Patent Baristas

In another round of challenges to the proposed rules by the U.S. Patent & Trademark Office, one group looks to challenge the rule change regarding the draft final regulation “Changes to Information Disclosure Statement Requirements and Other Related Matters.”

This is part of the USPTO Master Plan in the published final rules regarding limiting claims and continuations. (72 Federal Register 161 at 46716, “Rules and Regulations Changes To Practice for Continued Examination Filings, Patent Applications Containing Patentably Indistinct Claims, and Examination of Claims in Patent applications; Final Rule”).

David Boundy, Vice President & Assistant General Counsel Intellectual Property at Cantor Fitzgerald, submitted a challenge to the Office of Management and Budget (OMB) that the rules, if enacted, would have the practical effect of dramatically increasing the cost of obtaining patent protection, making it much more difficult for inventors and innovators to protect their legitimate intellectual property rights, and “adversely affecting in a material way the economy, a sector of the economy, productivity, [and] competition.”

They also note that while the preamble of the proposed rule asserts that the rule will generate savings to USPTO, these savings are neither quantified nor reflected in USPTO’s FY 2008 budget submission.

The law governing the conduct of patent applicants and their agents require applicants and agents to fully disclose all potentially relevant information to USPTO or risk losing their patent rights. Through the IDS Rule, the USPTO wants patent applicants stop submitting so much art just to ease USPTO’s workload.

The proposed IDS Rule states that where an applicant is aware of more than 20 prior art references, applicants must submit to the following Hobson’s Choice:

1. Deliberately withhold information from USPTO because the Rule forces applicants to submit only the “most” material information; or
2. Submit a “patentability justification document” describing each prior art reference
   in detail.

Choosing the first option unambiguously violates the failure-to-disclose part of the law of inequitable conduct, and raises a very high risk of losing the property right conveyed by the patent.

Choosing the second option creates a high risk of violating the misrepresentation part of the law of inequitable conduct.

Either way, the costs to the applicant in reviewing and preparing a submission will skyrocket.

See the entire letter here.

In a second challenge to the OMB, Richard B. Belzer, Ph.D. on behalf of an undisclosed client questions whether the PTO properly disclosed to OMB a reasonably accurate estimate of rule’s expected costs. In the Notice of Proposed Rulemaking published in July 2006, the PTO said it had “determined ” that the IDS Rule was “not significant” under Executive Order 12,286, See 71 Fed. Reg. 38819 col. 1, with no supporting rationale. At page 2, Dr. Belzer states:

“’Not significant’ under EO 12866 normally is limited to regulatory actions that have minor consequences and elicit little or no controversy, such as housekeeping actions, and matters for which the agency is willing and able to perform internal oversight equivalent to that of OMB.”

Belzer lists the PTO sources he consulted for data and analysis of the costs of the proposed IDS Rule, and concluded that PTO had disclosed no useful information. He says on pp. 4-5:

“From the number of public comments submitted to USPTO (65), it is clear that the proposed IDS Rule is at least ‘significant’ under EO 12866. From the contents of these comments, there is a prima facie case that the proposed IDS Rule has effects exceeding $100 million in any one year, and thus is ‘economically significant.’ USPTO did not perform a Regulatory Impact Analysis (RIA), nor did it disclose the basis for its determination that the proposed rule is ‘not significant’.”

This paper estimates the minimum direct paperwork cost for only one part of the IDS Rule at $1.9 billion – more than the PTO’s total budget of $1.7 billion. Four independent patent attorneys peer reviewed this cost estimate, and he attaches their reports.

Then at page 5, Dr. Belzer states:

“Executive Order 12,866. Based on my expertise in regulatory analysis, and more than 20 years’ experience reviewing such analyses (including 10 while employed as an economist at OMB), I am virtually certain that the proposed IDS Rule is economically significant …

“Furthermore, based on my governmental experience it is inconceivable that USPTO could be unaware of the approximate magnitude of these costs, or that it employed any reasonable economic method or logic to determine that the proposed rule was ‘not significant’. … One can infer with reasonable certainty that USPTO deliberately evaded the requirements of Executive Order 12,866.

See Belzer’s submission here.