IP Law Daily House Judiciary Committee queries USPTO Director on post-grant reviews, patent eligibility standards
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Tuesday, May 22, 2018

House Judiciary Committee queries USPTO Director on post-grant reviews, patent eligibility standards

By Thomas Long, J.D.

At an oversight hearing before the House Judiciary Committee this morning, USPTO Director Andre Iancu emphasized the agency’s role in fostering innovation and economic growth, focusing in particular on its efforts to increase the efficiency and clarity of post-grant patent review proceedings and examination standards regarding subject-matter eligibility in the wake of recent Supreme Court decisions. Director Iancu toldthe committee that the USPTO is attempting to increase the predictability and consistency of Patent Trial and Appeal Board review proceedings by changing the claim construction standard to match the standard used in district court litigation, as well as looking into possible changes in trial procedures and processes for making amendments to patent claims that are under review. Director Iancu also made statements and addressed questions about the impending expiration of the USPTO’s fee-setting authority in September of this year, along with continuing efforts to curb the diversion of "excess" fees to other administrative agencies.

Chairman’s opening statement. In his opening statement, Committee Chairman Bob Goodlatte (R-Va) stressed America’s role as a leader in technological innovation and recognized the historical role of a strong patent system in this regard. Noting that Congress passed the America Invents Act (AIA) in 2011 to address the problem of litigation abuse and "patent trolling," Rep. Goodlatte stated that the Judiciary Committee’s efforts to deter patent trolling have been a "resounding success," thanks largely to the AIA’s creation of a post-grant inter partes review (IPR) process in the USPTO. "The combined effects of our efforts along with several important court decisions have deprived patent trolls of many of the weapons they use to extort payments from innocent companies," Rep. Goodlatte said. "In recent years, abusive patent litigation has decreased substantially, as has the cost of defending a patent claim."

However, Rep. Goodlatte added, some stakeholders have argued that patent reforms have gone too far and have created uncertainty as to the validity of patents that small businesses rely on to secure funding needed for growth. In particular, critics have pointed to IPR proceedings as contributing to this perception of uncertainty.

Post-grant review proceedings. Rep. Goodlatte asked Director Iancu to speak to the question of whether the USPTO is implementing AIA post-grant review proceedings as Congress intended, to address patent litigation abuse in a manner that is fair to all interested parties. The Director pointed out that the USPTO earlier this month issued a proposal to replace the broadest reasonable interpretation (BRI) claim construction standard used in the PTAB’s trial proceedings in favor of the ordinary and customary meaning standard currently applied in district court and U.S. International Trade Commission proceedings. According to Director Iancu, this proposed change would increase predictability and consistency in the results of post-grant reviews, while also increasing judicial efficiency. The Director also stated that the agency is looking at proposing additional rule changes to make it easier for patent owners to amend patent claims that are under PTAB review, as well as possible changes to the trial process itself, such as allowing for increased hearing length and additional witness testimony.

Representative Zoe Lofgren (D-Calif) expressed concern with respect to the USPTO’s proposed rulemaking on claim construction, stating that changing the PTAB’s standard to the district court standard seemed to circumvent Congress’s prerogative on this issue, which had been expressed in the AIA and its emphasis on ensuring patent quality at the administrative level. Noting that the Supreme Court had found the BRI standard to be constitutional, Rep. Lofgren said she did not find the supposed reasons for a change to be compelling, pointing out that a study has showed that 83% of claim challenges result in the reviewed patent being unchanged, indicating that the post-grant review process was hardly a "death knell" for patents. Representative Lofgren also stated that she was concerned that changing the claim amendment process would constitute an attempt to thwart the intent of Congress in passing the AIA. Director Iancu responded by saying that after five years’ experience with post-grant review, the agency has found that more than 80% of challenged patents are also involved in parallel civil court litigation. The Director explained that the USPTO’s purpose in proposing the claim construction standard change is to create consistency between the Office and courts regarding claim construction, as well as to reduce gamesmanship by parties making challenges to patents in multiple forums. In the Director’s view, bringing the PTAB’s claim construction standard in line with the district courts would enhance the Congressional intent behind the AIA to provide an alternative to district court litigation because aligning the standards would reduce potential discrepancies and enhance the PTAB forum as a true alternative to litigation. Director Iancu argued that to have a predictable patent system, the meaning of a patent and its boundaries should not depend on the forum that the patent is challenged in.

Representative Darrell Issa (R-Calif) also expressed concerns about the proposed change to the claim construction standard. In Rep. Issa’s view, the PTAB’s role was analogous to that of the USPTO’s examiner in assessing claim validity, so the PTAB should examine claims in a similar way to examiners, rather than district court judges. Director Iancu was dubious about this analogy, stating that a PTAB proceeding differed from an initial examination because the entire record evidentiary record regarding validity was available, including expert witness reports, making it akin to a district court proceeding.

Subject-matter eligibility. Director Iancu also fielded several questions related to Section 101 subject-matter eligibility in the wake of the Supreme Court’s Alice decision. In response to a question by Chairman Goodlatte as to the status of the law in this area, Director Iancu stated that there was some confusion in the industry about what is an "abstract idea," as well as what it means to be "directed to" an abstract idea, and what is "conventional," for purposes of determining whether a claim contains a patent-eligible inventive concept. According to the Director, the USPTO can try to provide better guidance for examiners and applicants. In this connection, Director Iancu noted that the Office issued guidance to examiners in April, incorporating the Federal Circuit’s decision in Berkheimer v. Hewlett-Packard Co., (December 12, 2016). In that case, the court held that the determination of whether something was "conventional" to a skilled artisan was a factual determination. The guidance memorandum—titled "Changes in Examination Procedure Pertaining to Subject Matter Eligibility, Recent Subject Matter Eligibility Decision (Berkheimer v. HP, Inc.)"—clarified that "an examiner should conclude that an element (or combination of elements) represents well-understood, routine, conventional activity only when the examiner can readily conclude that the element(s) is widely prevalent or in common use in the relevant industry." The USPTO is looking at issuing additional guidance on other aspects of the Section 101 analysis, Director Iancu said.

When asked by Rep. Doug Collins (R-Ga) for further clarification about the USPTO’s efforts to clarify the legal significance of Alice, and whether the USPTO might be exceeding its authority, Director Iancu explained that the USPTO intended to work within Supreme Court jurisdiction to provide forward-looking guidance to help examiners and the public understand the law. Noting that Section 101 has not been amended since 1952 and retained much of the language written by Thomas Jefferson in the 1790s, the Director said he would be happy to work with the committee on tackling the revision of Section 101, but in the meantime the agency must attempt to help stakeholders understand the USPTO’s position on the meaning of the statute.

USPTO fee-setting and retention. Chairman Goodlatte also raised the issue of efforts to curb "fee diversion" from the USPTO, noting that currently the agency retains application fees and other fees that exceed its operating expenses, to roll over for later expenditures, although at times in the past these excess fees have been diverted to other administrative agencies. Chairman Goodlatte asked Director Iancu to provide his views on the potential for excess fees to be diverted to the Commerce Department for international IP enforcement efforts or for other initiatives. Director Iancu stated that, in his view, the system was working as intended but that it was critically important for the USPTO to retain its fee-setting authority. Absent Congressional action, the USPTO’s fee-setting authority under Section 10 of the AIA will expire on September 16, 2018. The agency is entirely funded by user fees, Director Iancu said, and it carefully watches expenses and cautiously raises fees in what tends to be a multiyear process with a public comment period and advisory committees with industry representation. Sometimes the agency lowers fees, the Director noted, as it has done occasionally in order to encourage electronic filing of certain documents.

The text of Director Iancu’s prepared testimony is available here.

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