Editors Note: Jose Cortina is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A.Significant proposed changes to the United States Patent laws were discussed in a panel presentation at the October 2004 annual meeting of the American Intellectual Property Law Association (AIPLA) in Washington, D.C. The AIPLA is the leading professional association of Intellectual Property Lawyers which advises, lobbies and comments on issues of concern to the profession.

The topics discussed included a Federal Trade Commission (FTC) Report dated October 2003 entitled “To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy”; a National Research Council (NAS) Report dated 2004 entitled “A Patent System for the 21st Century”; and the AIPLA response to the October 2003 Federal Trade Commission Report.

The FTC Report

The premise of the FTC report is that competition among businesses and the protection given to individual businesses by patents must work together in the proper balance. The FTC recognizes that both competition and patent law promote innovation and benefit the public. However, as a result of hearings conducted by the FTC and the Department of Justice (DOJ), the FTC issued a report which appears in some aspects to advocate the weakening of patents in order to increase competition.

One underlying theme behind the recommendations in the report is a general perception, based on testimony at the FTC hearings, that poor quality or otherwise questionable patents are being issued and that such patents deter or raise the cost of innovation. In an effort to address the issue of questionable patents, the FTC first focused on procedures and presumptions used in challenging such patents.

The Recommendations

In its recommendations, the FTC (also citing to recommendations made by the United States Patent and Trademark Office (USPTO)) proposed enactment of legislation to create a procedure for post-grant review of and opposition to patents. While the FTC recognizes that current administrative procedures before the U.S. Patent and Trademark Office exist to challenge patents, it argued that such procedures are inadequate and suggested that a more substantive review presided over by an administrative patent judge, and allowing cross-examination and carefully controlled discovery should be established.

In addition, the legislation should provide for the appellate court to grant deference to USPTO’s conclusions of law. This would make challenging patents an easier task.

In addition to changes in procedures before the USPTO, the FTC also recommends that challenges to the validity of a patent should be based on a “preponderance of the evidence” standard, as contrasted to the current “clear and convincing evidence” standard. This would also make challenging patents an easier task. In addition, the FTC recommended that certain legal standards used to evaluate whether a patent is “obvious” should be tightened.

However, in discussing such a proposal, the FTC improperly identified as major “tests” what are currently viewed as secondary considerations in evaluating the obviousness of an invention. Judge Rader of the Court of Appeals for the Federal Circuit (CAFC), who was on the panel, quickly pointed out the apparent error and maintained that the test of obviousness would remain the same under the FTC proposal, and this led to a somewhat heated discussion among panel members.

The National Research Council Report

The National Research Council, which was also represented on the panel, proposed a number of other changes to U.S. patent laws. The National Research Council report, like the FTC report, supports a post-grant open review procedure for patents and changing the obviousness standard. Most significantly, the report urged the shielding of research uses of patented inventions from infringement liability.

The National Research Council report cites a 2002 Federal Circuit ruling that even non-commercial scientific research conducted in a university enjoys no protection from patent infringement liability. In light of the degree to which the academic research community has proceeded with its work in the belief that such an exception exists, the report urges that there should be limited protection for some research uses of patented inventions. The Council acknowledged that, while Congress should consider appropriate legislation, reaching agreement on the specifics of the legislation would take significant time.

The AIPLA Response

The AIPLA agreed in part with the FTC report and recommended that legislation be enacted to create new administrative procedures to create post-grant review and opposition to patents. In so doing, however, the AIPLA expressed concerns regarding the extent of discovery that should be allowed since it would affect the length of the proceeding and its cost. On the other hand, the AIPLA opposed the FTC proposal to reduce the burden of proof on facts leading to validity, arguing that the change was unnecessary and could lead to problems. In stating its reasons, the AIPLA indicated that such a change would undermine decades of well-reasoned precedent and that the proper solution is clarification by judicial interpretation, since the perceived problem is only the result of lack of precision in many decisions.

Not Everyone Agrees

Judge Rader of the CAFC questioned a number of the recommendations and conclusions reached in the report. For instance, in addressing the issue of “questionable patents,” Judge Rader pointed out that the decisions being handed down by the Federal Circuit simply did not support the proposition that the USPTO was issuing a large number of patents of questionable value. Members of the audience also questioned creation of a research use exception tailored to universities, and properly pointed out that the role of universities today is to conduct research for the purpose of making money.

Changes Coming

While there appeared to be no consensus reached on the recommendations presented, it is clear that members of the patent bar and the federal government believe the time is right for legislative changes to U.S. patent law, and that it may be possible to pass changes through Congress without undue delay. It is clear from the panel discussion that there is consensus with respect to establishing a post-grant opposition or cancellation proceeding in the USPTO. It is less certain whether other changes proposed can be enacted given the disparate points of views presented.

A. José Cortina is a registered patent attorney with the law firm of Daniels, Daniels & Verdonik. He focuses his practice on the intellectual property needs of small to large technology companies, including providing patent, trademark, copyright, counseling, licensing, conflict resolution and transactional services. He is experienced in a broad range of technologies, including electronics, communications, computer hardware and software, biomedical, materials, and selected chemical and chemical engineering technologies.