The economic doldrums may be slowing patent filing work for intellectual property specialists, but the U.S. Patent and Trademark Office's increasingly stingy patent allowance rate is boosting back-end work for lawyers at the agency's appeals board.
Attorneys link the recent spike in ex parte appeals at the Board of Patent Appeals and Interferences to the sharp slide in patent allowance rates. In fiscal year 2008, the board approved 44 percent of patents that came before it -- down from 66 percent five years ago and 71 percent at the start of the decade. Lawyers blame some of the decline on KSR International Co. v. Teleflex, a 2007 U.S. Supreme Court decision that made it harder for patent filers to establish that a new invention wasn't obvious. But they say much of the decrease stems from a pendulum shift in the PTO's philosophy: The agency now appears interested in curtailing patents instead of granting new ones.
As a result, appeals have spiked 70 percent this fiscal year, according to the PTO. Since October 2008, when the current federal fiscal year began, through May, 10,870 patent appeals have been filed -- that's up from 6,385 from the previous year.
For lawyers, the appeals work is partially compensating for the decline in legal work related to patent filings. Patent filings have been down this year due to budget cuts at corporate patent departments resulting from the recession. Lawyers have the option of filing continuing patent applications, or additional applications for the same invention, following an initial rejection, but many say appeals are more viable in the face of the PTO's unwillingness to negotiate.
"[Lawyers are] appealing more because the patent office is rejecting things on shakier ground," James J. Mullen, an intellectual property lawyer and partner in the San Diego office of Morrison & Foerster. "If the examiner is wrong as a matter of law or procedure, the board will rule to overturn that examiner."
PTO spokeswoman Jennifer Rankin Byrne said in a statement that a "significant increase" in the ranks of patent examiners has led to more examinations and "more final rejections which could result in an appeal." Examiners will have less time to process applications and hand down rejections, at least in the short term. The PTO suspended overtime pay from June 21 through at least the end of the fiscal year, according to a June 17 internal memo obtained by The National Law Journal and posted on The Blog of Legal Times.
Stopping overtime is likely to reduce the processing rate, but not necessarily the rejection rate, said Bruce Sunstein, a co-founder of Boston-based intellectual property boutique Bromberg & Sunstein.
Examiners already face internal pressure to process applications quickly and the overtime ban ratchets up that pressure, Sunstein said. The PTO's high turnover rate also means that relatively inexperienced examiners are often making those judgment calls, he said. "The system is supposed to be neutral in favor of acceptance or rejection, but it's biased towards rejection," Sunstein said. "Examiners don't have time to read the application. If they don't read the application, it's hard to process it well."
Craig Opperman, an intellectual property group partner in Reed Smith's Palo Alto, Calif., office, said that he and his colleagues are filing appeals to combat "a tremendous increase" in rejections stemming from patent examiners' "extreme positions" on patent filings. Opperman said that KSR is a factor, but that the PTO is also erroneously linking a high rejection rate with its efforts to improve the quality of the patents issued by the agency. "Examiners are under pressure to reject [patents] for any possible reason, but there comes a point where people are saying 'enough is enough and we're now going to take it on appeal,' " Opperman said.
Opperman, whose clients run the gamut from computer networking firms to solar companies, said his appeal filings this year, and ones in the works for the next quarter, add up to more than his total appeal filings during his previous 15 years of practice.
Until recently, the patenting process was more of a negotiation between the filing attorney and the patent examiner, said Leigh J. Martinson, a Boston intellectual property, media and technology partner at McDermott Will & Emery. If the PTO had a concern about a claim on a patent application, the lawyer would incorporate the suggested changes on a continuing application, he said. But patent examiners' growing unwillingness to budge is driving lawyers to opt for appeals rather than continuing applications, Martinson said.
"You stopped getting that negotiating feeling with examiners," Martinson said. "The only way you can get past them is to go to the board."
Byrne of the PTO denied that the PTO's current philosophy is to reduce the number of issued patents. "There is not an agency policy to have examiners reject claims without merit," Byrne said. "The examination of applications is constrained by controlling case law. It is this controlling case law that examiners use as guidance in making rejections."
For inventors, the silver lining of an expensive patent appeal is a longer patent-protection period. The time it takes to appeal is tacked on to the end of a patent's life, while filing a continuing application doesn't stop the clock. For attorneys, appeals are lucrative, noncommodity legal work.
Complex appeals cost tens of thousands of dollars, said Opperman, who's aware of law firms charging $6,000 or $7,000 to $20,000 to prepare an appeal brief. Reed Smith's rates run at an average of $600 per page, which adds up to $18,000 for a 30-page appeal brief, he said. "To protect a decent invention properly, you need [to spend] about that," Opperman said. "Cost is directly proportional to number of pages of documentation you have to prepare."
Appeals are more expensive than continuing applications because the focus is on proving the examiner wrong, Martinson said. "It becomes a much more involved response," Martinson said. "You've really got to point out everything the examiner has done incorrectly."