The Pros and Cons of Prioritized Examination

The Leahy-Smith America Invents Act, signed into law by President Obama on Sept. 16, implements, among other things, a procedure for examining patent applications on a special expedited track—prioritized examination.

Effective Sept. 26, certain U.S. patent applications filed with a Request for Prioritized Examination will be placed on an examination track to reach final disposition within 12 months. This procedure provides inventors and applicants with an inexpensive, less prohibitive alternative to the regular patent prosecution route, which on average takes about three years before reaching final disposition, ¹See “United States Patent and Trademark Office Performance and Accountability Report Fiscal Year 2010” at 12. and to existing programs for expediting patent examination.

Inventors and applicants, particularly those in industries where products have a relatively short shelf life, those trading patent rights for investment or licensing opportunities, and/or those regarding patent rights as an important defensive tool against infringers, may want to consider utilizing this procedure to significantly expedite patent prosecution.

Background

The prioritized examination procedure is a part of an effort by the Patent and Trademark Office to “provide applicants with greater control over when their utility and plant applications are examined and to promote greater efficiency” in the patent examination process. ²Id. at 18,400.

In April, the PTO published a final rule to implement a procedure under which applicants may request to enter a prioritized examination track (Track I) at the time of filing of an application, subject to certain requirements (Track I final rule) (81 PTCJ 748, 4/8/11). ³See “Changes to Implement the Prioritized Examination Track (Track I) of the Enhanced Examination Timing Control Procedures (Final Rule).” 76 Fed. Reg. 18,399-18,407 (April 4, 2011) (81 PTCJ 748, 4/8/11). Later that month, however, the PTO published a second final rule indicating that due to funding limitations, the effective date of the Track I final rule (originally May 4, 2011) was delayed until further notice (82 PTCJ 9, 5/6/11). ⁴See “Changes to Implement the Prioritized Examination Track (Track I) of the Enhanced Examination Timing Control Procedures (Final Rule; delay of effective and applicability dates).” 76 Fed. Reg. 23,876 (April 29, 2011).

The Track I final rule was brought back to life by the recently enacted AIA. Section 11(h) of the AIA emulates the requirements of the Track I final rule with revised fee amounts and a new effective date of Sept. 26. ⁵Leahy-Smith America Invents Act, H.R. 1249 at 41-42. The AIA also includes a provision that addresses the funding limitations that required a delay in the implementation of the Track I final rule. A week after the enactment of the AIA, the PTO issued a third final rule implementing Section 11(h) of the AIA and, thus, effectively revives the prioritized examination procedure (82 PTCJ 728, 9/30/11). ⁶See “Changes to Implement the Prioritized Examination Track (Track I) of the Enhanced Examination Timing Control Procedures Under the Leahy-Smith America Invents Act (Final Rule).” 76 Fed. Reg. 59,050-59,055 (Sept. 23, 2011).

The Mechanics

Under the new final rule, a patent application filed on or after Sept. 26 may be granted prioritized examination status, subject to the following requirements: ⁷Id.

(1) Application Type. The application must be a nonprovisional application for an original utility or plant patent filed under 35 U.S.C. §111(a). The application can be a continuing application (e.g., a continuation or divisional application).

However, a continuing application is not automatically given prioritized examination status based on the status of the parent application. Rather, each continuing application must on its own meet all the requirements for prioritized examination under 37 C.F.R. §1.102(e).

Furthermore, the procedure for prioritized examination does not apply to international applications, design applications, reissue applications, provisional applications, and reexamination proceedings.

(2) Complete Application. The application must be complete under 37 C.F.R. §1.51(b). That is, the application must be filed with an oath or declaration under 37 C.F.R. §1.63, the basic filing fee, the search fee, the examination fee, any excess claims fees, and any application size fee. In addition, a utility application must be filed via the electronic filing system of the PTO (“EFS-Web”).

(3) Request and Fee. The application must be filed with a request for prioritized examination, such as the certification and request form PTO/SB/424 that is available on EFS-Web. A request fee of $4,800 ($2,400 for a small entity) is required at filing, which is on top of the aforementioned filing, search, examination, processing, and publication fees, as well as any applicable excess claims or application size fees.

(4) Claims and Amendment. The application as filed must contain no more than four independent claims and no more than 30 total claims. In addition, the application must not contain any multiple dependent claims. While it is possible to file a preliminary amendment at the time of filing the application to present a conforming set of claims, the PTO indicated that it is strongly encouraging applicants to file applications without any preliminary amendments. It should also be noted that in an application that has been granted prioritized examination status, if at any time during prosecution an amendment is filed that results in a non-conforming set of claims, the prioritized examination procedure will be automatically terminated. ⁸However, upon mailing of a final rejection (at which point prioritized examination is terminated), applicants may amend the claims to place them in independent form where dependent claims were found allowable, or add new claims, subject only to the limitations applicable to any application under final rejection. Id. at 59051. Similarly, upon mailing of a notice of allowance, applicants may submit amendments to the claims, again subject only to the limitations applicable to any application that has been allowed. Id.

(5) Number Limit. The AIA currently limits the number of requests for prioritized examination under 37 C.F.R. §1.102(e) in each fiscal year to a maximum of 10,000, while providing that the PTO may by regulation change the number of filings that may be accepted. The PTO has indicated that the FY 2011 limit is 10,000 and that it will revisit this limit at the end of FY 2011 to evaluate what the appropriate maximum should be, if any.

In connection with the current annual numerical cap of 10,000, the PTO has indicated that applications entering the national stage under 35 U.S.C. §371 are not eligible for now. However, an international application may be entered into the United States as a “by-pass” continuation under 35 U.S.C. §111(a), which is eligible to participate in the prioritized examination program. The PTO also indicated that it may reconsider the exclusion of applications entering the national stage under 35 U.S.C. §371 at a future date.

In summary, procedurally or mechanically the prioritized examination procedure is not that different from what is typically required of a regular utility or plant patent application. The main difference is the upfront fee with the request.

The Pros

1. Shortened Examination Time

The prioritized examination procedure offers a significant shortening of the time spent in the examination/prosecution of an application. Under prioritized examination, an application will be accorded special status and placed on the examiner’s special docket throughout its entire course of prosecution. The PTO’s goal is to on average provide a final disposition ⁹The final disposition for the 12-month goal means that within 12 months from the date prioritized status has been granted that one of the following occur: (1) mailing of a notice of allowance; (2) mailing of a final office action; (3) filing of a notice of appeal; (4) completion of examination as defined in 37 C.F.R. §41.102; (5) filing of a request for continued examination; or (6) abandonment of the application. Id. at 59,051. If allowance of the case has not been reached by this time, filing of an appeal or a request for continued examination is required to further prosecution. Id. within 12 months of prioritized status being granted. This is a significant shortening of examination time (and expenses associated therewith) compared to current wait times.

As can be seen from the PTO FY 2010 statistics below, ¹⁰“United States Patent and Trademark Office Performance and Accountability Report Fiscal Year 2010” at 128. currently utility, plant and reissue (“UPR”) applications on average wait 25.7 months before receiving a first office action, and on average spend 35.3 months in examination before reaching a final disposition.

Interestingly enough, the wait time tends to be the longest for technology areas where the product shelf life is on the shorter end. These technology areas include computer architecture, software, and information security; networks, multiplexing, cable, and security; communications; and mechanical engineering, manufacturing, and products.

Applicants in these technology areas, on average, must wait about 27.5 months or more to receive a first communication on the patentability of their inventions. In addition, for computer, software, and communications industries, the total average pendency is about 42.5 months or more, the longest of all technology areas.

As such, those who would benefit the most from the significantly shortened examination time under prioritized examination are inventors and applicants in the computer, software and communications industries. Prioritized examination offers a quick, inexpensive option for obtaining a patent, as opposed to the traditional route where the application must wait in queue for two to four years before it is examined. Because issued patents enjoy a presumption of validity, ¹¹35 U.S.C. §282 (2002). and have a more defined scope of claim coverage than pending applications, those patents that issue quickly will enable inventors and applicants to more effectively market and protect their products that may be constantly subject to improvements, redesigns and replacements.

The same benefit would also be valuable to innovation driven companies that are seeking to leverage patent rights to establish and maintain their competitive position in a fast-changing market. In particular, with an issued patent, a startup company will be better positioned for investment considerations; a growth-stage company may be able to identify more partnership and cross-licensing opportunities; and an established company will be able to better defend itself against potential infringers.

Again, because issued patents have less uncertainty than pending applications, they are viewed more favorably by investors and licensees, while being more of a deterrent to infringers.

• 2. Reduced Burden

Compared with the PTO’s existing programs for expediting examination, ¹²Existing programs at the PTO for expediting examination are petitions to make special based on an applicant’s age or health, the Patent Prosecution Highway, the Green Technology Pilot Program, the Patent Application Backlog Reduction Stimulus Program, and the Accelerated Examination Program. the prioritized examination procedure is advantageous in that it significantly reduces the burden on the applicants. For example, unlike the accelerated examination program implemented in 2006, the prioritized examination procedure does not require a pre-examination prior art search and does not require an accelerated examination support document (and the rigorous requirements for preparing such support document). As such, under the prioritized examination procedure, applicants are not required to identify and characterize any prior art, which had been a significant burden under the accelerated examination program.

In addition, the prioritized examination can lessen the financial burden on the applicant. In particular, the up front request fee of $4,800 ($2,400 for small entities) is likely to save costs for applicants in the long term. For comparison purposes, the costs for pursuing accelerated examination can range upwards of $10,000 to $20,000 independent of the costs for preparing the application itself.

In exchange for the relatively modest cost associated with prioritized examination, applicants could potentially save on average one to three years of attorneys’ fees for the upkeep of the application.

• 3. Global Strategy

Global patent protection has become increasingly important for companies big and small in today’s global economy. An added advantage of faster allowance of U.S. patents, promised by the prioritized examination procedure, is that U.S. patentees may be able to accelerate patent examination in certain foreign countries. The PTO has a number of bilateral Patent Prosecution Highway (“PPH”) agreements with various foreign patent offices. ¹³These foreign patent offices include Australia, Austria, Canada, Denmark, the European Patent Office, Finland, Germany, Hungary, Israel, Japan, Korea, Mexico, Russia, Singapore, Spain, Sweden, Taiwan, and the United Kingdom. Under the PPH, an applicant receiving a ruling from the Office of First Filing (“OFF”) that at least one claim in an application filed with the OFF is patentable may request that the Office of Second Filing (“OSF”) fast track the examination of corresponding claims in the corresponding applications filed in the OSF.

Therefore, a potential strategy is to use the PTO as the OFF and obtain allowable claims under the prioritized examination procedure quickly, and then proceed to fast track examination in OSFs. This combined prioritized examination-PPH strategy will allow applicants to obtain patents in both the PTO and eligible foreign patent offices faster and more efficiently.

The Cons

1. The Rush to Filing

As discussed above, the current annual numerical cap is 10,000 prioritized examination applications, which is a small fraction (about two percent) compared to the total number of 479,664 utility and plant applications filed in FY 2010. ¹⁴“United States Patent and Trademark Office Performance and Accountability Report Fiscal Year 2010” at 125. Savvy inventors and applicants thus have begun to rush to file their applications. Additionally, there is at least one more reason for this rush: first to file.

Under the AIA, the current “first-to-invent” system is set to be replaced with a “first-inventor-to-file” (“FITF”) system, effective March 16, 2013. ¹⁵H.R. 1249 at 2. A FITF standard grants patents to inventors who first filed a patent application with the PTO, whereas the current system grants patents to the first inventor, regardless of which inventor filed a patent application first. FITF encourages inventors and companies to file their patent applications quickly rather than rely on the U.S. 12-month grace period for public disclosures.

Undoubtedly, companies in industries where technology and products are rapidly evolving and have short life spans will race to the patent office to stake their priority claim before their competitors.

This rush to file applications may potentially result in weaker, less well prepared applications that may be filed before the technology is fully understood. This presents a problem because the examiner may reject the application based on potential written requirement and enablement issues.

Such rejection may result in a more restricted set of claims, making it easier for competitors to obtain design-around patents. Thus, applicants and inventors should look to balance the urge to file applications quickly and the need to prepare adequate applications.

• 2. Enforceability Consideration

Although the prioritize examination procedure can lead to a faster issued patent, careful consideration should also be given to post-issuance enforceability and enforcement strategies. For example, patents issued from less well prepared applications are more vulnerable as a defensive tool, particularly under the new post grant review (“PGR”) system introduced by the AIA. ¹⁶Id. at 16-30. Under PGR, any third party may request a post-grant review proceeding to invalidate one or more claims of any patent by asserting an invalidity argument and providing supporting evidence. The petition must be filed within nine months of issuance of the patent or reissue patent. Therefore, in light of the availability of the PGR, ¹⁷The standard for commencing PGR is either it is more likely than not that at least one of the challenged claims is unpatentable or PGR would resolve an important or unsettled legal question important to the patent system. See id. at 23-24. competitors may move faster to challenge the validity of the patent.

Competitors may also use the PGR process as a tool to delay the patentee’s ability to enforce the issued patent. In a civil action alleging infringement of a patent, a court may stay its consideration on the basis that a PGR has been filed or instituted, unless that civil action is filed within three months of the issuance of the patent. ¹⁸Id. at 24.

As such, to minimize the costs of investment that could result in delayed enforceability of the issued patent, one should make sure that the application is well written and meets the requirements for patentability.

It should be noted, however, that the PGR provision will take effect Sept. 16, 2012, and will apply only to FITF applications filed on or after March 16, 2013. Therefore, to avoid potential third party challenges under the PGR, companies should consider filing their applications before the March 16, 2013 deadline.

• 3. Preference to Prolonged Prosecution

For companies who wish to prolong prosecution for strategic reasons, they should be dissuaded from the prioritized examination procedure. For example, if venture capital funding is still being sought or research and development are still ongoing, it may make more sense for companies to avoid the prioritized track. Rather, they may want to use the regular examination track and take advantage of available extensions of time in responding to office actions.

Final Recommendations

To maximize the benefits of prioritized examination, an applicant may need to carefully consider the most relevant prior art and present a set of claims based on what the applicant is entitled to in view of the prior art. ¹⁹76 Fed. Reg. at 59,055. It is also recommended that a complete schedule of claims be filed, from the broadest to which the applicant believes he is entitled in view of the prior art to the narrowest which the applicant is willing to accept. ²⁰Id. In many instances this may require a conservative approach toward the claims where the applicant may choose to submit and accept a relatively narrow set of claims, while leaving the pursuit of broader claims for a continuing application that is not on the prioritized track.

Companies should start reviewing their patent portfolios as soon as possible to identify any pending applications whose examination they would like to expedite by filing a continuing application with a request for prioritized examination. Should companies decide to file new applications under the prioritized examination procedure, care should be taken in preparing such new applications that not only cover their core technology but also future improvements and alternative embodiments.

Furthermore, to avoid potential third party challenges under the PGR, companies should consider filing their applications before the March 16, 2013 deadline. In addition, the combined prioritized examination-PPH strategy should be leveraged to obtain patents in both the PTO and eligible foreign patent offices faster and more efficiently. Last but not the least, seek professional advice from a patent counsel.