America-Israel Patent Law

Civil Servant Gone Wild (3): Putting Form Before Substance in the ILPTO Practitioner Licensing Process

Here’s a pop quiz.  

Frank is an Israeli citizen who has a science degree from an Israeli university.  He’s trained for two years in a patent firm, and he wants to take the Israel patent practitioner qualifying exams and has paid the fee to take them, but the ILPTO won’t let him take the exams.   Why not?

(a)            Because the firm where he works refuses to provide a letter attesting to the fact that he trained there for two years.

(b)            Because the ILPTO asked for samples of work he did and he refused to provide such.

(c)            Because the previous commissioner introduced a new requirement regarding trainees that has no basis in law, namely that the trainer must report to the ILPTO regarding the commencement of training within one month thereof, and the firm where the person works failed to comply with this extra-legal requirement.

For readers who’ve followed this blog for a while, the answer is clear: it’s (c).  But some explanation is in order.

As in the USA, to practice patent cases before the Israel PTO, one must (a) have a technical background, i.e. a university degree or the equivalent and (b) pass a set of exams.**  Unlike in the USA, but as is the case for lawyers in Canada, England and elsewhere, one must also undergo a two year apprenticeship period.  The statutory and regulatory framework is set forth in sections 142-145 of the statute and regulations 124-144 of the regulations (the latter being secondary legislation which is promulgated by the Justice Minister, with the approval of the relevant parliamentary committee). 

The two-year training period is set forth in section 142(4) of the statute; regulation 136 says that proof of this service shall be provided in the way of certificate from the trainer that sets forth the type of work the trainee did, the number of hours worked per week, and additional work done by the trainee, if there was any.  This regulation also empowers the Commissioner to require up to five examples of the trainee’s work in different areas of IP practice.  So in principle, answers (a) and (b) above are correct answers.  But that’s not what happened here: Frank’s firm provided such a letter, and the ILPTO didn’t ask for samples (and if it had, Frank would have complied).

No, Frank’s dilemma is a direct result of the previous Israel Patents Commissioner’s inability to usurp his urge toward the ultra vires.  Although regulation 136 says that the number of hours worked per week must be stated, nowhere do the statute or regulations prescribe a minimum number of hours that must be worked.  Desiring to bring clarity to this situation – and to end the hypothetical potential for abuse, whereby, for example, someone could work one day a week as a patent practitioner trainee over the course of two years, an abuse which I’m not aware has actually ever occurred – the previous Commissioner established a new practice, in accordance with which: 

(1)          the practitioner training the trainee must notify the ILPTO of the commencement of the training period within one month thereof, otherwise the ILPTO will not recognize the commencement of the training period until receiving actual notice from the practitioner;

(2)          the trainee must serve the equivalent of two years of full-time employment, and

(3)          anyone wishing to sit for the examinations must have completed at least one year of training.

There is no legal basis for at least two of these requirements, but as we know, the previous Commissioner had an uncanny ability to regard legal strictures as mere suggestions, to be followed only by mere mortals; this is but a minor example of that ability. 

Let’s start with the easiest one, the second requirement.  It’s sensible to want to ensure that patent practitioner trainees have trained full-time and not part-time.  And given that, maybe one could make a statutory construction argument to support this requirement, using the “purposive construction” conceit that Aaron Barak brought into vogue in Israeli jurisprudence: since the purpose of this section of the statute is to ensure that licensed practitioners have a minimum level of competence, the “two years” of training referred to in 142(4) must necessarily mean the equivalent of two years of full-time employment.  The requirement of regulation 136 to report the number of hours worked per week, it can be argued, reflects this understanding of the statute, at an essentially contemporaneous point in time (the regulations were made about a year after the statue was enacted): the point is to ensure that the person has trained for the equivalent of two years of full-time work.  So requirement (2) may be defensible.

The third requirement, however, has no basis in the statute or the regulations, which do not condition sitting for the exam on a minimum training period prior thereto.  To the contrary, the exams are mentioned as a separate, independent requirement, the express purpose of which “is to prove that [the candidate] has sufficient knowledge in the laws of patents, designs, and trademarks in Israel and abroad and in other relevant laws, as will be established [in regulations to be promulgated later], and that has command of Hebrew and another language necessary for his work, as will be established.”  So while it may be more prudent to put off the exams until after one has gained some experience, the statute enables anyone who desires to do so to sit for the exams. 

The extra-legal one-year-before-exam requirement is even more absurd considering that the ILPTO calculates the one-year on the basis of the pre-training notification requirement, which itself is the most difficult of these three requirements.  The notification requirement is legally problematic because it imposes an additional condition not set forth in the statute or regulations.  Regulation 136 doesn’t say anything about notifying the ILPTO before the start of training – it just says that the trainer must provide a certificate attesting to what the trainee did and, by implication, when he did it.  Given that the trainer may himself be subject to discipline if he lies to the ILPTO, it’s unlikely that a practitioner is going to lie about having trained someone he didn’t train. 

To be sure, a practitioner’s providing a statement to the ILPTO about the commencement of training can help protect a trainee, for example if during the training period the two have a falling out and the practitioner later refuses to confirm the length of the trainee’s employment or what he did (and unlike the hypothetical abuse that concerned the ex-Commish, I am aware of these kinds of cases having occurred).  But the submission of such a pre-training statement should be left as something voluntary.  That’s because – and here we come to the practical difficulty with this requirement – the imposition of the extra-legal requirement to report the start of training can come back to adversely affect the blameless, as in Frank’s case.  Frank is being penalized because the trainer didn’t notify the ILPTO of start of the training period.  Assuming the practitioner-trainer had good intentions toward the trainee, it’s a shanda that the ILPTO now penalizes the trainee for the actions of a third party, actions over which the trainee had no control.

The ILPTO should follow regulation 136 as set forth: a letter from the practitioner attesting to the trainee’s training should be all that is necessary.  Where the ILPTO would be wise to change things is to allow trainees themselves to provide proof of their employment and work on patent matters, such as salary stubs and billing records, in lieu of such a letter, in cases in which practitioners refuse to sign such a letter.  A voluntarily-submitted statement from the practitioner at the outset of the training period could also be used to this end, in conjunction with other forms of proof.  But the current situation, in which the ILPTO penalizes trainees for the failure of their employer-practitioners to comply with an extra-legal requirement, is unacceptable. 

If I were advising Frank, I would tell him to seek an audience with the new Commissioner to convince him that Frank has met the legal requirements to take the exams and to receive his license if he passes those exams.  The additional requirements imposed by the Commissioner’s predecessor are ultra vires and go well beyond what is necessary to ensure the integrity of the licensing process.  I suspect that if challenged in court, the additional requirements will be struck down on those grounds – and I suspect that the present Commissioner, who worked in both a general commercial law firm as well as an IP litigation boutique before becoming Commissioner, will be sensitive to that and therefore receptive to entreaties to make the ILPTO’s position more reasonable.

Then again, I personally think the whole licensing process is in need of repair – such as getting rid of an oral exam, which is a capricious way to test people.  But that’s for a different post.

**Strictly speaking, that statement isn’t correct: by law, anyone who is licensed as a lawyer may also practice patent cases before the ILPTO, notwithstanding their complete lack of technical training, but for the most part lawyers practicing patent cases before the ILPTO restrict their representation in patent cases to oppositions and cancellation actions, not substantive prosecution.  However, there is at least one rogue lawyer of which I’m aware who files incredibly poorly written patent applications at the ILPTO.  Even more incredibly, after several years of doing this he still has a law license.

The U.S.A. Doesn’t Have a Monopoly on Duplicity When It Comes to Patent Reform

A few hours ago the House of Representatives passed HR 1249.  HR 1249 is disingenuously called the “America Invents Act”; for reasons that have been explicated on other blogs, and may be discussed in more posts in the future here, a better name probably would have been the “America Invents A New Way To Stifle Innovation Act”.  If enacted, the bill will bring sweeping changes to the U.S. patent system, none of them good (except, possibly, the end of universal standing for false marking suits). 

For people who have been following US patent “reform” for a while, a curious aspect of what just passed in the House is that it bears little resemblance to the “reform” efforts of previous years.  That’s probably due to the fact that in the interim, the courts addressed many of the issues raised in earlier “reform” proposals.  For example, the issue of patent damages vexed companies like Microsoft, which were exposed to large damage awards for patents that covered miniscule aspects of their products.  Among other things, those companies sought legislation to require “damage apportionment”, i.e. to force courts to award damages only commensurate with the proportional contribution of the claimed invention to the infringing product.  But then the Federal Circuit, and several district court decisions authored by (now CAFC Chief) Judge Rader sitting by designation, reined in damage awards, in part by raising the quanta of proof required to prove damages.  So this year’s legislation contained no amendments regarding damages.  (See, e.g., IP Innovation LLC v. Red Hat, Inc. (E.D. Tex. 2010), ResQNet.com v Lansa, (Fed. Cir. 2010), Lucent Techs. Inc. v. Gateway, Inc., et al. (Fed. Cir. 2009), Cornell University v. Hewlett Packard (N.D. NY 2009)).

Instead, with the issue of damages out of the way, it appears that the established companies who most benefit from the House bill turned their attention to legislative amendments farther down their wish list, amendments that in the past they could only dream about getting.  Like prior user rights against patentees for companies that choose to keep their processes secret rather than disclose them in a patent.

In this respect, Israel unfortunately seems poised to emulate the USA.  As discussed in an earlier post, Israel is in the process of adopting legislation to facilitate 18-month publication of patent applications.  Plenty of jurisdictions do that, and you’d think it would be a straightforward amendment.  But the local generic drug industry looked at this as an opportunity to slip in some wish-list amendments.  Like making it impossible to broaden the claims of an application after it’s been filed.  The Justice Ministry, which authored the bill, relented on that point, but then considered an equivalent (and equally ridiculous) proposal to allow the broadening of claims but to also grant intervening rights to third parties that rely on things that were disclosed but unclaimed in the published patent application.  That proposal as well wasn’t adopted, and the draft bill in its present form – the one that will be presented to the Knesset for a first reading – will leave unchanged the provisions of the statute regarding amendments. 

Of course, that’s not the end of the story, and it’s certain that after passing the first reading, the generics will lobby the Knesset on the points where their lobbying efforts in the Justice Ministry failed.  One possible proposal: to enable a third party to request commencement of examination of someone else’s application. 

What you won’t see is a proposal to end to pre-grant oppositions, or to end the loser-pays systems in those oppositions (a topic which is going to be the subject of a post in the hopefully near future).

(A side note: one thing I’ve always found interesting is that the law firm that is home to Israeli generic drug industry’s key lobbyist still manages to prosecute patent applications for innovators like Genentech and AstraZeneca.  I wonder if they know that that firm is working against their interests.)

On the other hand, once the 18-month publication amendment passes the first reading and goes into committee for further consideration and revision, it is unclear when if ever it will see the light of day.  That’s because the committee chair is irked at the Justice Ministry over the issue of publication fees that he says should be refunded (the subject of a way-too-long-in-progress post), and has vowed not to let any patent-related legislation move forward until that money is refunded.

Good News: USPTO, ILPTO announce Bilateral Patent Prosecution Highway (PPH) Program

On June 20, the USPTO announced on its web site that it had agreed with the Israel PTO to undertake a pilot Patent Prosecution Highway (PPH) project, beginning July 1, 2011 and continuing until June 30, 2012.  Under the project, a patent applicant whose application was first filed in one of the two countries, and for which at least one claim has been found allowable, may request that the other office fast-track a corresponding application in the other country.  

As of this writing, the link posted on the USPTO’s site for more information on this project does not contain any country-specific information regarding the program with Israel.  However, the Israel PTO site does contain information in English (an explanation of how PPH works in Israel and a form to be filed when making the request), and although this writer wasn’t able to find comparable information in Hebrew from the Hebrew web site’s home page, the Hebrew PPH site is up (as noted in a press release in Hebrew that was sent out via the ILPTO’s email distribution list earlier today). 

Some noteworthy points about utilization of the PPH before the ILPTO:

First, according to the information on the ILPTO web site, the claims of the Israel application must be of a scope which is identical to or narrower than that of the claims allowed by the USPTO.  (This is the same requirement in place today under section 17(c) of the IL patent statute for acceptance of an application on the basis of allowance of a corresponding application in certain other countries.  Note that the English instructions use the word “similar” rather than the word “identical”, which appears in the Hebrew explanation; presumably the Hebrew is in this case more reflective of the ILPTO’s intention.)  Presumably, if one’s IL application doesn’t meet this requirement, an amendment may be filed concomitantly with the PPH request in order for the application to comply. 

Second, a fee will be required; this is in contrast to applications utilizing the PPH in the USA, where no fee is required.  And one may only request PPH status before examination of the Israel application has commenced.  It’s not clear if the pre-examination request for additional information that the ILPTO sends before beginning substantive examination counts in this regard; the sensible thing would be for it not to count.  Certain documentation will also need to be provided.

Thus, for applicants for whom Israel is the country of second filing, the present PPH program effectively amounts to a speeded-up version of the existing provisions under section 17(c) of the statute; the PPH merely provides an additional way to accelerate examination in Israel, beyond the currently accepted reasons for accelerating examination (e.g. potential infringement, imminent commercialization of the invention, etc.).  It therefore appears that applicants for whom the USA is the country of second filing (i.e. who file first in the ILPTO) get the better end of the deal: as has mentioned in a previous post, as of January 1, 2011, an applicant who first files in Israel can have his application examined in accelerated fashion without paying an extra fee, and obtain a substantive office action within three months.  Assuming allowance can be gained quickly in Israel, that applicant can use the quick allowance in Israel to obtain PPH status – at no extra cost – for a corresponding application in the much larger and more commercially significant U.S. market.

Although bilateral PPH is not as significant as PCT-PPH, it is a step in the right direction for the ILPTO, and new Commissioner Asa Kling and his staff are to be commended for completing this arrangement less than two months into his term.  If Israel succeeds in becoming a PCT search and examination authority, it would stand to reason that Israel will also conclude a PCT-PPH agreement with the USPTO, which would truly be a boon for Israel-based applicants.

The form used for requesting PPH in the ILPTO does raise at least one important question, however: it’s sufficient for PPH applicants to direct the ILPTO to the allowed claims on the USPTO’s public PAIR, instead of supplying a hard copy themselves.  That means the ILPTO staff is competent enough to make its way through public PAIR.  If that’s the case, why are patent applicants in Israel still required to provide copies of prior art patent publications that can be downloaded from various sites on the internet just as easily as allowed US claims can be downloaded by the ILPTO staff from PAIR? 

Never Argue With A Fool: On Claim Status Identifiers and AMBER Alerts

Anyone who’s ever dealt with the USPTO is well aware that there are often times when the person at the USPTO’s end is wrong, but the most efficient response is to capitulate rather than fight.  A classic example is the use of claim status identifiers when amending claims.  That practice is governed by 37 C.F.R. 1.121, which in parts (c) and (c)(3) states,

(c)Claims. Amendments to a claim must be made by rewriting the entire claim with all changes (e.g., additions and deletions) as indicated in this sub­section, except when the claim is being canceled. Each amendment document that includes a change to an existing claim, cancellation of an existing claim or addition of a new claim, must include a complete list­ing of all claims ever presented, including the text of all pending and withdrawn claims, in the application. The claim listing, including the text of the claims, in the amendment document will serve to replace all prior versions of the claims, in the application. In the claim listing, the status of every claim must be indi­cated after its claim number by using one of the fol­lowing identifiers in a parenthetical expression: (Original), (Currently amended), (Canceled), (With­drawn), (Previously presented), (New), and (Not entered).

(3)When claim text in clean version is required. The text of all pending claims not being cur­rently amended shall be presented in the claim listing in clean version, i.e., without any markings in the pre­sentation of text. The presentation of a clean version of any claim having the status of “original,” “with­drawn” or “previously presented” will constitute an assertion that it has not been changed relative to the immediate prior version, except to omit markings that may have been present in the immediate prior version of the claims of the status of “withdrawn” or “previ­ously presented.” Any claim added by amendment must be indicated with the status of “new” and pre­sented in clean version, i.e., without any underlining.

Note that there are seven status identifiers that are allowed; when you file your set of amended claims, you have to identify each and every claim with one (and only one) of those identifiers. 

Now here’s a quiz for readers who have never made an amendment at the USPTO: according to Rule 1.121, if in your amendment, some of the originally-filed claims are retained in their original form, what status identifier do those claims get – “original” or “previously presented”?  To put it differently, “original” can presumably always be used for a claim that has never been amended at any stage of prosecution.  But what about “previously presented”?  If you’re filing an amended set of claims, then an originally-filed, unamended claim was certainly previously presented.  So can you identify such a claim as “previously presented” as well?

That the question even arises evinces the fact that rule 1.121 is not absolutely clear on its face.  Of course, if one wishes to engage in some parshanut, one could reason that since “original” is already an option, and that option cannot possibly apply to a claim that has been amended at any point, or canceled, or is presently withdrawn, or is new, or has never been entered – that is, the only instance in which “original” can be used is for an originally-filed, never-canceled, never-amended claim – then “previously presented” must of necessity signify something other than an originally-filed, never-canceled, never-amended claim.

That’s the USPTO’s view.  Specifically, the USPTO says that “previously presented” is to be used only for a claim that was (a) either added or amended in a previously-filed amendment, but (b) in comparison to the most recently filed version of that claim, is not being amended in the present amendment.  To illustrate, if in my last response to the USPTO, I filed an amendment in which I amended claim 2 and added new claim 4, if I’m now filing a response in which some claim is being amended but claims 2 and 4 remain as I filed them in my previous response, then the status identifier for both claims 2 and 4 is “previously presented”.  

Ironically, although this is the USPTO’s position, you wouldn’t necessarily know it from reading the MPEP, which is supposed to set forth the USPTO’s interpretation of the relevant statutes and rules and their application to the daily function of the patent examination corps.  Section 714 of the MPEP includes the statement that “If applicant files a subsequent amendment, applicant must use the status identifier (previously presented) if the claims are not being amended, or (currently amended) if the claims are being amended, in the subsequent amendment.”  Here, the MPEP’s parshanut itself needs parshanut: by saying that if an “applicant files a subsequent amendment” in the beginning (reisha) of the sentence, the MPEP implies that it is the previously amended or added claims that are referred to in the end (seifa) of the sentence that require the status identifier “previously presented” or “currently amended”.

In any event, if one inadvertently uses “previously presented” when the USPTO expects “original” (or in some other way mis-identifies a claim), the examiner will send the applicant a notice that the amendment has not been entered for that reason, and the applicant can make the trivial change from “previously presented” to “original” and refile the amendment. 

If before reading this post you weren’t acquainted with the USPTO’s rules governing status identifiers in amended claims, and now that you’re familiar with them, you think this whole business is anally retentive, you’re not alone.  But the rules are the rules, and for those of us who do this regularly, it’s just become a part of life.  What is perhaps surprising, given the hundreds of thousands of applications examined by the USPTO every year and the poor wording of Rule 1.121 and MPEP 714, is that since the early 2000’s when the status identifier rules were implemented, no one has challenged the USPTO on the implementation of this rule. 

That is, until now. 

Last week USPTO Director Kappos was sued in the Federal District Court for Eastern Virginia over the interpretation of Rule 1.121 by Catalina Marketing International, Inc., which identifies itself in the complaint as the assignee of all rights in USSN 11/153,377.  (The USPTO’s assignment database seems to indicate that Catalina Marketing International, Inc. subsequently assigned its rights to Catalina Marketing Corporation, but let’s assume for now that the correct plaintiff filed the suit.)  The application was filed on June 16, 2005, published on December 21, 2006 as 20060287872, and received a first Office Action rejection on April 18, 2008.  On July 17, 2008, the applicant responded, and included a set of amended claims in which some originally-filed, unamended claims were identified as “previously presented”.  On November 3, 2008, the Examiner mailed a Notice of Non-Compliant Amendment, citing the improper status identifiers.  On November 25, 2008, the applicant filed a revised amendment, in which the relevant status identifiers were changed to “original”.

Now, you’d think that was the end of the story, but it wasn’t.  Beginning in December 2008, the applicant filed a series of petitions to have the Notice of Non-Compliant Amendment expunged, and to have the amendment of July 17, 2008 instated the record, so as not to detrimentally affect patent term adjustment (PTA), should the application be entitled to such at the end of the day.  (If the USPTO drags its feet in examination, the applicant is entitled to PTA to compensate, but each day of PTA to which an applicant is entitled is offset by each day of delay due to the applicant itself.  Hence the filing of a response that is deemed non-compliant can result in the loss of PTA to which a patentee would otherwise be entitled.  See 35. U.S.C. §154 if you’re really interested…or have insomnia.)

Obviously, none of the petitions were accepted, which is why the assignee filed suit.  What’s striking, though, is the assignee’s assumption that the lost time – a few months at most – is worth the time, money and effort to fight.  If this were a patent application for a molecule that’s sure to be the basis for a multi-billion-dollar-per-year blockbuster drug, I could understand the concern about PTA.  But it’s not clear that this patent will be in the billions-(or even millions)-per-year category.  That’s because the title of this application is “AMBER alert system and method for locating missing children”. 

If you don’t know what an AMBER alert is, you can read more here and here, but briefly, as explained in the specification, “AMBER is an acronym for America's Missing: Broadcast Emergency Response”, and an “An AMBER alert is a notification containing a description of an abducted child, and optional additional information, such as suspected abductor of the child, that is broadcast” using an emergency alert system (EAS).  Basically, the idea is to quickly get the word out, via mass media (radio, TV, and these days Twitter and the like), that a child has been abducted.  The patent application is directed to getting the information to retail outlets, so that information about the abducted child can be printed on the customer’s receipt (in the same way the register may print coupons for a future purchase on the back of the receipt).

Now let’s suppose that a patent in this case issues (and that’s by no means a given).  Who exactly would the assignee sue for infringement?  The local government?  Last I heard, many towns in America were strapped for cash.  The state government?  Not possible, there’s a little thing called the 11th amendment that says you can’t sue states in federal court.  The federal government?  Maybe, but if Catalina wants to take on the Feds in this matter, it’s not clear how it could publicize or advertise its services: the U.S. Department of Justice owns the word mark for AMBER ALERT in many classes and covering many goods and services, including publications, brochures, booklets and teaching materials. 

Even if the state, local or federal governments were good targets, does the assignee of this application really want to go to a jury?  What would he plead – “I’m just an honest citizen who wants to make a buck in the abducted-child recovery business”?  Yeah, that’ll go over big.  I suppose the assignee could go after the retailers, or some of the other private-sector partners in the AMBER alert program, but in that case there would be an easy solution to avoid patent infringement: just stop printing the AMBER alerts on the store receipts.  Not exactly the socially optimal result.  

Moreover, you have to wonder about Catalina’s chances in this suit.  It was, after all, the USPTO that wrote Rule 1.121.  Under the Supreme Court’s holding in Chevron v Natural Resources Defense Council, U.S. government agencies are given deference over the interpretation of the rules that they themselves promulgated.  So while Rule 1.121 may not be the best-written rule around, and a little statutory construction may be necessary to fathom its depths, the USPTO’s position is certainly a plausible one.  Given that this rule is procedural, it's hard to see the USPTO losing under Chevron.

Al tikra Catalina, ela Sisyphus?

Smokey says, Only YOU can prevent passage of patent perversion

With the debacle that’s being touted by its proponents as “patent reform” being set for a vote this week in the House, I thought I’d share with readers a letter that I sent today to various parties in the USA, urging them to contact their congressional representatives to vote no on this monstrosity.  The version shown below was sent to people in Michigan, my last port of call before moving to Israel.  The 19-word statement at the end is courtesy David Boundy from his post this morning on PatentDocs.  I will be calling the office of my U.S. representative (Congressman Dingell) later today to tell him to vote against the bill; if you can vote in the U.S.A., you should do likewise with your representative.  

 

On Wednesday of this week (June 22), the House is set to vote on HR 1249, the deceptively titled “America Invents Act”.  If enacted, the bill will effect numerous amendments in the patent statute; at this stage, none of them are good, and most are bad.  I write now to briefly share two reasons why it is imperative that people who care about the economies of Michigan and Israel call, fax or email their representatives and urge them to vote against the bill, should it reach floor.  The bill is bad for inventors and start-ups, which is bad news for the economies of both Michigan and Israel.  (For readers who want to know more about specifics of the bill, I strongly recommend the posts on this topic at www.patentdocs.org, a blog that has been tracking this legislation.)

Chief among the reasons to vote against HR 1249 is that it will destroy what patentees refer to as “the grace period”.  Outside the USA, if an inventor publishes a description of his invention before filing a patent application, he can no longer get a patent on the invention.  If you’re a start-up company, that’s bad news: without publicizing the invention and disclosing it to others, it’s difficult to get funding; but without that funding, it’s impossible to further develop the invention.  Catch-22.  In contrast, under current U.S. law, an inventor can publish his idea, and still have a year to file a patent application without his own disclosure counting against him. The one-year grace period is unique to U.S. law, but it’s not merely reflective of the traditional American emphasis on entrepreneurship.  It’s an approach to the patent process that closely aligns with the realities of the development process, unlike the “you disclosed, you lose” approach taken in other countries, which favors established interests over start-ups. 

But it’s not just U.S. companies that take advantage of the inventor-friendly grace period.  Israeli companies routinely take advantage of it too.  That’s because, unsurprisingly, Israeli companies tend to be more focused on the U.S. market than the Israeli market, and if they can’t get a foothold in the USA, they’re not going anywhere.

HR 1249 will do away with the grace period, which is reason enough to vote against the bill.

Another main reason to vote against HR 1249 is that it no longer contains what was its best part, namely that it would have ended a practice known as “fee diversion”.  Instead, HR 1249 will allow fee diversion to continue apace.  Fee diversion is the practice of Congress taking monies collected by the U.S. Patent & Trademark Office (USPTO) from the parties that use its services – the applicants for and owners of patents and trademarks – and diverting those funds to other government projects.  With the exception of a few years under the second President Bush, during which the USPTO was allowed to keep all its fees, this practice has persisted for many years.  The problem is that the USPTO’s operating budget is funded entirely by those users fees.  By taking funds from the USPTO, fee diversion effectively acts as both a direct tax on innovation (by charging patent applicants to fund non-patent related government activities) as well as an indirect tax, since it means the USPTO cannot work as efficiently as possible, as it doesn’t get to keep all the funds it should. 

Chronic fee diversion has had deleterious results for the USPTO’s operations.  Among other things, fee diversion resulted in the USPTO’s computer infrastructure becoming antiquated, making it difficult for the USPTO to efficiently examine patent applications.   Moreover, this has occurred as the overall number of patent applications filed at the USPTO has risen dramatically; the USPTO is still hopelessly backlogged in its examination of patent applications.  One consequence of what was effectively fee diversion this year alone (due to the budgetary stalemate in Congress) was that the USPTO will face a $100 million shortfall in its budget; on April 22 USPTO Director David Kappos announced ways in which it would respond to the shortfall, including a hiring freeze, a freeze on the plans to open a satellite patent office in Michigan, and a slowdown in the provision of certain other services. 

Until last week, HR 1249 included provisions to allow the USPTO to not only keep all of its fees, but to set them too, a set of conditions that presumably would have enabled the USPTO to optimize its fees so as to optimize the services it provides.  Unfortunately, some members of the House Appropriations Committee felt that they should continue to have the prerogative to raid the USPTO for their own pet projects.  As a result, HR 1249 contains language that will only allow the USPTO to use up to a certain portion of the monies it collects every year; the rest will be set aside in a fund that will be controlled by the House.  That’s fee diversion, just dressed differently. 

The continuation of fee diversion means that the USPTO will continue to be backlogged, and take longer than it should to issue patents.  That’s bad news for everyone, but especially for small companies looking for funding, since in many cases later-stage investment won’t be forthcoming until after a patent has been granted.  Lengthy delays in patent examination at the USPTO thus means that many young companies won’t be able to survive long enough to develop a commercial product; that translates into loss of potential jobs and tax revenue. 

If you care about your local economy and about Israel’s, please contact your representative today or tomorrow and urge him or her to vote no on HR 1249.  You can find your representative’s phone number at  http://www.house.gov/representatives/; please call today or tomorrow and say, “Please vote no on the rule for the patent bill, H.R. 1249, and vote no on final passage.”  (Voting “no on the rule” means  not allowing the bill to come to the floor for a vote.) 

Daniel Feigelson

Daniel Feigelson is a U.S. and Israel patent attorney who grew up in Ann Arbor and has lived for nearly 20 years in Rehovot, Israel.

[NOTE: after posting, Canadian patent practitioner Ian Goodman reminded me that the USA is not unique in having a grace period: Canada is one of a handful of other countries that also have some form of a grace period.  Nevertheless, it is a rarity, and it one of the great strengths of the US patent system.]

Jumping the Gun in Texas – It’s not Just for Patent Trolls Anymore

Fans of patent blogs will recall the now-defunct Troll Tracker blog.  That blog, which was written anonymously, unmasked the various shell corporations behind which the ownership of many asserted patents was hidden.  Along the way, the blog attracted the attention – and scorn – of several attorneys who represented those non-practicing owners.  One of those attorneys offered a bounty for revealing the identity of the Troll Tracker, and eventually, when threatened with being outed, the author revealed himself: he was Rick Frenkel, who at the time worked for Cisco. 

This in turn led to the filing of a lawsuit against Mr. Frenkel by two irate lawyers from the Eastern District of Texas.  They had filed a patent infringement suit that was stamped by the court as being received a day before the patent issued; the date stamp was then later changed to the following date, without the court records indicating that the change had been made, let alone why. In his blog Mr. Frenkel was none-too-sympathetic in his characterization of the lawyers’ behavior, leading to the filing of the suit against him.  I won’t go into the rest of the details; interested readers can Google the story or read this paper by Jake Ward of the Anticipate This! blog that tells the tale.  (The case against Mr. Frenkel ultimately settled; under the terms of the settlement he’s not allowed to discuss it.)

Turns out that patent trolls (or non-practicing entities, or whatever you want to call them) aren’t the only ones who jump the gun in trigger-happy Texas (where, I’m told, but haven’t confirmed, it’s legal to carry open liquor, firearms and ammunition in the cab of one’s pick-up truck).  According to court records, yesterday (June 6) Hydro-Quebec – hardly a patent troll – filed suit in the Northern District of Texas (Civil Action No. 3:11-cv-01216-B , the Hon. Jane J Boyle presiding), asserting a patent relating to the very non-troll-like subject of materials for lithium batteries (US 7,955,733) that only issued today (June 7).  Apparently someone realized what had happened, but, learning from the mistakes of their brethren in the bar in EDTX, had the good sense to re-file the same complaint shortly after midnight today (Civil Action No. 3:11-cv-01217-K , the Hon. Ed Kinkeade presiding), rather than contact the court clerk and have that person change the filing date.  A notice of related case has already been filed and presumably the plaintiff will move to dismiss the earlier-filed case without prejudice.

(Hat tip to PriorSmart for reporting both filings.)