Lack Of USPTO Funds Risks AIA's Promise, Experts Say

Fordham Law School's IP Summit in Law360, November 18, 2013

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Two years after the America Invents Act was passed, its goal of providing a streamlined and cost-effective alternative to patent litigation is being undermined by the failure of Congress to provide the patent office and the courts with enough funding, experts said at a conference Monday.

While the 2011 patent reform bill created useful new proceedings that let accused infringers challenge the validity of questionable patents, it did little to ensure that bad patents are never issued in the first place, Suzanne Michel, chief patent counsel for Google Inc., said at Fordham Law School's IP Summit.

The U.S. Patent and Trademark Office would be better served by being given the resources to hire significantly more examiners to review patents and ensure that applicants are not able to get patents on basic concepts that are not eligible for a patent, she said.

"It's not economically rational to put low resources into examination and just let patents issue, then require companies that are sued for infringement to clean it up," Michel said. "It would be much better to put more money into examination and get higher-quality patents up front."

New post-grant review proceedings in the AIA to allow for the review of issued patents don't do enough when companies face large volumes of litigation, she said, and another provision that allows the public to submit prior art during examination is not feasible when patent office gets hundreds of thousands of applications a year.

According to former Federal Circuit Chief Judge Paul Michel, the USPTO needs thousands more examiners and hundreds of patent judges to conduct the new review proceedings in order to improve patent quality, but its funding situation "is going in exactly the wrong direction."

"The AIA hasn't provided the results it promised in every case because Congress hasn't provided the resources," said Judge Michel, who is not related to Suzanne Michel, although she once served as his law clerk.

It's "crazy" that Congress isn't doing more to bolster USPTO funding and is in fact taking away resources from the office, he said, noting that the office has been forced to cut its budget by tens of millions due to the across-the-board budget cuts known as sequestration.

"There has been a substantial destruction of the promise of the AIA because of sequestration," Judge Michel said.

In addition to the USPTO's limited resources, it has also set high filing fees to challenge all the patents in inter partes review and the other new AIA procedures, so when a company is sued over multiple patents, seeking reviews can be cost-prohibitive, Wayne Stacy of Cooley LLP said.

Challenging dozens of claims in multiple patents can cost more than half a million dollars, contrary to the AIA's claim that it would provide a low-cost alternative to litigation, he said.

"Inter partes review is fine for a one-patent suit, but it's not having any effect on multiple-patent suits; in fact, it's driving costs up," Stacy said.

The failure of Congress and the Obama administration to nominate and confirm enough federal judges and fund the court system is also having a negative impact on the ability to adjudicate patent disputes, speakers at the conference said.

Judge K. Michael Moore of the Southern District of Florida noted that his court, a popular venue for patent litigation, currently has three vacant judgeships with another expected soon.

"If we're missing four judges out of 18 judges, we can handle it for a month or a few months, but eventually it catches up," he said. "It's critically important to get district court seats filled."

Judge Michel praised a pilot program aimed at steering patent cases to judges that are interested and experienced in handling them, but noted that when it was originally proposed in Congress, it included funding for an additional law clerk to help the judges handle the complex technical cases.

That provision was stripped out of the final version of the bill, further evidence of the "duplicity" of Congress in creating new mandates for the USPTO and the courts and then not funding them, Judge Michel said.

A further problem with AIA has not surfaced yet, but will soon, he said. The new challenges to patent validity under the AIA, which became available last year, can be appealed to the Federal Circuit, which will soon be facing an influx of new appeals without any commensurate new resources, he said.

"The inevitable impact will be to create huge delays in disposition at the Federal Circuit," he said. "Congress didn't plan very well for the impact of these new proceedings."