[Federal Register Volume 77, Number 157 (Tuesday, August 14, 2012)]
[Rules and Regulations]
[Pages 48734-48753]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-17904]
[[Page 48733]]
Vol. 77
Tuesday,
No. 157
August 14, 2012
Part IV
Department of Commerce
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Patent and Trademark Office
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37 CFR Part 42
Transitional Program for Covered Business Method Patents--Definitions
of Covered Business Method Patent and Technological Invention; Final
Rule
Federal Register / Vol. 77 , No. 157 / Tuesday, August 14, 2012 /
Rules and Regulations
[[Page 48734]]
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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--
Definitions of Covered Business Method Patent and Technological
Invention
AGENCY: United States Patent and Trademark Office, Commerce.
ACTION: Final rule.
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SUMMARY: The United States Patent and Trademark Office (Office or
USPTO) is revising the rules of practice to implement the provision of
the Leahy-Smith America Invents Act (``AIA'') 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 AIA will take
effect on September 16, 2012, one year after the date of enactment. The
AIA provides that this 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provision will be repealed on September 16, 2020, with respect to any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: Effective Date: The changes in this final rule take effect on
September 16, 2012.
Applicability Date: The changes in this final rule apply to any
covered business method patent issued before, on, or after September
16, 2012.
FOR FURTHER INFORMATION CONTACT: Sally C. Medley, Administrative Patent
Judge; Michael P. Tierney, Lead Administrative Patent Judge; Robert A.
Clarke, Administrative Patent Judge; and Joni Y. Chang, Administrative
Patent Judge; Board of Patent Appeals and Interferences, by telephone
at (571) 272-9797.
SUPPLEMENTARY INFORMATION:
Executive Summary: Purpose: On September 16, 2011, the AIA was
enacted into law (Pub. L. 112-29, 125 Stat. 284 (2011)). The purpose of
the AIA and this final rule is to establish a more 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 definitions of the terms ``covered
business method patent'' and ``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,
this rulemaking process is designed to ensure the integrity of the
trial procedures. See 35 U.S.C. 326(b).
Summary of Major Provisions: This final rule sets forth the
definitions of the terms ``covered business method patent'' and
``technological invention'' that the Office will use in conducting
transitional covered business method patent review proceedings.
Costs and Benefits: This rulemaking is not economically
significant, but is significant, under Executive Order 12866 (Sept. 30,
1993), as amended by Executive Order 13258 (Feb. 26, 2002) and
Executive Order 13422 (Jan. 18, 2007).
Background: To implement sections 6 and 18 of the AIA, the Office
published the following notices of proposed rulemaking: (1) Rules of
Practice for Trials before the Patent Trial and Appeal Board and
Judicial Review of Patent Trial and Appeal Board Decisions, 77 FR 6879
(Feb. 9, 2012), to provide a consolidated set of rules relating to
Board trial practice for inter partes review, post-grant review,
derivation proceedings, and the transitional program for covered
business method patents, and judicial review of Board decisions by
adding new parts 42 and 90 including a new subpart A to title 37 of the
Code of Federal Regulations (RIN 0651-AC70); (2) Changes to Implement
Inter Partes Review Proceedings, 77 FR 7041 (Feb. 10, 2012), to provide
rules specific to inter partes review by adding a new subpart B to 37
CFR part 42 (RIN 0651-AC71); (3) Changes to Implement Post-Grant Review
Proceedings, 77 FR 7060 (Feb. 10, 2012), to provide rules specific to
post-grant review by adding a new subpart C to 37 CFR part 42 (RIN
0651-AC72); (4) Changes to Implement Transitional Program for Covered
Business Method Patents, 77 FR 7080 (Feb. 10, 2012), to provide rules
specific to the transitional program for covered business method
patents by adding a new subpart D to 37 CFR part 42 (RIN 0651-AC73);
(5) Transitional Program for Covered Business Method Patents--
Definition of Technological Invention, 77 FR 7095 (Feb. 10, 2012), to
add a new rule that sets forth the definition of technological
invention for determining whether a patent is for a technological
invention for purposes of the transitional program for covered business
method patents (RIN 0651-AC75); and (6) Changes to Implement Derivation
Proceedings, 77 FR 7028 (Feb. 10, 2012), to provide rules specific to
derivation proceedings by adding a new subpart E to 37 CFR part 42 (RIN
0651-AC74).
Additionally, the Office published a Patent Trial Practice Guide
for the proposed rules in the Federal Register to provide the public an
opportunity to comment. Practice Guide for Proposed Trial Rules, 77 FR
6868 (Feb. 9, 2012) (Request for Comments) (hereafter ``Practice
Guide'' or ``Office Patent Trial Practice Guide''). The Office
envisions publishing a revised Patent Trial Practice Guide for the
final rules. The Office also hosted a series of public educational
roadshows, across the country, regarding the proposed rules for the
implementation of the AIA.
In response to the notices of proposed rulemaking and the Practice
Guide notice, the Office received 251 submissions offering written
comments from intellectual property organizations, businesses, law
firms, patent practitioners, and others, including a United Stated
senator who was a principal author of section 18 of the AIA. The
comments provided support for, opposition to, and diverse
recommendations on the proposed rules. The Office appreciates the
thoughtful comments, and has considered and analyzed the comments
thoroughly. The Office's responses to the comments are provided in the
124 separate responses based on the topics raised in the 251 comments
in the Response to Comments section infra.
Section 18 of the AIA provides that the Director may institute a
transitional proceeding only for a patent that is a covered business
method patent. In particular, section 18(d)(1) of the AIA 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) of the AIA
provides that the Director will issue regulations for determining
whether a patent is for a technological invention. Consistent with
these statutory provisions, this rulemaking provides regulations for
determining whether a patent is for a technological invention. The AIA
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 AIA and the
[[Page 48735]]
regulations issued under this provision will be repealed on September
16, 2020. Section 18 of the AIA 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.
Pursuant to section 18(d) of the AIA, the Office is prescribing
regulations to set forth the definitions of the terms ``covered
business method patent'' and ``technological invention'' in its
regulation. In February 2012, the Office published two notices
proposing changes to 37 CFR chapter I to implement sections 18(d)(1)
and (d)(2) of the AIA. See Changes to Implement Transitional Program
for Covered Business Method Patents, 77 FR 7080 (Feb. 10, 2012) and
Transitional Program for Covered Business Method Patents--Definition of
Technological Invention, 77 FR 7095 (Feb. 10, 2012).
This final rule revises the rules of practice to implement section
18(d)(1) of the AIA that provides the definition of the term ``covered
business method patent'' and section 18(d)(2) of the AIA that provides
that the Director will issue regulations for determining whether a
patent is for a technological invention. This final rule sets forth the
definitions in new subpart D of 37 CFR 42, specifically in Sec.
42.301.
This rulemaking is one of a series of rules that the Office is
promulgating directed to the new trials that were created by the AIA.
The Office, in a separate rulemaking, revises the rules of practice to
provide a consolidated set of rules relating to Board trial practice,
adding part 42, including subpart A (RIN 0651-AC70). More specifically,
subpart A of part 42 sets forth the policies, practices, and
definitions common to all trial proceedings before the Board. In
another separate rulemaking, the Office revises the rules of practice
to implement the provisions of the AIA for the transitional program for
covered business method patents (RIN 0651-AC71). In particular, that
separate final rule adds a new subpart D to 37 CFR part 42 to provide
rules specific to transitional post-grant review of covered business
method patents. Further, that separate final rule adds a new subpart B
to 37 CFR part 42 to provide rules specific to inter partes review, and
a new subpart C to 37 CFR part 42 to provide rules specific to post-
grant review. The notices are available on the USPTO Internet Web site
at www.uspto.gov.
Discussion of Specific Rules
Title 37 of the Code of Federal Regulations, Chapter I, Part 42,
Subpart D, Section 42.301, entitled ``Definitions'' is added as
follows:
Section 42.301: Section 42.301 provides definitions specific to
covered business method patent reviews.
Section 42.301(a) adopts the definition for covered business method
patents provided in section 18(d)(1) of the AIA. Specifically, the
definition provides that 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.
Section 42.301(b) sets forth the definition for technological
invention for covered business method patent review proceedings. The
definition of technological invention provides that in determining
whether a patent is for a technological invention solely for purposes
of the Transitional Program for Covered Business Methods, 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. 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 complete them timely, consistent with 35 U.S.C. 326(b).
The definition is consistent with the legislative history of the
AIA. 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.'').
Response to Comments
The Office received about 47 written submissions of comments (from
intellectual property organizations, businesses, law firms, patent
practitioners, and others) in response to the proposed definitions. The
Office appreciates the thoughtful comments, and has considered and
analyzed the comments thoroughly. The Office's responses to the
comments that are germane to the definitions adopted in this final rule
are provided below:
Section 42.301(a)
Comment 1: Several comments suggested that the Office interpret
``financial product or service'' broadly.
Response: The definition set forth in Sec. 42.301(a) for covered
business method patent adopts the definition for covered business
method patent provided in section 18(d)(1) of the AIA. In administering
the program, the Office will consider the legislative intent and
history behind the public law definition and the transitional program
itself. For example, the legislative history explains that the
definition of covered business method patent was drafted to encompass
patents ``claiming activities that are financial in nature, incidental
to a financial activity or complementary to a financial activity.'' 157
Cong. Rec. S5432 (daily ed. Sept. 8, 2011) (statement of Sen. Schumer).
This remark tends to support the notion that ``financial product or
service'' should be interpreted broadly.
Comment 2: One comment noted that there is no proposed definition
of the term ``financial product or service'' and suggested amending the
proposed rule for covered business method patent to include two factors
to consider on a case-by-case basis: (1) Whether the claimed subject
matter is directed to an agreement between two parties stipulating the
movement of money or other consideration now or in the future; and (2)
whether the claimed subject matter is particular to the characteristics
of financial institutions. Still other comments supported the Office's
definition of a covered business method patent as is.
Response: The definition suggested by the comment for ``financial
product or service'' is not adopted. That suggestion would appear to
limit the scope of the definition of covered business method patents
provided in section 18(d)(1) of the AIA, particularly the second prong
of the proposed definition. In addition, the Office has considered the
comment seeking to change the definition of a covered business method
patent against the comments in support of the
[[Page 48736]]
definition set forth in the proposed Sec. 42.301(a) and in section
18(d)(1) of the AIA. Upon consideration of the diverging comments, and
the definition provided in the public law, the Office adopts proposed
Sec. 42.301(a), in this final rule, without any alterations.
Comment 3: One comment suggested that the Office should clarify
that the term ``financial product or service'' should be limited to the
products or services of the financial services industry. Still another
comment stated that the term ``financial product or service'' is not
limited to the products of the financial services industry.
Response: The suggestion to clarify that the term ``financial
product or service'' is limited to the products or services of the
financial services industry is not adopted. Such a narrow construction
of the term would limit the scope of the definition of covered business
method patents beyond the intent of section 18(d)(1) of the AIA. For
example, the legislative history reveals that ``[t]he plain meaning of
`financial product or service' demonstrates that section 18 is not
limited to the financial services industry.'' 157 Cong. Rec. S5432
(daily ed. Sept. 8, 2011) (statement of Sen. Schumer). This remark
tends to support the notion that ``financial product or service'' is
not limited to the products or services of the financial services
industry.
Comment 4: One comment suggested that the Office revise proposed
Sec. 42.301(a) to clarify that the determination of a ``covered
business method patent'' would not be satisfied by merely reciting an
operating environment related to data processing or management of a
financial product or service, but that eligibility should be determined
by what the patent claims.
Response: This suggestion is not adopted. The definition set forth
in Sec. 42.301(a) adopts the definition for a covered business method
patent provided in section 18(d)(1) of the AIA. Specifically, the
statutory language states that a covered business method patent is ``a
patent that claims a method or corresponding apparatus for performing
data processing * * *, except that the term does not include patents
for technological inventions.'' (Emphasis added.) Consistent with the
AIA, the definition set forth in Sec. 42.301(a), as adopted in this
final rule, is based on what the patent claims.
Comment 5: One comment suggested that the proposed definition is
based on Class 705 of the United States Classification System and that
the definition should be amended to include a specific reference to
Class 705, including systems.
Response: The definition set forth in Sec. 42.301(a) adopts the
definition for covered business method patents provided in section
18(d)(1) of the AIA. The definition set forth in Sec. 42.301(a) will
not be altered to make reference to Class 705 of the United
Classification System since doing so would be contrary to the
definition set out in the public law. The legislative history reveals
that
[o]riginally, class 705 was used as the template for the definition
of business method patents in section 18. However, after the bill
passed the Senate, it became clear that some offending business
method patents are issued in other sections. So the House bill
changes the definition only slightly so that it does not directly
track the class 705 language.
157 Cong. Rec. S5410 (daily ed. Sept. 8, 2011) (statement of Sen.
Schumer). This remark tends to support the notion that the definition
of a covered business method patent should not be changed to refer to
Class 705 of the United States Classification System. In addition, the
Office received comments in support of the definition set forth in the
proposed rule. Upon considering the AIA and legislative history, as
well as those supporting comments in favor of the definition against
the comment to change the definition, the Office has decided to adopt
proposed Sec. 42.301(a) in this final rule, without altering the
proposed definition.
Section 42.301(b)
Comment 6: One comment asked whether it is the novel and unobvious
technological feature that provides the technical solution to a
technical problem or that the novel and unobvious technological feature
does not necessarily need to be the technical solution to the technical
problem.
Response: The definition in Sec. 42.301(b) includes considering
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. The reference ``and
solves a technical problem using a technical solution'' is with respect
to ``the claimed subject matter as a whole.''
Comment 7: One comment suggested that the definition is not
actually a definition as it only states two factors to be considered,
and that the Office did not have to use legislative history for the
rule because Congress instructed the Office to use its own expertise.
Still another comment suggested that the Office should not have based
the definition on the legislative history.
Response: Section 18(d)(2) of the AIA provides that ``[t]o assist
in implementing the transitional proceeding authorized by this
subsection, the Director shall issue regulations for determining
whether a patent is for a technological invention.'' Consistent with
the AIA, the definition for technological invention, as adopted in this
final rule, sets forth what is to be considered in determining whether
a patent is for a technological invention. The Office disagrees that it
should not have looked to the legislative history in formulating the
definition. The Office, in determining the best approach for defining
the term ``technological invention,'' concluded that the relied upon
portion of the legislative history represented the best policy choice.
Comment 8: Several comments sought clarification on whether a
single claim can make the patent a covered business method patent or
whether it is the subject matter as a whole that is considered.
Response: The definition set forth in Sec. 42.301(b) for a covered
business method patent adopts the definition for covered business
method patents provided in section 18(d)(1) of the AIA. Specifically,
the language states that a covered business method patent is ``a patent
that claims a method or corresponding apparatus for performing data
processing * * *, except that the term does not include patents for
technological inventions.'' (Emphasis added.) Consistent with the AIA,
the definition, as adopted, therefore is based on what the patent
claims. Determination of whether a patent is a covered business method
patent will be made based on the claims. Similarly, determination of
whether a patent is to a technological invention will be determined
based on the claims of the patent. A patent having one or more claims
directed to a covered business method is a covered business method
patent for purposes of the review, even if the patent includes
additional claims.
Comment 9: Several comments suggested that the definition should
not be based on novelty or nonobviousness; some proposed a definition
that eliminates ``novel and unobvious.'' Other comments fully supported
the proposed definition set forth in the proposed rule.
Response: Under Sec. 42.301(b), in determining whether a patent is
for a technological invention solely for purposes of the Transitional
Program for Covered Business Methods, the Office will consider whether
the claimed subject matter as a whole recites a technological feature
that is novel and unobvious over the prior art. Therefore, the
definition in Sec. 42.301(b) is consistent with the AIA and the
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legislative history. Moreover, several comments supported the
definition set forth in proposed Sec. 42.301(b). Upon considering the
AIA and the legislative history as well as the supporting comments in
favor of the definition balanced against the comments to change the
definition, the Office adopts the definition in proposed Sec.
42.301(b), in this final rule, without alterations. Therefore, the
Office did not adopt a definition that is not based on novelty or
nonobviousness.
Comment 10: Several comments proposed using the standards of patent
subject matter eligibility under 35 U.S.C. 101 to define whether a
patent is for a technological invention. Still other comments opposed
using a 35 U.S.C. 101 standard. Moreover, several comments fully
supported the definition in proposed Sec. 42.301(b).
Response: The definition in proposed Sec. 42.301(b) is consistent
with the AIA and the legislative history as discussed above. The
suggestions to change the definition using the standards of patent
subject matter eligibility under 35 U.S.C. 101 will not be adopted.
Several comments supported the definition set forth in proposed Sec.
42.301(b) while other comments opposed changing the definition based on
the standards of patent subject matter eligibility under 35 U.S.C. 101.
Upon considering the AIA and the legislative history as well as the
comments in favor of the definition balanced against the comments to
change the definition, the Office decided to adopt proposed Sec.
42.301(b), in this final rule.
Comment 11: Several comments suggested applying the definition to
limit reviews under the program while others suggested applying the
definition not to limit reviews under the program.
Response: The Office will consider whether a patent is for a
technological invention on a case-by-case basis and will take into
consideration the facts of a particular case. Therefore, the Office did
not adopt the suggestions to apply a definition to limit, or not to
limit, reviews without considering the factors as applied to all of the
reviews.
Comment 12: Several comments stated that the definition in proposed
Sec. 42.301(b) is confusing, circular, and ambiguous. Other comments
fully supported the definition set forth in the proposed rule.
Response: The definition adopted in Sec. 42.301(b) is based upon
the legislative history of the AIA. The Office believes that the
definition provides appropriate guidance to the public, taken in light
of the legislative history, as well as the Supreme Court case law on
patent eligible subject matter and the Office's existing guidelines.
See, e.g., Interim Guidance for Determining Subject Matter Eligibility
for Process Claims in View of Bilski v. Kappos, 75 FR 43922 (Jul. 27,
2010). The Office will consider whether a patent is for a technological
invention on a case-by-case basis and will take into consideration the
facts of a particular case. As applied to a particular case, only one
result will occur. Moreover, additional guidance will be provided to
the public as decisions are rendered applying the definition as they
become available. Many comments fully supported the definition. Upon
considering the AIA and the legislative history as well as the
supporting comments in favor of the definition balanced against the
comments to change the definition, the Office decided to adopt proposed
Sec. 42.301(b) in this final rule, and not to alter the definition as
requested.
Comment 13: Several comments proposed various different definitions
for technological invention. Other comments fully supported the
definition set forth in the proposed rule.
Response: The Office appreciates and has considered the suggested
definitions. Although the definitions have been considered, the Office
is not adopting the definitions suggested in the comments.
Specifically, the Office believes that the definition in Sec.
42.301(b) is consistent with the legislative history of the AIA and
more narrowly tailors the reviews that are instituted in view of that
history. Moreover, several comments supported the definition set forth
in the proposed rule. Upon considering the comments in favor of the
definition balanced against those comments to change the definition,
the Office has decided to adopt proposed Sec. 42.301(b), in this final
rule, and not alter the definition as requested.
Comment 14: One comment supported the definition set forth in
proposed Sec. 42.301(b), but encouraged the Office to include in the
preamble of the final rule notice a reference to remarks made by
Senator Durbin from the legislative history. One other comment
suggested that the remarks of Senators Schumer and Coburn and
Representative Smith should not be given controlling weight and in any
event their remarks should be balanced against the remarks of others,
including Senator Durbin. Both comments refer to the remarks made by
Senator Durbin on September 8, 2011. 157 Cong. Rec. S5433 (daily ed.
Sept. 8, 2011).
Response: The Office appreciates the comments. However, the
specific remarks of Senator Durbin to which the Office is directed will
not be included in the preamble as suggested. In the testimony to which
the Office is directed, Senator Durbin provided broad examples of the
kinds of patents that would not be subject to a transitional covered
business method patent review. Although the comments are instructive,
the comments identify very specific examples that are not necessarily
suited for the preamble but are better addressed when reviewing the
merits of a case.
Comment 15: Several comments suggested that the case-by-case
approach is not specific enough and could create uncertainty. Other
comments fully supported the definition set forth in proposed Sec.
42.301(b).
Response: The definition in proposed Sec. 42.301(b) was drafted to
ensure flexibility in administering the transitional covered business
method review program. In determining whether a patent is for a
technological invention, the particular facts of a case will be
considered. Additionally, more information on how the rule applies to
specific factual situations will be available as decisions are issued.
Therefore, the Office adopts proposed Sec. 42.301(b) in this final
rule without any alteration.
Office Patent Trial Practice Guide
Comment 16: Several comments suggested that the Office provide
additional examples for what is a covered business method patent and
what is a technological invention.
Response: The Office agrees that more examples would be helpful to
the public. The Office anticipates publishing written decisions as soon
as practical, after which more examples likely will be provided in the
Office Patent Trial Practice Guide. The Office will make cases publicly
available to provide more guidance in the future.
Comment 17: One comment stated that the provided examples in the
Practice Guide for Proposed Trial Rules are inconsistent because a
hedging machine and credit card reader are computers using known
technologies.
Response: The Office disagrees that the examples of covered
business method patents that are subject to a covered business method
patent review are inconsistent with the examples of patents that claim
a technological invention. The Practice Guide for Proposed Trial Rules
provides examples of covered business method patents that are subject
to a covered business method patent review. One example is a patent
that claims a method for hedging risk in the field of commodities
trading. Another example is a patent that claims a method for verifying
[[Page 48738]]
validity of a credit card transaction. Still other examples are given
of a patent that claims a technological invention that would not be
subject to a covered business method patent review. One example is a
patent that claims a novel and nonobvious hedging machine for hedging
risk in the field of commodities trading. Another example is a patent
that claims a novel and nonobvious credit card reader for verifying the
validity of a credit card transaction. The comment assumes that in all
examples the machine or card reader is a computer using known
technologies. However, no such qualifications were provided in the
examples.
Rulemaking Considerations
The rulemaking considerations for the series of final rules
implementing the administrative patent trials as required by the AIA
have been considered together and are based upon the same assumptions,
except where differences between the regulations and proceedings that
they implement require additional or different information. Notably,
this final rule is directed to the covered business method patent
provision, and therefore, does not depend on or discuss the responses
or information related to inter partes reviews, post-grant reviews
other than covered business method patent reviews, and derivations.
This final rule also provides the alternatives considered for the
technological invention for the purposes of the covered business method
patent review, provided in section B(6) below.
A. Administrative Procedure Act (APA)
This final rule revises the rules of practice concerning the
procedure for requesting a covered business method patent review. The
changes being adopted in this notice do not change the substantive
criteria of patentability. These changes involve rules of agency
practice, including related standards. See, e.g., 35 U.S.C. 316(a)(5),
as amended. These rules are procedural and/or interpretive rules. See
Bachow Commc'ns Inc. v. FCC, 237 F.3d 683, 690 (D.C. Cir. 2001) (rules
governing an application process are procedural under the
Administrative Procedure Act); Inova Alexandria Hosp. v. Shalala, 244
F.3d 342, 350 (4th Cir. 2001) (rules for handling appeals were
procedural where they did not change the substantive requirements for
reviewing claims); 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); JEM Broad. Co.
v. F.C.C., 22 F.3d 320, 328 (D.C. Cir. 1994) (The rules are not
legislative because they do not ``foreclose effective opportunity to
make one's case on the merits''). Moreover, section 18(d)(2) of the AIA
requires the Director to prescribe regulations for determining whether
a patent is for a technological invention.
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 rule making for
``interpretative rules, general statements of policy, or rules of
agency organization, procedure, or practice'') (quoting 5 U.S.C.
553(b)(A)); U.S. v. Gould, 568 F.3d 459, 476 (4th Cir. 2009) (``The APA
also requires publication of any substantive rule at least 30 days
before its effective date, 5 U.S.C. Sec. 553(d), except where the rule
is interpretive * * * .''). The Office, however, published these
proposed changes for comment as it sought the benefit of the public's
views on the Office's proposed implementation of these provisions of
the AIA. See Changes to Implement Transitional Program for Covered
Business Method Patents, 77 FR 7080 (Feb. 10, 2012) (notice of proposed
rulemaking) and Transitional Program for Covered Business Method
Patents--Definition of Technological Invention, 77 FR 7095 (Feb. 10,
2012) (notice of proposed rulemaking).
The Office received one written submission of comments from the
public regarding the Administrative Procedure Act (APA). Each component
of that comment directed to the APA is addressed below.
Comment 18: One comment suggested that almost all of the proposed
regulations were legislative and not interpretive rules. That leads the
USPTO to omit required steps in the rulemaking process.
Response: At the outset, it should be noted that the Office did not
omit any steps in the rulemaking process. Even though not legally
required, the Office published notices of proposed rulemaking in the
Federal Register, solicited public comment, and fully considered and
responded to comments received. Although the Office sought the benefit
of public comment, these rules are procedural and/or interpretive.
Stevens v. Tamai, 366 F3d. 1325, 1333-34 (Fed. Cir. 2004) (upholding
the Office's rules governing the procedure in patent interferences).
The final written decisions on patentability which conclude the reviews
will not be impacted by the regulations, adopted in this final rule, as
the decisions will be based on statutory patentability requirements,
e.g., 35 U.S.C. 101 and 102.
Comment 19: One comment suggested that, even if the rules are
merely procedural, reliance on Cooper Techs. v. Dudas was not
appropriate and therefore notice and comment was required.
Response: These rules are consistent with the AIA requirements to
prescribe regulations to set forth standards and procedures. The rules
are procedural and/or interpretative. Stevens v. Tamai, 366 F3d. 1325,
1333-34 (Fed. Cir. 2004) (upholding the Office's rules governing the
procedure in patent interferences). The Office nevertheless published
notices of proposed rulemaking in the Federal Register, solicited
public comment, and fully considered and responded to comments
received. In both the notice of proposed rulemaking and this final
rule, the Office cites Cooper Techs. Co v. Dudas, 536 F.3d 1330, 1336,
37 (Fed. Cir. 2008), for the proposition that 5 U.S.C. 553, and thus 35
U.S.C. 2(b)(2)(B), does not require notice and comment rulemaking for
``interpretive rules, general statement of policy, or rules of agency
organization, procedure or practice.'' The Office's reliance on Cooper
Technologies is appropriate and remains an accurate statement of
administrative law. In any event, the Office sought the benefit of
public comment on the proposed rules and has fully considered and
responded to the comments received.
B. Final Regulatory Flexibility Act Analysis
The Office estimates that 50 petitions for covered business method
patent review will be filed each year in fiscal years 2013-2015. Fiscal
year 2013 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 Class 705 Data Processing: Financial, Business
Practice, Management, or Cost/Price Determination (Jan. 2012),
available at
[[Page 48739]]
http://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 (Jan. 2012), available at http://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 is
estimating the number of petitions for covered business method patent
review to be 50 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 updated its review of the entity status of patents
for which inter partes reexamination was requested from October 1,
2000, to May 18, 2012. This data only includes filings granted a filing
date, and does not include filings of improper requests. 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 32.09% 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 annually in fiscal
years 2013-2015.
Table 1--Inter Partes Reexamination Requests Filed With Parent Entity Type *
----------------------------------------------------------------------------------------------------------------
Number filed
Inter partes where parent Percentage of
Fiscal year reexamination patent is small small entity type
requests filed entity type of total
----------------------------------------------------------------------------------------------------------------
2012................................................... 226 85 37.61
2011................................................... 369 135 36.59
2010................................................... 255 89 34.9
2009................................................... 237 61 25.74
2008................................................... 155 51 32.9
2007................................................... 127 32 25.2
2006................................................... 61 16 26.23
2005................................................... 59 20 33.9
2004................................................... 26 5 19.23
2003................................................... 21 12 57.14
2002................................................... 4 1 25.00
2001................................................... 1 0 0.00
1315 422 32.09
----------------------------------------------------------------------------------------------------------------
* Small entity status determined by reviewing preexamination small entity indicator for the parent patent.
The 16 petitions estimated to be filed annually involve only a
minute fraction of the total of approximately 375,000 patents in force
that are owned by small entities.
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
small entity 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 approximately 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
[[Page 48740]]
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 estimate 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, any adjustment would be
incomplete would be administratively burdensome to estimate. Thus, it
is estimated that the number of small entity patents in force in fiscal
years 2013-2015 will be approximately 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 annually in fiscal years 2013-2015 (16 patents) would be less
than 0.005% (16/375,000) of all patents in force that are owned by
small entities.
1. Description of the Reasons That Action by the Office Is Being
Considered
The Office is revising the rules of practice to implement the
transitional program for covered business method patent review
provisions of the AIA, which take effect September 16, 2012. Public Law
112-29, Sec. 6(f), 125 Stat. 284, 311 (2011). The AIA 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.
2. Statement of the Objectives of, and Legal Basis for, the Final Rule
The final rule is part of a series of rules that implement covered
business method patent review as authorized by the AIA. Specifically
the final rule provides a definition for determining whether a patent
is for a technological invention for use in a transitional post-grant
review proceeding for covered business method patents. The AIA 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 six
months if good cause is shown. See 35 U.S.C. 326(a)(11). The AIA 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 the instituted
proceedings timely. See 35 U.S.C. 326(b). Consistent with the time
periods provided in 35 U.S.C. 326(a)(11), those final rules are
designed to result in a final determination by the Patent Trial and
Appeal Board within one year of the notice of initiation of the review,
except where good cause is shown to exist. This one-year review will
enhance the economy and improve the integrity of the patent system and
the efficient administration of the Office.
3. Statement of Significant Issues Raised by the Public Comments in
Response to the IRFA and the Office's Response to Such Issues
The Office published IRFA analyses to consider the economic impact
of the proposed rules on small entities, including an IRFA analysis for
covered business methods. See Transitional Program for Covered Business
Method Patents-Definition of Technological Invention, 77 FR 7095, 7097-
7105 (Feb. 10, 2012).
The Office received one written submission of comments from the
public concerning the Regulatory Flexibility Act, which was relevant to
all three final rulemakings concerning contested cases. Each component
of that comment directed to the Regulatory Flexibility Act is addressed
below.
Comment 20: One comment argued that non-office costs and burden
should include the burden on small entity patent owners, petitioners,
and licensees, as well as settlement burdens, disruption of businesses,
or effects on investment, business formation or employment. The comment
further argued that prophylactic application steps (e.g., filing of
reissue applications) were not considered and that the offsets for
inter partes reexamination's elimination were not appropriate.
Response: As explained in the notice of proposed rulemaking, the
Office notes that inter partes reexamination is the appropriate
baseline for estimating economic impacts because the use or outcome of
the prior reexamination process and the new trial are largely the same.
See OMB Circular A4, (e)(3). The Office estimated that the same number
of patents would be subject to inter partes review as would have been
subject to inter partes reexamination. The comment did not argue that
this estimate was unreasonable or provide an alternative estimate.
Considering the similarities in the grounds of review and the number of
patents subject to the proceedings, it is anticipated that the existing
inter partes reexamination process, if not eliminated for new filings,
would have had similar impact on the economy as the new review
proceedings and therefore the impacts noted in the comment would simply
replace existing analogous impacts and effects in inter partes
reexamination. The comment argues that no offset for the replaced
process should be considered although OMB guidance provides otherwise.
See OMB Circular A4. Additionally, although the comment argues that the
new proceedings may result in patent owners taking additional
prophylactic measures that would have their own burdens for small
businesses, any patent owner motivated by the regulations adopted in
this final rule to take prophylactic application steps would similarly
have been motivated to take those steps under the former inter partes
reexamination regime. Thus, the burdens on small entity patent owners,
petitioners, and licensees, as well as settlement burdens, disruption
of businesses, or effects on investment, business formation or
employment that are caused by the final rules would have been similarly
caused by the former inter partes reexamination proceedings as the same
effects and impacts are caused by the two types of proceedings.
Additionally, the Office's estimates of the burden on small
entities are likely overstated. As noted in the notice of proposed
rulemaking, it is anticipated that the current significant overlap
between district court litigation and inter partes reexamination may be
reduced by improvement in the coordination between the two processes.
See Rules of Practice for Trials before the Patent Trial and Appeal
Board and Judicial Review of Patent Trial and Appeal Board Decisions,
77 FR at 6903. Similarly, it is anticipated that the public burden will
be reduced because the longer duration of the inter partes
reexamination process will be reduced owing to the anticipated shorter
duration of the new procedure. Id.
Comment 21: A comment indicated that the underlying data for the
98.7 hours of judge time for an inter partes review proceeding was not
provided.
Response: Based on the Office's experience involving similar
[[Page 48741]]
proceedings, the Office estimates that, on average, an inter partes
review proceeding will require 35 hours of judge time to make a
decision on institution, 20 hours of judge time to prepare for and
conduct hearings, 60 hours of judge time to prepare and issue a final
decision, and 15 hours of judge time to prepare and issue miscellaneous
interlocutory decisions. It is also estimated that 2.5% of proceedings
will settle before a decision of whether to institute is made and
another 2.5% of proceedings will terminate by patent owners filing a
default judgment motion after institution. The Office estimates that
10% of proceedings will not be instituted and another 20% of
proceedings will settle after institution. In settled cases it is
estimated that 50% of the anticipated motions would not be filed. It
should be appreciated that cases that terminate prior to the need to
render a decision on institution, that do request an oral hearing or do
not require a final decision because of an earlier termination, result
in an average judge time per proceeding which is less than the time
needed to perform all possible steps in a proceeding.
4. Description and Estimate of the Number of Affected Small Entities
A. Size Standard and Description of Entities Affected. The Small
Business Administration's (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 the 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's small business size standards set forth in 13 CFR
121.201, the size standard for USPTO is not industry-specific.
Specifically, the Office's definition of 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, 1313 Off. Gaz.
Pat. Office at 63 (Dec. 12, 2006).
B. Overview of Estimates of Number of Entities Affected. The rules
will apply to any small entity that either files a petition for covered
business method patent review or owns a patent subject to such review.
As discussed above (which is incorporated here), it is anticipated that
50 petitions for covered business method patent review will be filed
annually in fiscal years 2013-2015. The Office has reviewed the
percentage of patents owned by small entities for which inter partes
reexamination was requested from October 1, 2000, to May 18, 2012. 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 32.09%
of patents for which an inter partes reexamination was requested. Based
on an estimation 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 be affected by covered
business method patent review annually, and it is also estimated that
no more than that number of small entities will file a petition for
review.
The USPTO estimates that 2.5% of patent owners will file a request
for adverse judgment (e.g., a default 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 two patent owners will annually 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 (32.09%)
from October 1, 2000, to May 18, 2012, it is estimated that one small
entity will annually file such request or fail to participate in
covered business method patent review.
Under the final 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 of avoiding 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 annually 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 annually. Based on the percentage of small entity-owned
patents that were the subject of inter partes reexamination (32.09%),
it is estimated that 14 small entities will annually file a preliminary
response to a covered business method patent review petition filed in
fiscal years 2013-2015.
Under the final 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 Reexaminations--FY 2011, http://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf. The
Office also considered the impact of: (1) Patent owner preliminary
responses newly authorized in 35 U.S.C. 323; (2) the enhanced
thresholds for instituting reviews set forth in 35 U.S.C. 324(a),
[[Page 48742]]
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 approximately 10% of the petitions for review (5
divided by 49) would be dismissed annually.
Thus, the Office estimates that no more than five entities (two
small entities) would be subject to a denial of the petition to
initiate covered business method patent review annually. This estimate
is based upon either the patent failing to meet the 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
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, http://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 two requests for reconsideration (5
decisions not to institute multiplied by 33.333%) will be filed
annually. Based on the percentage of small entity-owned patents that
were the subject of inter partes reexamination (32.09%), it is
estimated that annually one 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 years 2013-2015.
Further, the Office estimates that it will issue 34 final written
decisions for post-grant reviews, including cover business method
patent reviews annually. Applying the same 33.333% rate, the Office
estimates 11 requests for reconsiderations (34 multiplied by 33.333%)
will be filed annually based on the final written decisions. Therefore,
the Office estimates a total of 13 (2 + 11) requests for
reconsiderations annually.
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. This series of final rules adopts changes to
permit parties to agree to certain changes from the default process
between themselves without filing a motion with the Board. Based on the
changes in these final rules, the estimate of the number of motions has
been revised downwardly so that it is now anticipated that post-grant
reviews and covered business method patent reviews will have an average
of 8 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. The Office envisions that most motions will be decided in a
conference call or shortly thereafter.
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 annually 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 final rule. Based on the percentage of small
entity-owned patents that were the subject of inter partes
reexamination (32.09%), it is estimated that annually 14 small entity
patent owners or petitioners will file a request for oral hearing in
the covered business method patent reviews instituted in fiscal years
2013-2015.
Parties to a covered business method patent review may file
requests to treat a settlement as business confidential and requests
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 (such as arbitration for derivation proceedings)
will be infrequently used. The Office estimates that two requests to
treat a settlement as business confidential and ten requests for
adverse judgment, default adverse judgment, or settlement notices will
be filed annually. The Office also estimates that two requests to make
a settlement available will be filed annually. Based on the percentage
of small entity-owned patents that were the subject of inter partes
reexamination (32.09%), it is estimated that one small entity will
annually file a request to treat a settlement as business confidential
and three small entities will annually file a request for adverse
judgment, default adverse judgment notices, or settlement notices in
the reviews instituted in fiscal years 2013-2015.
Parties to a covered business method patent review may seek
judicial review of the final decision of the Board. Historically, 33%
of decisions by examiners in inter partes reexamination proceedings
have been appealed to the Board. Given the increased coordination with
district court litigation, the Office has adjusted its estimate of the
appeal rate to be 120% of the historic rate (40% of decisions); seven
additional notices of appeal will be filed annually based on the
decisions issued in the new covered business method patent review
proceedings during fiscal years 2013-2015. Furthermore, based on the
percentage of small entity-owned patents that were the subject of inter
partes reexamination (32.09%), it is estimated that two small entities
would seek judicial review of final decisions of the Board annually in
the covered business method patent reviews instituted in fiscal years
2013-2015.
5. Description of the Reporting, Recordkeeping, and Other Compliance
Requirements of the Final 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
The rules will apply to any small entity that petitions for a
covered business method patent review or owns a patent subject to such
review. The reviews would be limited to business method patents that
are not patents for technological inventions. Under the final rules, a
person who is not the owner of a patent may file a petition to
institute a review of that patent if the person is currently a party to
litigation based on the patent or charge with infringement, 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 final rule
provides the procedural requirements setting forth which patents are
eligible for review. Additional requirements are provided in
[[Page 48743]]
contemporaneous trial specific rulemaking. The procedures for petitions
to institute a covered business method patent review include those set
forth 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 and to represent a party in an inter partes reexamination
before the Board. The level of skill typically is 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. The Office believes, based on its
experience, that $46,000 is an appropriate estimate. 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.
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 fees for filing a petition for covered business
method patent review would be: $35,800 to request review of 20 or fewer
claims and $800 for each claim in excess of 20 for which review is
sought.
In setting fees, the estimated information technology (IT) cost to
establish the process and maintain the filing and storage system
through FY 2017 is to be recovered by charging each petition an IT fee
that has a base component of $1,705 for requests to review 20 or fewer
claims. The IT component fee would increase $75 per claim in excess of
20. 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 about 130 hours of time
for review by the judges will be required. An additional amount of time
estimated to be slightly less than three hours of judge time would be
required for each claim in excess of 20.
The rules 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 set forth 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 91.6 hours of professional time and cost
$34,000. The AIPLA Report of the Economic Survey 2011 reported that the
average cost for inter partes reexamination including of the request
was $46,000, the first patent owner response and third party comments
was $75,000 (see page I-175) and the mean hourly billing rate for
professional time for attorneys in private firms was $371 (see page 8).
Thus, the cost of the first patent owner reply and the third-party
statement is $29,000, the balance of $75,000 minus $46,000. 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.
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 $371 per hour, for a total estimated
cost of $29,680. 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 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 include those set forth
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 include those set forth 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 include those set forth 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 a
total of 8 motions, oppositions, and replies after institution. The
Office envisions that most motions will be decided in a conference call
or shortly thereafter.
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 set forth 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 18.3
hours of professional time ($6,800 divided by $371), 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
requests for adverse judgment. A written request to make a settlement
agreement available may also be filed.
[[Page 48744]]
The procedures to file requests that a settlement be treated as
business confidential are set forth in Sec. 42.74(c). The procedures
to file requests for adverse judgment are set forth in Sec. 42.73(b).
The procedures to file requests to make a settlement agreement
available are set forth in Sec. 42.74(c)(2). It is anticipated that
requests to treat a settlement as business confidential will require
two hours of professional time for a cost of $742. It is anticipated
that requests for adverse judgment will require one hour of
professional time a cost of $371. It is anticipated that requests to
make a settlement agreement available will require one hour of
professional time a cost of $371. The requests to make a settlement
agreement available will also require payment of a fee of $400
specified in Sec. 42.15(d). The fee is the same as that currently set
forth in Sec. 41.20(a) for petitions to the Chief Administrative
Patent Judge.
Parties to a review proceeding may seek judicial review of the
judgment of the Board. The procedures to file notices of judicial
review of a Board decision, including notices of appeal and notices of
election provided for in 35 U.S.C. 141, 142, 145, and 146, are set
forth 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 six
minutes of professional time at a cost of $37.10.
6. Description of Any Significant Alternatives to the Final Rules Which
Accomplish the Stated Objectives of Applicable Statutes and Which
Minimize Any Significant Economic Impact of the Rules on Small Entities
This Office considered significant alternatives such as: (1) The
establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance and reporting requirements under the rule for such small
entities; (3) the use of performance rather than design standards; and
(4) an exemption from coverage of the rule, or any part thereof, for
such small entities. See 5 U.S.C. 603; see also 35 U.S.C. 41(h) (fee
reduction for small business concerns not applicable to fees set under
35 U.S.C. 41(d)(2)).
A. Definition of Technological Invention
The definition set forth in this final rule is consistent with the
AIA and the legislative history, and assists in implementing the
transitional program for covered business method patents as required by
section 18(d)(2) of the AIA. 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.'').
With respect to the rules to define patents that are eligible for
covered business method patent review of the AIA, the Office considered
requiring less than, or exempting small entities from, Sec. 42.304
(which defines the specific content requirement for a petition seeking
a review under the transitional program for covered business method
patents). 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.
A covered business method patent review is a unique process
subject, by statute, to strict periods for completion. Thus, the
establishment of longer timetables would not be feasible and likely
would result in increased costs.
B. Other Aspects of Proceedings
Size of petitions and motions: The Office considered whether to
apply a page limit in covered business method proceedings in which a
patent's inclusion in or exclusion from the definition is determined,
and what a more 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, available
at http://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, five-page limit for miscellaneous issues, and
ten-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 in nine months in fiscal year 2011. The percentage of
contested cases terminated within two 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, available at http://www.uspto.gov/ip/boards/bpai/stats/perform/index.jsp.
Comparing the average time period for terminating a contested case,
10.0 to 12.0 months, with the average time period, during fiscal years
2009 through 2011, for completing an inter partes reexamination, 28.9
to 41.7 months, indicates that the average contested case 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. Section 42.24 thus provides 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 the trials
timely. The page limits set forth in this final rule is consistent with
these considerations.
[[Page 48745]]
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 further 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, and reducing costs for the parties and for
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 final 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 80-page limit is considered sufficient in all but exceptional
cases.
The rule provides that petitions to institute a trial must comply
with the stated page limits but may be accompanied by a motion that
seeks to waive the page limits. The petitioner must show in the motion
how a waiver of the page limits is in the interests of justice. A copy
of the desired non-page limited petition must accompany the motion.
Generally, the Board would decide the motion prior to deciding whether
to institute the trial.
Current Board practice provides a limit of 25 pages for other
motions and 15 pages for miscellaneous motions. The Board's experience
is that such page limits are sufficient for the parties filing them and
do not unduly burden the opposing party or the Board. Petitions to
institute a trial would generally replace the current practice of
filing motions for unpatentability, as most motions for relief are
expected to be similar to the current contested cases miscellaneous
motion practice. Accordingly, the 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.
Section 42.24(b) provides 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 rule
would continue the current practice.
Section 42.24(c) provides page limits for replies. Current
contested cases practice provides a 15-page limit for priority motion
replies, a five-page limit for miscellaneous (procedural) motion
replies, and a ten page limit for all other motions. The rule is
consistent with current contested case practice for procedural motions.
The rule provides a 15-page limit for reply to petitions requesting a
trial, which the Office believes is sufficient based on current
practice. Current contested case practice has shown that such page
limits do not unduly restrict the parties and, in fact, have provided
sufficient flexibility to parties not only to 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 AIA 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,
[[Page 48746]]
and the ability of the Office to complete the instituted proceedings
timely. 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), adopting procedures
with reasonable page limits is consistent with the objectives set forth
in the AIA. 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 35 U.S.C. 311(b) and 312(c),
effective September 15, 2012, the AIA requires the Director to
establish more than one fee for reviews based on the total cost of
performing the reviews, and does not provide explicitly 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, under the fee setting authority in 35 U.S.C. 321(a), it is
reasonable that the Director 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 manage
a patent case efficiently). 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 petition is refused
due to improper fee payment. Any subsequent petition could be time
barred in view 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, this option would have a negative impact on small
entities. Moreover, contested cases 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 records were often a collection of disparate issues and
evidence. This led to lengthy and unwarranted delays in deciding
contested cases as well as increased costs for parties and the Office.
Accordingly, this alternative is inconsistent with objectives of the
AIA 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 the instituted
proceedings timely.
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 ten pages for a single ``fact'' that merely
cut and pasted a portion of a declarant's cross-examination.
Accordingly, this alternative is inconsistent with objectives of the
AIA 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 the instituted
proceedings timely.
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 reviews timely, 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 AIA 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 the instituted proceedings
timely.
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. However, 35 U.S.C. 41(d)(2) provides that the Office
shall set the fee to recover the cost of providing the services. 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 proceeding.'' See
introduction to An E-Discovery Model Order, available at http://www.cafc.uscourts.gov/images/stories/announcements/Ediscovery_Model_Order.pdf. Accordingly, this would have been inconsistent with
objectives of the AIA 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
[[Page 48747]]
administration of the Office, and the ability of the Office to complete
the instituted proceedings timely.
Additional discovery increases trial costs and increases the
expenditures of time by the parties and the Board. To promote effective
discovery, the rule requires 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. Parties may,
however, agree to additional discovery amongst themselves.
The Board will set forth a default scheduling order to provide
limited discovery as a matter of right and provide parties with the
ability to seek additional discovery on a case-by-case basis. In
weighing the need for additional discovery, should a request be made,
the Board would consider the economic impact on the opposing party.
This would tend to limit additional discovery where a party is a small
entity.
Pro Hac Vice: The Office considered whether to allow counsel to
appear pro hac vice. In certain cases, highly skilled, but non-
registered, attorneys have appeared satisfactorily before the Board in
contested cases. The Board may recognize counsel pro hac vice during a
proceeding upon a showing of good cause. The Board may impose
conditions in recognizing counsel pro hac vice, including a requirement
that counsel acknowledge that counsel is bound by the Office's Code of
Professional Responsibility. Proceedings before the Office can be
technically complex. 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 Code of
Professional Responsibility, 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 final rule allows for this practice in the new proceedings
authorized by the AIA.
The rules 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 rule delegates to the Board the authority to conduct counsel
disqualification proceedings while the Board has jurisdiction over a
proceeding. The rule also delegates 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 and subsequently
a patent review is 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 it more broadly would have been
inconsistent with objectives of the AIA 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 the instituted proceedings timely.
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 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 AIA 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
the instituted proceedings timely.
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, under the adopted option, it is expected that the entity size
and sophistication will be considered in determining whether
alternative filing methods would be authorized.
7. Identification, to the Extent Practicable, of All Relevant Federal
Rules Which May Duplicate, Overlap, or Conflict With the Final Rules
The following rules also provide processes involving patent
applications and patents:
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
[[Page 48748]]
provide a different threshold for initiation, require the proceeding to
be conducted by an examiner with a right of appeal to the Patent Trial
and Appeal Board, and allow for limited participation by third parties.
37 CFR 1.902-1.997 provide for inter partes reexamination of
patents. Similar to ex parte reexamination, inter partes reexamination
provides a procedure in which a third party may request reexamination
of any claim in a patent on the basis of the cited prior art patents
and printed publication. The inter partes reexamination practice will
be eliminated, except for requests filed before the effective date,
September 16, 2012. See section 6(c)(3)(C) of the AIA.
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 in which the definitions adopted in this final rule
apply, the USPTO estimates the annual aggregate burden of the rules on
the public to be $22,417,241.20 in fiscal years 2013-2015, which
represents the sum of the estimated total annual (hour) respondent cost
burden ($20,340,891.20) plus the estimated total annual non-hour
respondent cost burden ($2,076,350) provided in Part O, Section II, of
this notice, infra.
The USPTO expects several benefits to flow from the AIA and these
rules. It is anticipated that the 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, available at
http://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf.
Likewise, it is anticipated that the rules will minimize
duplication of efforts. In particular, the AIA 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 where the
damages at risk are less than $1,000,000 the total cost of patent
litigation was, on average, $916,000, where the damages at risk are
between $1,000,000 and $25,000,000 the total cost was, on average,
$2,769,000, and where the damages at risk exceed $25,000,000 the total
cost was, on average, $6,018,000. The Office believes, based on its
experience, that these estimates are reasonable. There may be a
significant reduction in overall burden if, as intended, the AIA and
the 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, available at 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 patent cases (the highest number of
yearly filings between 2006 and 2010 rounded to the nearest 100) are
likely to be filed annually. The aggregate burden estimate above
($22,417,241.20) was not offset by a reduction in burden based on
improved coordination between district court patent litigation and the
new inter partes review proceedings.
The Office received one written comment from the public regarding
Executive Order 12866. Each component of that comment directed to
Executive Order 12866 is addressed below.
Comment 22: One comment suggested that the proposed rules would
have been classified more appropriately as significant under section
3(f)(4) of Executive Order 12866 because the proposed rules raise novel
legal or policy issues arising out of legal mandates.
Response: As stated in the notice of proposed rulemaking and in
this final rule, the Office of Management and Budget designated the
proposed rules as significant under Executive Order 12866, but not
economically significant. The comment does not present what aspect(s)
of the rule is believed to present novel legal or policy issues.
Comment 23: One comment suggested that the costs, including any
prophylactic application steps resulting from the new proceedings, were
not calculated appropriately when the Office offset the new burdens
with those removed by elimination of the ability to file new inter
partes reexamination under Executive Order 12866 and that when
appropriately calculated, the cost would exceed the $100 million
threshold for declaring the proposed rules significant under section
3(f)(1).
Response: As stated in the notice of proposed rulemaking and in
this final rule, the Office of Management and Budget designated the
proposed rules as significant under Executive Order 12866, but not
economically significant. The baseline costs that the Office used to
determine the increased burden of the proposed rules properly included
the burden on the public to comply with inter partes reexamination
because those burdens existed before the statutory change, and that
process was eliminated and replaced by the process adopted by the AIA
as implemented this final rule. See OMB Circular A4, section (e)(3).
See also response to Comment 20.
Comment 24: One comment argued that the $80,000,000 burden estimate
is so close to $100,000,000 threshold, that, particularly in view of
the difficulties in estimating burden, the Office should assume that it
is likely that the proposed rules would have a $100,000,000 impact. One
comment suggested that the Office should have conducted a Regulatory
Impact Analysis.
Response: As stated in the notice of proposed rulemaking and in
this final rule, the Office of Management and Budget designated the
proposed rules as significant under Executive Order 12866, but not
economically significant. The comment did not indicate what aspect of
the estimate was likely to be wrong. Furthermore, $80,000,000 is twenty
percent below the $100,000,000 threshold. Moreover, the Office's
estimate did not take into account the reduction in burden due to
decreased litigation. Thus, the Office's estimate is likely an
overstatement of the estimated basis.
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
[[Page 48749]]
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 rule making 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 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 affect 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 set forth in this final rule 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 et seq.
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 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 final rule was submitted to OMB under OMB control number 0651-
0069 when the notice of proposed rulemaking was published. The Office
published the title, description, and respondent description of the
information collection, with an estimate of the annual reporting
burdens, 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,'' 77 FR 6879 (Feb. 9, 2012) (notice of proposed
rulemaking) (RIN 0651-AC70) and the Notice ``Changes to Implement
Transitional Program for Covered Business Method Patents,'' 77 FR 7080
(Feb. 10, 2012) (notice of proposed rulemaking) (RIN 0651-AC73).
The Office received one comment and made minor revisions to the
requirements in the rule, as well as the burden estimates, as outlined
below. Accordingly, the Office has resubmitted the proposed revision to
the information collection requirements under 0651-0069. The proposed
revision to the information collection requirements under 0651-0069 is
available at OMB's Information Collection Web site (www.reginfo.gov/public/do/PRAMain).
This 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); and
[[Page 48750]]
(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 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 AIA 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 mean billing rate ($371 per 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 for
instituting a review are provided for in a covered business method
patent review compared with inter partes reexamination, 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.
Considering the percentage of motions on patentability issues
provides an appropriate estimate of transitional proceedings for
covered business methods because grounds raised in those proceedings
would be directed to the same issues. Accordingly, the USPTO reviewed
recent contested cases before the trial section of the Board to
estimate the average number of motions for any matter including
priority, the subset of those motions directed to non-priority issues,
the subset of those motions directed to non-priority patentability
issues, and the subset of those motions directed to patentability
issues based on a patent or printed publication on the basis of 35
U.S.C. 102 or 103. The review of current contested cases before the
trial section of the Board indicated that approximately 15% of motions
were directed to prior art grounds, 18% of motions were directed to
other patentability grounds, 27% were directed to miscellaneous issues,
and 40% were directed to priority issues. It was estimated that the
cost per motion to a party in current contested cases before the trial
section of the Board declines because of overlap in subject matter,
expert overlap, and familiarity with the technical subject matter.
Given the overlap of subject matter, a proceeding with fewer motions,
such as a transitional proceeding for a covered business method patent
will have a somewhat less than proportional decrease in costs since the
overlapping costs will be spread over fewer motions as compared with a
derivation proceeding.
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. This final rule implements
the changes to Office practice necessitated by sections 6(d) and 18 of
the AIA.
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: 0651-0069.
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 486 responses per year.
Estimated Time per Response: The USPTO estimates that it will take
the public from 0.1 to 165.3 hours to gather the necessary information,
prepare the documents, and submit the information to the USPTO.
Estimated Total Annual Respondent Burden Hours: 54,827.2 hours per
year.
The table below summarizes the burden hours under the rules
proposed in the notices of proposed rulemaking and the burden hours
under this final rule.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed Proposed Final estimated Final
estimated time estimated estimated time for estimated Final estimated
Item for response annual annual burden response annual annual burden
(hours) responses hours (hours) responses hours
--------------------------------------------------------------------------------------------------------------------------------------------------------
Petition for covered business method patent review... 180.4 50 9,020 165.3 50 8,265
Reply to initial covered business method patent 100 45 4,500 91.6 45 4,122
review..............................................
[[Page 48751]]
Request for Reconsideration.......................... 80 14 1,120 80 13 1,040
Motions, replies and oppositions after institution in 130 342 44,460 130 312 40,560
covered business method patent review...............
Request for oral hearing............................. 20 45 900 18.3 45 823.5
Request to treat a settlement as business 2 2 4 2 2 4
confidential........................................
Request for adverse judgment, default adverse 1 10 10 1 10 10
judgment or settlement..............................
Request to make a settlement agreement available..... 1 2 2 1 2 2
Notice of judicial review of a Board decision (e.g., 0.1 5 0.5 0.1 7 0.7
notice of appeal under 35 U.S.C. 142)...............
--------------------------------------------------------------------------------------------------
Totals........................................... ............... 515 60,016.50 ............... 486 54,827.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Total Annual (hour) Respondent Cost Burden:
$20,340,891.20 per year. The USPTO expects that the information in this
collection will be prepared by attorneys. Using the professional rate
of $371 per hour for attorneys in private firms, the USPTO estimates
that the respondent cost burden for this collection will be
approximately $20,340,891.20 per year (54,827.2 per year multiplied by
$371 per hour).
Estimated Total Annual Non-hour Respondent Cost Burden: $2,076,350
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 $2,076,350 per year.
Therefore, the total estimated cost annual burden in fiscal years
2013-2015 is estimated to be $23,864,141.20 (the sum of the estimated
total annual (hour) respondent cost burden ($21,787,791.20) plus the
estimated total annual non-hour respondent cost burden ($2,076,350)).
The table below summarizes the (non-hour) respondent cost burden
under the rules proposed in the notices of proposed rulemaking and the
(non-hour) respondent cost burden under this final rule.
The fees, including the fee structure, referenced in this
rulemaking may be revisited and may be proposed to be set or adjusted
in a notice of proposed rulemaking under section 10 of the AIA.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed Final
estimated Proposed fee Proposed estimated Final fee Final
Items annual amount estimated annual amount estimated
responses annual fees responses annual fees
--------------------------------------------------------------------------------------------------------------------------------------------------------
Petition for covered business method patent review...... 50 $47,100 $2,355,000 50 * $41,400 $2,070,000
Reply to covered business method patent review petition. 45 0 0 45 0 0
Request for Reconsideration............................. 14 0 0 13 0 0
Motions, replies and oppositions after initiation in 342 0 0 303 0 0
covered business method patent review..................
Motions in post-grant review or covered business method n/a n/a n/a 3 370 1,110
patent review with excess claims by small entity patent
owners.................................................
Motions in post-grant review or covered business method n/a n/a n/a 6 740 4,440
patent review with excess claims by other than small
entity patent owners...................................
Request for oral hearing................................ 45 0 0 45 0 0
Request to treat a settlement as business confidential.. 2 0 0 2 0 0
Request for adverse judgment, default adverse judgment 10 0 0 10 0 0
or settlement..........................................
Request to make a settlement agreement available........ 2 400 800 2 400 800
Notice of judicial review of a Board decision (e.g., 5 0 0 7 0 0
notice of appeal under 35 U.S.C. 142)..................
-----------------------------------------------------------------------------------------------
[[Page 48752]]
Totals.............................................. 515 .............. 2,355,800 486 .............. 2,076,350
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Average.
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 requirement of
the Paperwork Reduction Act unless that collection of information
displays a currently valid OMB control number.
The Office received one written submission of comments regarding
the Paperwork Reduction Act. Each component of that comment directed
the Paperwork Reduction Act is addressed below.
Comment 25: A comment suggested that inter partes reexamination is
a very poor proxy for these proceedings because there have been very
few completed proceedings relative to all filing of inter partes
reexaminations from 2001 to 2011 and the comment claims that the
completed proceeding were only the least complex of proceedings which
the comment alleges results in a sampling bias.
Response: While only 305 inter partes reexamination proceedings
have resulted in a certificate, the comment is not correct that only
the least complex of proceedings have been completed. The number of
filings of inter partes reexamination has increased considerably in the
last three full years. See Rules of Practice for Trials before the
Patent Trial and Appeal Board and Judicial Review of Patent Trial and
Appeal Board Decisions, 77 FR at 6893. For example, in the last three
years 824 or 64% of the 1,278 requests filed from 2001 to 2011 were
filed. Considering that the average time from filing to certificate for
the 305 certificates was 36.2 months and the median pendency was 32.9
months, it would have been more appropriate for the comment to consider
the 305 certificates that have issued compared with the filings from
2001 to 2008. During that time period there were 467 requests filed, 14
requests were subsequently denied a filing date, 53 requests were
denied on the merits, 246 had concluded with a certificate by September
30, 2011, and 154 were still pending on September 30, 2011. Of the 154
that were still pending, only one was before the examiner after a non-
final rejection, only three had an action closing prosecution as the
last action, and only three had a right of appeal notice as the last
action. Most of the 154 proceedings were subject to appeal proceedings
or were in the publication process. Accordingly, inter partes
reexamination is an appropriate proxy.
Comment 26: One comment suggested that for matters not concurrently
in litigation, the Office's two hour estimate for the public burden of
settlement under the Paperwork Reduction Act was unreasonably low by a
factor of 30-100 and must include the costs to arrive at the settlement
in addition to the cost of submitting the agreement to the Office. The
comment asserts that this burden is fully cognizable under the
Paperwork Reduction Act.
Response: By statute, any petitioner seeking review of a covered
business method must also be in litigation regarding the patent or have
been charged with infringement. The comment only argued that for
parties not in litigation, the cost of settlement was too low.
Therefore, this comment is not pertinent to this rulemaking and is not
adopted.
Comment 27: A comment requested that the Office set forth the basis
for the number of petitions for review.
Response: As discussed above in item B, the Office considered the
actual number of inter partes reexamination requests filed during FY
2001-2011 and the anticipated number of requests in FY 2012, the number
of such requests of patents classified in Class 705, the number of
interferences, and the differences between reexamination and the new
review. The Office estimated the number of reviews based on the
historical data on the number of filings in the most analogous
proceedings. See Transitional Program for Covered Business Method
Patents--Definition of Technological Invention, 77 FR at 7097.
Comment 28: One comment suggested that a projection for at least
three years of growth in future filings is necessary because the PRA
clearance is for three years. The comment also seeks disclosure of
USPTO's estimation models.
Response: The suggestion has been adopted. The Office estimates no
growth for petitions seeking review under the transitional program for
covered business method patents during the three year period.
Calculations for these numbers are provided in the supporting statement
for this collection. In 2013, the number of eligible patents will
include patents for which currently in litigation. In subsequent years,
the number of eligible patents is expected to be reduced, because some
proceedings will have been settled, while others will have been stayed
pending a review. At the same time, as experience in the procedure
becomes more widespread, the public would more likely seek a review.
Because these two factors offset each other, the Office is anticipated
zero growth for petitions for the covered business method patent
review.
Comment 29: A comment noted that the distribution of claims for the
review was not disclosed during the comment period. The comment asserts
that failure to disclose underlying data in the Notice of Proposed
Rulemaking violates the Paperwork Reduction Act (and other
requirements).
Response: The distribution of claims for which review will be
requested was estimated based on the number of claims for which inter
partes reexamination was requested in the first 60 requests filed
during the second quarter of FY 2011 as that data was the most timely
when the proposed rule notices were drafted. That data was publically
available when the notice of proposed rulemaking was published and
remains available today. See http://portal.uspto.gov/external/portal/pair. A summary of that publicly available data is provided as follows:
40 of the 60 proceedings requested review of 20 or fewer claims; eight
of the 60 requested review of between 21 and 30 claims; three of the 60
requested review of between 31 and 40 claims; six of the 60 requested
review of between 41 and 50 claims; one of the 60 requested review of
between 51 and 60 claims; one of the 60 requested review of between 61
and 70 claims; and one of the 60 requested review of between 91 and 100
claims. A second group of 20 proceedings filed after September 15,
2011, were reviewed to determine if the change to the statutory
threshold resulted in a clear change in the number of claims for which
review was requested. A summary of that data is provided as follows: 13
of 20 requested review of 20 or fewer claims; three of 20 requested
review of between 21 and 30
[[Page 48753]]
claims; three of 20 requested review of between 31 and 40 claims; and
one of 20 requested review of 53 claims.
Comment 30: One comment suggested that the estimate of the number
of post-grant review proceedings should be doubled based on the
analysis of the University of Houston of patent cases from 2005-2009.
According to the comment, this analysis shows that for every 15
decisions involving printed prior art grounds, there were 13 decisions
involving public use, ``on sale,'' or 35 U.S.C. 112.
Response: The suggestion is not adopted. While the Office agrees
that many decisions involved public use, ``on sale,'' or 35 U.S.C. 112,
the comment and the analysis by the University of Houston did not
consider which decisions did not include a prior art grounds, but did
include a public use, ``on sale,'' or 35 U.S.C. 112 ground. Only the
subset of decisions including the newly available grounds could be used
appropriately in estimating an increased rate of post-grant review
filings relative to inter partes review. The comment also did not
address how the limited filing window relative to the filing of
district court litigation for post-grant review would be addressed
appropriately if the University of Houston study served as a basis for
the estimates.
Comment 31: One comment suggested that the hourly rate for
practitioners should be raised from $340 (the medium hourly rate from
the AIPLA economical survey referenced in the notice of proposed
rulemaking) to $500. The comment asserts that using the median hourly
rate from the AIPLA Economic Survey of $340 is analytically wrong and
that, at a minimum, the higher mean rate of $371 from that survey
should be used.
Response: The suggestion is adopted in part. The Office has adopted
a mean hourly rate of $371 from the AIPLA Economic Survey, rather than
the median hourly rate of $340 from that survey. The suggestion of a
$500 hourly rate cannot be adopted because the comment did not provide
any data to support the validity of hourly rate suggested and the
Office believes, based on its experience, that $371 is a better
estimate of the average hourly rate.
Comment 32: One comment suggested that reliance on the AIPLA
economic survey was inappropriate as the survey is flawed. The comment
asserts that the survey is unreliable for estimating paperwork burden
under the Information Quality Act.
Response: In providing estimates of burden hours, the USPTO
sometimes referenced the AIPLA economic survey report, as a benchmark
for the estimates. While the costs reported in the survey were
considered, the Office, in estimating the cost of the collection, also
considered the work required to prepare and file the submissions.
Under the USPTO's Information Quality Guidelines (ICG), the AIPLA
economic survey report is not a ``dissemination'' of information. The
Guidelines state that ``dissemination'' means an ``agency initiated or
sponsored distribution of information to the public.'' USPTO's ICG,
Section IV, A, 1. Subsection (a) further defines ``agency initiated
distribution of information to the public'' to mean ``information that
the agency distributes or releases which reflects, represents, or forms
any part of the support of the policies of the agency.'' Id. at Section
IV, A, 1, a. The USPTO did not distribute or release the AIPLA economic
survey report.
Likewise, the AIPLA economic survey report does not qualify as an
``agency sponsored distribution of information'' under Subsection (b)
of the Guidelines, which ``refers to situations where the agency has
directed a third party to distribute or release information, or where
the agency has the authority to review and approve the information
before release.'' Id. at Section IV, A, 1, b. The USPTO did not
commission the report, had no input into the structure of the report
and does not rely exclusively upon the results of the report to arrive
at estimates. No correction of the documents is required because the
Office utilized the AIPLA economic survey report in formulating some
burden estimations. No correction is required under the Information
Quality Act.
Comment 33: One comment suggested that the regulations imposed a
substantial paperwork burden without a valid OMB Control Number.
Response: The suggestion is not adopted. OMB Control number 0651-
0069 has been requested appropriately and is pending.
Comment 34: One comment suggested that the USPTO's estimates
systematically ignore burdens and costs associated with the attorney's
client company.
Response: See response to Comment 20.
List of Subjects
37 CFR Part 42
Administrative practice and procedure, Inventions and patents,
Lawyers.
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 amends 37 CFR part 42, as added elsewhere
in this issue of the Federal Register, as follows:
PART 42--TRIAL PRACTICE BEFORE THE PATENT TRIAL AND APPEAL BOARD
0
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 AIA, Pub. L. 112-29, Sec. Sec. 6(c), 6(f), and 18,
125 Stat. 284, 304, 311, and 329 (2011).
0
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: July 16, 2012.
David J. Kappos,
Under Secretary of Commerce for Intellectual Property and Director of
the United States Patent and Trademark Office.
[FR Doc. 2012-17904 Filed 8-13-12; 8:45 am]
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