Kappos’ Early Days At USPTO: Many Changes, Few Funds

Reform of the United States patent system, better patent quality and greater international cooperation among patent offices are just a few of the jobs new United States Patent and Trademark Office chief David Kappos has on his plate.

Kappos, who won confirmation in August from the US Senate as Undersecretary of Commerce for Intellectual Property and Director of the USPTO, has already taken several major, patent community-pleasing steps away from Bush Administration policies.

He quickly rescinded the unpopular “Tafas” rules limiting the number of continuation requests and claims patent seekers can submit without incurring additional expense and paperwork (IPW, Patent Policy, 5 December 2008). He is revamping the agency’s “count system” – which guides patent examiners’ work and compensation – to give them more time to do a more careful job and reduce the number of pending applications, he said in a 15 October speech to the American Intellectual Property Law Association (AIPLA). Kappos also expanded the “first action interview pilot programme” to improve communications between examiners and patent seekers.

The USPTO also has begun “an ambitious set of projects” on the trademark side, Kappos said. Although it, unlike the patents section, functions well and is adequately funded, its information technology system needs to be updated, he said. The agency wants input from trademark practitioners on possible new functions to be added to the system, he said.

Kappos has also added a new Deputy Director and Commissioner of Patents, and this week, Duke University professor Arti Rai started as USPTO Administrator for External Affairs with responsibility for congressional and international affairs. Under Kappos’ watch, he said, the USPTO is about “action taken in concert with the needs of the IP community as a whole.”

Breaking the Patent Reform Logjam?

Commerce Secretary Gary Locke outlined the Obama Administration’s position on patent reform in a 5 October letter [pdf] to the chairman and ranking member of the Senate Judiciary Committee. Among other things, it wants the USPTO to have the authority to set its own fees and enact substantive administrative regulations. It also “broadly supported” the Senate compromise version of patent reform legislation, Foley & Lardner LLP Of Counsel Philip Kiko wrote in a “legal alert.”

The letter “may revitalise efforts to pass legislation during this session of Congress,” Kiko said.

Substantive rulemaking authority is not “a dangerous thing” because other US government agencies have it and it would be overseen by Congress, the Patent Public Advisory Committee and other bodies, Kappos said during a 13 October Web interview.

Moreover, the current situation, in which fees are determined by Congress, is not sustainable because subsidies are “always risky” and sometimes lead to business instability in times of economic hardship, he said. Kappos, who comes to the USPTO from a business background including large US patent filer IBM, said his intention is not to penalise the patent community but to charge applicants the cost of handling their applications. The legislative fee-setting cycle is too long and cannot adapt to changes in market dynamics and applicant behaviour, he said.

The Commerce Department also asked Congress for a “limited interim fee adjustment.” The USPTO has a $200 million budget shortfall for fiscal year 2010 (which began on 1 October), Kappos said. There are many things Congress can do to relieve the problem, and the quicker the funding becomes available, the faster the office can get back on track, he said in the Web interview.

Meanwhile, Kappos has frozen hiring, limited overtime work, and is doing the minimum amount necessary on the Patent Cooperation Treaty. And tackling the backlog of 750,000 applications and installation of new information technology infrastructure is on hold, he said.

Patent reform is Kappos’s top priority. “No one is getting everything they want” in the legislation moving through Congress, but they will all get something, he said. The measure may be a compromise but it is a major step forward on changing the patent system, he said. He urged AIPLA members to support reform.

Capitol Hill talks on patent reform have “intensified recently,” according to the Intellectual Property Owners Association. The administration’s letter of support for patent reform “reinforces the urgent need to enact this legislation,” Senate Judiciary Committee Chairman Patrick Leahy (Vermont Democrat) said in early October. He said he will work to bring the bill up for debate before year’s end.

Patent reform still faces stumbling blocks, however. In a 15 October letter to Senate leaders, 12 Republican senators said the bill “needs additional work before it is brought to the floor.” Among their concerns were “new and expanded mechanisms” for post-grant patent reviews.

Tafas Move “Welcome but No Surprise”

The USPTO rescinded the Tafas rules on 8 October. From now on, Kappos said, it will work with stakeholders to boost efficiency and address the evolving needs of applicants by putting in place rules that make sense.

The announcement “will be welcomed by most of the patent community, but does not come as a surprise,” said Foley & Lardner attorney Courtenay Brinckerhoff. Patent lawyers had been hoping for the move since Kappos was confirmed, she said. It is a “great result for inventors and the US patent system,” said DLA Piper Partner Timothy Lohse, who praised Kappos for engaging with the applicant community on ways to make the office more efficient.

The Biotechnology Industry Organization applauded the demise of the “controversial and harmful” rules. The AIPLA called the rescission a “significant step … towards rebuilding the relationship between the USPTO and the user community.”

Cruising the Patent Prosecution Highway

International patent filings have increased dramatically in recent years, Kappos said. The USPTO usually winds up being the first examining authority for many jurisdictions but lacks the resources to be the world’s lead examiner, he said. That’s where work-share programmes such as the Patent Cooperation Treaty (PCT) – administered by the World Intellectual Property Organization – and Patent Prosecution Highway (PPH) come in, he said.

Kappos has named a task force to improve the agency’s PCT processes, but he is especially focussed on the PPH. Statistics show it works, he said. For applicants who use the PPH, the odds of getting a first-action allowance are nearly double, and the chances of winning a patent in the first round, without resort to continuations, are also higher, he said. The PPH cuts the time for completing patent reviews and increases harmonisation among the various national offices, he said.

The USPTO will invest more in the PPH and try to scale it up via a standard format for use in bilateral treaties, he said. In countries where the agency already has work-share agreements, it will seek input on how patent offices can take the lead in the cross-use of work so the entire onus does not rest on patent-seekers, he said.

“Kappos has started out strong,” said a lobbyist involved in patent reform since 2005. He has a “laundry list” of useful changes he wants to make at the USPTO but needs resources, the lobbyist said.

Kappos and others see patent reform as a “vehicle for a new surcharge on patent owners” that can bring more money into the agency, he said. But, the lobbyist added, if the bill does not pass soon, the new chief will likely have to delay his initiatives or pare them back.