 42.221, 42.123,
and 42.223);
(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, 42.65, 42.207, and
42.220);
(4) replies provided for in 35 U.S.C. 321-329 (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) provided for in 35 U.S.C. 326(a)(10), requests for
rehearing (Sec. 42.71(c)), requests for adverse judgment (Sec.
42.73(b)), and requests that a settlement be treated as business
confidential (Sec. 42.74(b)) provided for in 35 U.S.C. 327.
I. Abstract: The USPTO is required by 35 U.S.C. 131 and 151 to
examine applications and, when appropriate, issue applications as
patents.
Chapter 32 of title 35 U.S.C. in effect on September 16, 2012,
provides for post-grant review proceedings allowing third parties to
petition the USPTO to review the patentability of an issued patent
under any ground authorized under 35 U.S.C. 282(b)(2). If a trial is
initiated by the USPTO based on the petition, as authorized by the
USPTO, additional motions may be filed by the petitioner. A patent
owner may file a response to the petition and if a trial is instituted,
as authorized by the USPTO, may file additional motions.
Section 18 of the Leahy-Smith America Invents Act provides for a
transitional program for covered business method patents which will
employ the standards and procedures of the post-grant review proceeding
with a few exceptions.
In estimating the number of hours necessary for preparing a
petition to institute a covered business method patent review, 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. Since additional grounds are
provided in covered business method patent review, the Office estimates
the cost of preparing a petition to institute a review will be 33.333%
more than the estimated cost of preparing a request for inter partes
reexamination, or $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 Office considered that the preliminary motion phase is
a good proxy for patentability reviews since that is the period of
current contested cases before the trial 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 make estimates on the
[[Page 7107]]
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.
It is estimated that the cost of an inter partes review would be
60% of the cost of current contested cases before the trial section of
the Board to the end of the preliminary motion period. An inter partes
review should have many fewer motions since only one party will have a
patent that is the subject of the proceeding (compared with each party
having at least a patent or an application in current contested cases
before the trial section of the Board). Moreover, fewer issues can be
raised since inter partes review will not have priority-related issues
that must be addressed in current contested cases before the trial
section of the Board. Consequently, a 60% weighting factor should
capture the typical costs of an inter partes review.
It is estimated that the cost of a covered business method patent
review would be 75% of the cost of current contested cases before the
trial section of the Board to the end of the preliminary motion period.
A covered business method patent review should have many fewer motions
since only one party will have a patent that is the subject of the
proceeding (compared with each party having at least a patent or an
application in current contested cases before the trial section of the
Board). Moreover, fewer issues can be raised since covered business
method patent reviews will not have the priority-related issues that
must be addressed in current contested cases before the trial section
of the Board before the priority phase. Again, a 75% weighting factor
should capture the typical costs of a covered business method patent
review.
The title, description, and respondent description of the
information collection are shown below with an estimate of the annual
reporting burdens for the covered business method patent review
provisions. 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. Sec.
6(d) and 18 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 review as well as the motions authorized following the
institution is used by the USPTO to determine whether to initiate a
review under 35 U.S.C. 324 and to prepare a final decision under 35
U.S.C. 328.
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 515 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: 60,016.5 hours per
year.
Estimated Total Annual (hour) Respondent Cost Burden: $20,405,610
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
$20,405,610 per year (60,016.5 hours per year multiplied by $340 per
hour).
Estimated Total Annual Non-hour Respondent Cost Burden: $2,355,800
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 covered business method patent
review 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 $2,355,800 per year.
Therefore, the total estimated cost burden in fiscal year 2013 is
estimated to be $22,761,410 (the sum of the estimated total annual
(hour) respondent cost burden ($20,405,610) plus the estimated total
annual non-hour respondent cost burden ($2,355,800)).
----------------------------------------------------------------------------------------------------------------
Estimated time Estimated Estimated
Item for response annual annual burden
(hours) responses hours
----------------------------------------------------------------------------------------------------------------
Petition for covered business method patent review.............. 180.4 50 9,020
Reply to initial covered business method patent review.......... 100 45 4,500
Request for Reconsideration..................................... 80 14 1,120
Motions, replies and oppositions after institution in covered 130 342 44,460
business method patent review..................................
Request for oral hearing........................................ 20 45 900
Request to treat a settlement as business confidential.......... 2 2 4
Request for adverse judgment, default adverse judgment or 1 10 10
settlement.....................................................
Request to make a settlement agreement available................ 1 2 2
Notice of judicial review of a Board decision (e.g., notice of 0.1 5 0.5
appeal under 35 U.S.C. 142)....................................
-----------------------------------------------
Totals...................................................... .............. 515 60,016.5
----------------------------------------------------------------------------------------------------------------
[[Page 7108]]
----------------------------------------------------------------------------------------------------------------
Estimated Estimated
Item annual Fee amount annual filing
responses costs
----------------------------------------------------------------------------------------------------------------
Petition for covered business method patent review.............. 50 $47,100 $2,355,000
Reply to covered business method patent review petition......... 45 0 0
Request for Reconsideration..................................... 14 0 0
Motions, replies and oppositions after initiation in covered 342 0 0
business method patent review..................................
Request for oral hearing........................................ 45 0 0
Request to treat a settlement as business confidential.......... 2 0 0
Request for adverse judgment, default adverse judgment or 10 0 0
settlement.....................................................
Request to make a settlement agreement available................ 2 400 800
Notice of judicial review of a Board decision (e.g., notice of 5 0 0
appeal under 35 U.S.C. 142)....................................
-----------------------------------------------
Totals...................................................... 515 .............. 2,355,800
----------------------------------------------------------------------------------------------------------------
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, 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: TPCBMP_Definition@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, Covered Business Method
Patent Review Proposed Definition for Technological Invention.''
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,
Sec. Sec. 6(c), 6(f), and 18, 125 Stat. 284, 304, 311, and 329
(2011).
2. Add Sec. 42.301 to subpart D to read as follows:
Sec. 42.301 Definitions.
In addition to the definitions in Sec. 42.2, the following
definitions apply to proceedings under this subpart D:
(a) Covered business method patent means a patent that claims a
method or corresponding apparatus for performing data processing or
other operations used in the practice, administration, or management of
a financial product or service, except that the term does not include
patents for technological inventions.
(b) Technological invention. In determining whether a patent is for
a technological invention solely for purposes of the Transitional
Program for Covered Business Methods (section 42.301(a)), the following
will be considered on a case-by-case basis: whether the claimed subject
matter as a whole recites a technological feature that is novel and
unobvious over the prior art; and solves a technical problem using a
technical solution.
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. 2012-2538 Filed 2-9-12; 8:45 am]
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