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Paul M. Janicke on new patent act

Paul JanickeOn September 16, President Obama signed the Leahy-Smith America Invents Act into law. It represents the most fundamental overhaul of United States patent law since the 1836 Act. In the works in Congress for six years, the new law had three main goals: (1) Prevent or eliminate patents of dubious quality; (2) simplify the processes of the Patent & Trademark Office (PTO) in examining and issuing patents and make them less costly; and (3) improve the rules governing infringement suits to enforce patents. University of Houston Law Center Professor Paul M.  Janicke, HIPLA Professor of Law and an expert on patent law, finds the act hit the mark on some of its goals and missed on others. He says the first goal will likely be achieved. It sets up new procedures for interested members of the public to bring to the attention of PTO examiners prior publications that could have a bearing on whether a particular pending application should be allowed. It also establishes new procedures for challenging patents in the PTO after they have been granted. The second goal, simplification, despite the President’s hopes, probably was not achieved, he says. While providing for reduced filing fees for small entities, the new challenge procedures, coupled with an overstrained PTO budget, are likely to run up costs and incur delays for patent applicants. The professor believes the third goal, to improve infringement litigation, was achieved to a modest extent. For example, certain types of actions based on marking products with an incorrect patent number have now been curtailed, and patents on business methods for minimizing taxes have been abolished. Janicke answers some general questions about patent law and, more specifically, about the effects of the Leahy-Smith Act:

Q. How many patent applications are filed per year in the PTO, and how many patents are issued?

A. According to the PTO website, in 2010 the Office received about 490,000 patent applications per year, and issued about 220,000.

Q. How many examiners are there, and how long does it take to get a patent?

A. According to the PTO’s online “patent dashboard” statistics, there are now 6,748 examiners. It takes on average about 33 months to obtain a patent. The backlog of unexamined applications now stands at nearly 700,000, an all-time high.

Q. What does it cost to obtain a patent, and how will the new law affect it?

A. The American Intellectual Property Law Association (AIPLA) conducts a biennial economic survey on costs for patent services. Their 2011 report indicates an average cost of $7,931 for patenting an invention of minimal complexity, and $9,277 for patenting a relatively complex mechanical invention. The challenge procedures established by the new law will certainly increase these averages. Members of the public can now send in prior publications to be used against the applicants. After a patent is granted, two new procedures have been created, each involving contests between the patent owner and one or more challengers, to be decided by a panel of three administrative patent judges. We cannot estimate the costs or frequency of these proceedings until we see the implementing regulations. The PTO director has one year in which to promulgate them.

Q. What is the cost of a suit against a patent infringer, and what will be the impact of the new law on those costs?

A. AIPLA’s 2011 report indicates that for cases involving $25 million or more, the median cost is $5,000,000 per case for each party. It is possible that the new law will indirectly reduce these costs by reducing the number of patent suits filed (presently around 2,700 per year). That is because the use of less costly challenges in the PTO, as discussed above, may head off a significant number of patent suits. The challenge may result in the challenger obtaining a license under the patent in question. If the challenge proceeding goes through to completion, a challenger victory would mean the patent claims are canceled or reduced in scope to where they are no longer a commercial threat. A patent owner victory may dissuade infringers from continuing infringing activities. They will be blocked from asserting invalidity attacks in court that they made or could have made in the PTO challenge proceeding.

Q. Much has been said in the press about the U.S. switching from a “first to invent system” to a “first to file system” that the rest of the world has. What do you think of that change?

A. I think it will be of minimal importance. First, we do not really have a first-to-invent “system” in the United States. What we have is a package of patentability provisions, some of which are filing-date-based and some invention-date-based. In practice, the filing-date provisions have proved far more important, so eliminating the few invention-date provisions will not result in much of a change. Second, the number of contests between two inventors or groups of inventors to see who was first to invent is vanishingly small, just a few dozen per year out of the 490,000 applications filed; and where there are such contests, the first to file usually prevails. So the elimination of invention date provisions is highly unlikely to affect filings or results.

Q. Does the PTO get to keep the fees it collects for patent filings and related services like issuance fees and maintenance fees?

A. No. This is probably the biggest failing of the new law. A Senate version of the patent reform bill earlier this year would have allowed the PTO to have direct and unrestricted access to the special account at the Treasury where all these fees are held. Unfortunately, the House of Representatives did not agree, and their bill is the one that ultimately passed both houses and was signed by the president. Under it the PTO’s collections can be accessed only pursuant to an appropriation passed by Congress. In an era of large-scale budget cutting, the likelihood is that the PTO’s fee collections will not be fully returned to it for patent and trademark operations. Some part will be kept at the Treasury and subject to having a form of I.O.U. substituted, so that the funds can be spent on other things. That is what has been occurring in some recent years, and there is little reason to think it will cease now.

To schedule an interview with Paul M.  Janicke, please contact: Carrie Criado, Executive Director of Communications and Marketing, cacriado@Central.UH.EDU, 713.743.2184; or John Kling, Communications Manager, , 713.743.8298.