Federal Register, Volume 77 Issue 28 (Friday, February 10, 2012)

[Federal Register Volume 77, Number 28 (Friday, February 10, 2012)]
[Proposed Rules]
[Pages 7060-7080]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2529]

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DEPARTMENT OF COMMERCE

Patent and Trademark Office

37 CFR Part 42

[Docket No. PTO-P-2011-0084]
RIN 0651-AC72

Changes To Implement Post-Grant Review Proceedings

AGENCY: United States Patent and Trademark Office, Commerce.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The United States Patent and Trademark Office (Office or
USPTO) proposes new rules to implement the provisions of the Leahy-
Smith America Invents Act that create a new post-grant review
proceeding to be conducted before the Patent Trial and Appeal Board
(Board). These provisions of the Leahy-Smith America Invents Act will
take effect on September 16, 2012, one year after the date of
enactment, and generally apply to patents issuing from applications
subject to first-inventor-to-file provisions of the Leahy-Smith America
Invents Act.

DATES: The Office solicits comments from the public on this proposed
rulemaking. Written comments must be received on or before April 10,
2012 to ensure consideration.

ADDRESSES: Comments should be sent by electronic mail message over the
Internet addressed to: post_grant_review@uspto.gov. Comments may also
be submitted by postal mail addressed to: Mail Stop Patent Board,
Director of the United States Patent and Trademark Office, P.O. Box
1450, Alexandria, VA 22313-1450, marked to the attention of ``Lead
Judge Michael Tierney, Post-Grant Review Proposed Rules.''
Comments may also be sent by electronic mail message over the
Internet via the Federal eRulemaking Portal. See the Federal
eRulemaking Portal Web site (http://www.regulations.gov) for additional
instructions on providing comments via the Federal eRulemaking Portal.
Although comments may be submitted by postal mail, the Office
prefers to receive comments by electronic mail message over the
Internet because sharing comments with the public is more easily
accomplished. Electronic comments are preferred to be submitted in
plain text, but also may be submitted in ADOBE[supreg] portable
document format or MICROSOFT WORD[supreg] format. Comments not
submitted electronically should be submitted on paper in a format that
facilitates convenient digital scanning into ADOBE[supreg] portable
document format.
The comments will be available for public inspection at the Board
of Patent Appeals and Interferences, currently located in Madison East,
Ninth Floor, 600 Dulany Street, Alexandria, Virginia. Comments also
will be available for viewing via the Office's Internet Web site
(http://www.uspto.gov). Because comments will be made available for
public inspection, information that the submitter does not desire to
make public, such as an address or phone number, should not be included
in the comments.

FOR FURTHER INFORMATION CONTACT: Michael Tierney, Lead Administrative
Patent Judge, Sally Lane, Administrative Patent Judge, Scott Boalick,
Lead Administrative Patent Judge, and Robert Clarke, Administrative
Patent Judge, Board of Patent Appeals and Interferences, by telephone
at (571) 272-9797.

SUPPLEMENTARY INFORMATION: On September 16, 2011, the Leahy-Smith
America Invents Act was enacted into law (Pub. L. 112-29, 125 Stat. 284
(2011)). The purpose of the Leahy-Smith America Invents Act and these
proposed regulations is to establish a more efficient and streamlined
patent system that will improve patent quality and limit unnecessary
and counterproductive litigation costs. The preamble of this notice
sets forth in detail the procedures by which the Board will conduct
post-grant review proceedings. The USPTO is engaged in a transparent
process to create a timely, cost-effective alternative to litigation.

[[Page 7061]]

Moreover, the rulemaking process is designed to ensure the integrity of
the trial procedures. See 35 U.S.C. 326(b). The proposed rules would
provide a set of rules relating to Board trial practice for post-grant
review.
More grounds for seeking post-grant review will be available as
compared with inter partes review. The grounds for seeking post-grant
review includes any ground that could be raised under 35 U.S.C.
282(b)(2) or (3). Such grounds for post-grant review include grounds
that could be raised under 35 U.S.C. 102 or 103 including those based
on prior art consisting of patents or printed publications. Other
grounds available for post-grant review include 35 U.S.C. 101 and 112,
with the exception of compliance with the best mode requirement. In
contrast, the grounds for seeking inter partes review are limited to
issues raised under 35 U.S.C. 102 or 103 and only on the basis of prior
art consisting of patents or printed publications.
Section 6 of the Leahy-Smith America Invents Act is entitled
``POST-GRANT REVIEW PROCEEDINGS.'' Section 6(d) of the Leahy-Smith
America Invents Act, entitled ``POST-GRANT REVIEW,'' adds chapter 32 of
title 35, United States Code, also entitled ``POST-GRANT REVIEW.'' In
particular, Sec. 6(d) adds 35 U.S.C. 321-329. Public Law 112-29, 125
Stat. 284, 305-311 (2011).
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
321, entitled ``Post-grant review.'' 35 U.S.C. 321(a) will provide
that, subject to the provisions of chapter 32 of title 35, United
States Code, a person who is not the owner of a patent may file a
petition with the Office to institute a post-grant review of the
patent. 35 U.S.C. 321(a) will also provide that the Director will
establish, by regulation, fees to be paid by the person requesting the
review, in such amounts as the Director determines to be reasonable,
considering the aggregate costs of the post-grant review. 35 U.S.C.
321(b) will provide that a petitioner in a post-grant review may
request to cancel as unpatentable one or more claims of a patent on any
ground that could be raised under 35 U.S.C. 282(b)(2) or (3) (relating
to invalidity of the patent or any claim). 35 U.S.C. 321(c) will
provide that a petition for post-grant review may only be filed not
later than the date that is nine months after the date of the grant of
the patent or of the issuance of a reissue patent.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
322, entitled ``Petitions.'' 35 U.S.C. 322(a) will provide that a
petition filed under 35 U.S.C. 321 may be considered only if: (1) The
petition is accompanied by payment of the fee established by the
Director under 35 U.S.C. 321; (2) the petition identifies all real
parties in interest; (3) the petition identifies, in writing and with
particularity, each claim challenged, the grounds on which the
challenge to each claim is based, and the evidence that supports the
grounds for the challenge to each claim, including (A) copies of
patents and printed publications that the petitioner relies upon in
support of the petition and (B) affidavits or declarations of
supporting evidence and opinions, if the petitioner relies on other
factual evidence or on expert opinions; (4) the petition provides such
other information as the Director may require by regulation; and (5)
the petitioner provides copies of any of the documents required under
paragraphs (2), (3), and (4) of 35 U.S.C. 322(a) to the patent owner
or, if applicable, the designated representative of the patent owner.
35 U.S.C. 322(b) will provide that, as soon as practicable after the
receipt of a petition under 35 U.S.C. 321, the Director will make the
petition available to the public.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
323, entitled ``Preliminary response to petition.'' 35 U.S.C. 323 will
provide that, if a post-grant review petition is filed under 35 U.S.C.
321, the patent owner has the right to file a preliminary response to
the petition, within a time period set by the Director, that sets forth
reasons why no post-grant review should be instituted based upon the
failure of the petition to meet any requirement of chapter 32 of title
35, United States Code.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
324, entitled ``Institution of post-grant review.'' 35 U.S.C. 324(a)
will provide that the Director may not authorize a post-grant review to
be instituted, unless the Director determines that the information
presented in the petition filed under 35 U.S.C. 321, if such
information is not rebutted, would demonstrate that it is more likely
than not that at least one of the claims challenged in the petition is
unpatentable. 35 U.S.C. 324(b) will provide that the determination
required under 35 U.S.C. 324(a) may also be satisfied by a showing that
the petition raises a novel or unsettled legal question that is
important to other patents or patent applications. 35 U.S.C. 324(c)
will provide that the Director will determine whether to institute a
post-grant review under chapter 32 of title 35, United States Code,
pursuant to a petition filed under 35 U.S.C. 321 within three months
after: (1) Receiving a preliminary response to the petition under 35
U.S.C. 323; or (2) if no such preliminary response is filed, the last
date on which such response may be filed. 35 U.S.C. 324(d) will provide
that the Director will notify the petitioner and patent owner, in
writing, of the Director's determination under 35 U.S.C. 324(a) or (b),
and will make such notice available to the public as soon as is
practicable. 35 U.S.C. 324(d) will also provide that such notice will
include the date on which the review will commence. 35 U.S.C. 324(e)
will provide that the determination by the Director whether to
institute a post-grant review under 35 U.S.C. 324 will be final and
nonappealable.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
325, entitled ``Relation to other proceedings or actions.'' 35 U.S.C.
325(a)(1) will provide that a post-grant review may not be instituted
under chapter 32 of title 35, United States Code, if, before the date
on which the petition for such a review is filed, the petitioner or
real party in interest filed a civil action challenging the validity of
a claim of the patent. 35 U.S.C. 325(a)(2) will provide for an
automatic stay of a civil action brought by the petitioner or real
party in interest challenging the validity of a claim of the patent and
filed on or after the date on which the petition for post-grant review
was filed, until certain specified conditions are met. 35 U.S.C.
325(a)(3) will provide that a counterclaim challenging the validity of
a claim of a patent does not constitute a civil action challenging the
validity of a claim of a patent for purposes of 35 U.S.C. 325(a).
35 U.S.C. 325(b) will provide that if a civil action alleging
infringement of a patent is filed within three months after the date on
which the patent is granted, the court may not stay its consideration
of the patent owner's motion for a preliminary injunction against
infringement of the patent on the basis that a petition for post-grant
review has been filed or instituted under chapter 32 of title 35,
United States Code.
35 U.S.C. 325(c) will provide that if more than one petition for a
post-grant review under chapter 32 of title 35, United States Code, is
properly filed against the same patent and the Director determines that
more than one of these petitions warrants the institution of a post-
grant review under 35 U.S.C. 324, the Director may consolidate such
reviews into a single post-grant review.
35 U.S.C. 325(d) will provide that, notwithstanding 35 U.S.C.
135(a), 251, and 252, and chapter 30 of title 35, United States Code,
during the

[[Page 7062]]

pendency of any post-grant review under chapter 32 of title 35, United
States Code, if another proceeding or matter involving the patent is
before the Office, the Director may determine the manner in which the
post-grant review or other proceeding or matter may proceed, including
providing for the stay, transfer, consolidation, or termination of any
such matter or proceeding. 35 U.S.C. 325(d) will also provide that, in
determining whether to institute or order a proceeding under chapter 32
of title 35, United States Code, chapter 30 of title 35, United States
Code, or chapter 31 of title 35, United States Code, the Director may
take into account whether, and reject the petition because, the same or
substantially the same prior art or arguments previously were presented
to the Office.
35 U.S.C. 325(e)(1) will provide that the petitioner in a post-
grant review of a claim in a patent under chapter 32 of title 35,
United States Code, that results in a final written decision under 35
U.S.C. 328(a), or the real party in interest or privy of the
petitioner, may not request or maintain a proceeding before the Office
with respect to that claim on any ground that the petitioner raised or
reasonably could have raised during that post-grant review. 35 U.S.C.
325(e)(2) will provide for estoppel against a post-grant review
petitioner, or the real party in interest or privy of the petitioner,
in certain civil actions and certain other proceedings before the
International Trade Commission if that post-grant review results in a
final written decision under 35 U.S.C. 328(a).
35 U.S.C. 325(f) will provide that a post-grant review may not be
instituted under chapter 32 of title 35, United States Code, if the
petition requests cancellation of a claim in a reissue patent that is
identical to or narrower than a claim in the original patent from which
the reissue patent was issued, and the time limitations in 35 U.S.C.
321(c) would bar filing a petition for a post-grant review for such
original patent.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
326, entitled ``Conduct of post-grant review.'' 35 U.S.C. 326(a) will
provide that the Director will prescribe regulations: (1) Providing
that the file of any proceeding under chapter 32 of title 35, United
States Code, will be made available to the public, except that any
petition or document filed with the intent that it be sealed will, if
accompanied by a motion to seal, be treated as sealed pending the
outcome of the ruling on the motion; (2) setting forth the standards
for the showing of sufficient grounds to institute a review under 35
U.S.C. 324(a) and (b); (3) establishing procedures for the submission
of supplemental information after the petition is filed; (4)
establishing and governing a post-grant review under chapter 32 of
title 35, United States Code, and the relationship of such review to
other proceedings under title 35, United States Code; (5) setting forth
standards and procedures for discovery of relevant evidence, including
that such discovery will be limited to evidence directly related to
factual assertions advanced by either party in the proceeding; (6)
prescribing sanctions for abuse of discovery, abuse of process, or any
other improper use of the proceeding, such as to harass or to cause
unnecessary delay or an unnecessary increase in the cost of the
proceeding; (7) providing for protective orders governing the exchange
and submission of confidential information; (8) providing for the
filing by the patent owner of a response to the petition under 35
U.S.C. 323 after a post-grant review has been instituted, and requiring
that the patent owner file with such response, through affidavits or
declarations, any additional factual evidence and expert opinions on
which the patent owner relies to support the response; (9) setting
forth standards and procedures for allowing the patent owner to move to
amend the patent under 35 U.S.C. 326(d) to cancel a challenged claim or
propose a reasonable number of substitute claims, and ensuring that any
information submitted by the patent owner in support of any amendment
entered under 35 U.S.C. 326(d) is made available to the public as part
of the prosecution history of the patent; (10) providing either party
with the right to an oral hearing as part of the proceeding; (11)
requiring that the final determination in any post-grant review be
issued not later than one year after the date on which the Director
notices the institution of a proceeding under chapter 32 of title 35,
United States Code, except that the Director may, for good cause shown,
extend the one-year period by not more than six months, and may adjust
the time periods in this paragraph in the case of joinder under 35
U.S.C. 325(c); and (12) providing the petitioner with at least one
opportunity to file written comments within a time period established
by the Director.
35 U.S.C. 326(b) will provide that in prescribing regulations under
35 U.S.C. 326, the Director will consider the effect of any such
regulation on the economy, the integrity of the patent system, the
efficient administration of the Office, and the ability of the Office
to complete timely proceedings instituted under chapter 32 of title 35,
United States Code.
35 U.S.C. 326(c) will provide that the Patent Trial and Appeal
Board will, in accordance with 35 U.S.C. 6, conduct each post-grant
review instituted under chapter 32 of title 35, United States Code.
35 U.S.C. 326(d)(1) will provide that during a post-grant review
instituted under chapter 32 of title 35, United States Code, the patent
owner may file a single motion to amend the patent in one or more of
the following ways: (A) Cancel any challenged patent claim; and/or (B)
for each challenged claim, propose a reasonable number of substitute
claims. 35 U.S.C. 326(d)(2) provides that additional motions to amend
may be permitted upon the joint request of the petitioner and the
patent owner to materially advance the settlement of a proceeding under
35 U.S.C. 327, or upon the request of the patent owner for good cause
shown. 35 U.S.C. 326(d)(3) will provide that an amendment under 35
U.S.C. 326(d) may not enlarge the scope of the claims of the patent or
introduce new matter. 35 U.S.C. 326(e) will provide that in a post-
grant review instituted under chapter 32 of title 35, United States
Code, the petitioner will have the burden of proving a proposition of
unpatentability by a preponderance of the evidence.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
327, entitled ``Settlement.'' 35 U.S.C. 327(a) will provide that a
post-grant review instituted under chapter 32 of title 35, United
States Code, will be terminated with respect to any petitioner upon the
joint request of the petitioner and the patent owner, unless the Office
has decided the merits of the proceeding before the request for
termination is filed. 35 U.S.C. 327(a) will also provide that if the
post-grant review is terminated with respect to a petitioner under 35
U.S.C. 327, no estoppel under 35 U.S.C. 325(e) will attach to the
petitioner, or to the real party in interest or privy of the
petitioner, on the basis of that petitioner's institution of that post-
grant review. 35 U.S.C. 327(a) will further provide that if no
petitioner remains in the post-grant review, the Office may terminate
the post-grant review or proceed to a final written decision under 35
U.S.C. 328(a).
35 U.S.C. 327(b) will provide that any agreement or understanding
between the patent owner and a petitioner, including any collateral
agreements referred to in such agreement or understanding, made in
connection with, or in contemplation of, the termination of a post-
grant review under

[[Page 7063]]

35 U.S.C. 327 will be in writing, and a true copy of such agreement or
understanding will be filed in the Office before the termination of the
post-grant review as between the parties. 35 U.S.C. 327(b) will also
provide that at the request of a party to the proceeding, the agreement
or understanding will be treated as business confidential information,
will be kept separate from the file of the involved patents, and will
be made available only to Federal Government agencies on written
request, or to any person on a showing of good cause.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
328, entitled ``Decision of the Board.'' 35 U.S.C. 328(a) will provide
that if a post-grant review is instituted and not dismissed under
chapter 32 of title 35, United States Code, the Patent Trial and Appeal
Board will issue a final written decision with respect to the
patentability of any patent claim challenged by the petitioner and any
new claim added under 35 U.S.C. 326(d).
35 U.S.C. 328(b) will provide that if the Patent Trial and Appeal
Board issues a final written decision under 35 U.S.C. 328(a) and the
time for appeal has expired or any appeal has terminated, the Director
will issue and publish a certificate canceling any claim of the patent
finally determined to be unpatentable, confirming any claim of the
patent determined to be patentable, and incorporating in the patent by
operation of the certificate any new or amended claim determined to be
patentable.
35 U.S.C. 328(c) will provide that any proposed amended or new
claim determined to be patentable and incorporated into a patent
following a post-grant review under chapter 32 of title 35, United
States Code, will have the same effect as that specified in 35 U.S.C.
252 for reissued patents on the right of any person who made,
purchased, or used within the United States, or imported into the
United States, anything patented by such proposed amended or new claim,
or who made substantial preparation therefor, before the issuance of a
certificate under 35 U.S.C. 328(b).
35 U.S.C. 328(d) will provide that the Office will make available
to the public data describing the length of time between the
institution of, and the issuance of, a final written decision under 35
U.S.C. 328(a) for each post-grant review.
Section 6(d) of the Leahy-Smith America Invents Act adds 35 U.S.C.
329, entitled ``Appeal.'' 35 U.S.C. 329 will provide that a party
dissatisfied with the final written decision of the Patent Trial and
Appeal Board under 35 U.S.C. 328(a) may appeal the decision pursuant to
35 U.S.C. 141-144. 35 U.S.C. 329 will also provide that any party to
the post-grant review will have the right to be a party to the appeal.
Section 6(f) of the Leahy-Smith America Invents Act is entitled
``REGULATIONS AND EFFECTIVE DATE.'' Section 6(f)(1) of the Leahy-Smith
America Invents Act provides that the Director will, not later than the
date that is one year after the date of the enactment of the Leahy-
Smith America Invents Act, issue regulations to carry out chapter 32 of
title 35, United States Code, as added by Sec. 6(d) of the Leahy-Smith
America Invents Act.
Section 6(f)(2)(A) of the Leahy-Smith America Invents Act provides
that the amendments made by Sec. 6(d) of the Leahy-Smith America
Invents Act will take effect upon the expiration of the one-year period
beginning on the date of the enactment of the Leahy-Smith America
Invents Act and, except as provided in Sec. 18 of the America Invents
Act and in Sec. 6(f)(3) of the Leahy-Smith America Invents Act, will
apply only to patents described in Sec. 3(n)(1) of the Leahy-Smith
America Invents Act. Section 3(n) of the Leahy-Smith America Invents
Act is entitled ``EFFECTIVE DATE.'' Section 3(n)(1) of the Leahy-Smith
America Invents Act provides:

(n) EFFECTIVE DATE.--
(1) IN GENERAL.--Except as otherwise provided in this section,
the amendments made by this section shall take effect upon the
expiration of the 18-month period beginning on the date of the
enactment of this Act, and shall apply to any application for
patent, and to any patent issuing thereon, that contains or
contained at any time--
(A) a claim to a claimed invention that has an effective filing
date as defined in section 100(i) of title 35, United States Code,
that is on or after the effective date described in this paragraph;
or
(B) a specific reference under section 120, 121, or 365(c) of
title 35, United States Code, to any patent or application that
contains or contained at any time such a claim.

For example, the post-grant review provisions will apply to patents
issued from applications that have an effective filing date on or after
March 16, 2013, eighteen months after the date of enactment.
Section 6(f)(2)(B) of the Leahy-Smith America Invents Act provides
that the Director may impose a limit on the number of post-grant
reviews that may be instituted under chapter 32 of title 35, United
States Code, during each of the first four one-year periods in which
the amendments made by Sec. 6(d) of the Leahy-Smith America Invents
Act are in effect.
Section 6(f)(3) of the Leahy-Smith America Invents Act is entitled
``PENDING INTERFERENCES.'' Section 6(f)(3)(A) of the Leahy-Smith
America Invents Act provides that the Director will determine, and
include in the regulations issued under Sec. 6(f)(1) of the Leahy-
Smith America Invents Act, the procedures under which an interference
commenced before the effective date set forth in Sec. 6(f)(2)(A) of
the Leahy-Smith America Invents Act is to proceed, including whether
such interference: (i) is to be dismissed without prejudice to the
filing of a petition for a post-grant review under chapter 32 of title
35, United States Code; or (ii) is to proceed as if the Leahy-Smith
America Invents Act had not been enacted.
Section 6(f)(3)(B) of the Leahy-Smith America Invents Act provides
that, for purposes of an interference that is commenced before the
effective date set forth in Sec. 6(f)(2)(A) of the Leahy-Smith America
Invents Act, the Director may deem the Patent Trial and Appeal Board to
be the Board of Patent Appeals and Interferences, and may allow the
Patent Trial and Appeal Board to conduct any further proceedings in
that interference.
Section 6(f)(3)(C) of the Leahy-Smith America Invents Act provides
that the authorization to appeal or have remedy from derivation
proceedings in Sec. Sec. 141(d) and 146 of title 35, United States
Code, as amended, and the jurisdiction to entertain appeals from
derivation proceedings in 28 U.S.C. 1295(a)(4)(A), as amended, will be
deemed to extend to any final decision in an interference that is
commenced before the effective date set forth in Sec. 6(f)(2)(A) of
the Leahy-Smith America Invents Act and that is not dismissed pursuant
to this paragraph.

Discussion of Specific Rules

The proposed new rules would implement the provisions of the Leahy-
Smith America Invents Act for instituting and conducting post-grant
review proceedings before the Patent Trial and Appeal Board (Board). 35
U.S.C. 326(a)(4), as added by the Leahy-Smith America Invents Act,
provides that the Director will prescribe regulations establishing and
governing post-grant review and the relationship of the review to other
proceedings under title 35 of the United States Code. Public Law 112-
29, Sec. 6(d), 125 Stat. 284, 308 (2011). In particular, this notice
proposes to add a new subpart C to 37 CFR part 42 to provide rules
specific to post-grant reviews.
Additionally, the Office in a separate rulemaking is proposing to
add part 42,

[[Page 7064]]

including subpart A, (RIN 0651-AC70) that will include a consolidated
set of rules relating to Board trial practice. Specifically, the
proposed subpart A of part 42 would set forth the policies, practices,
and definitions common to all trial proceedings before the Board. The
proposed rules in the instant notice and discussion below may reference
the proposed rules in subpart A of part 42. Furthermore, the Office in
separate rulemakings is proposing to add a new subpart B to 37 CFR part
42 (RIN 0651-AC71) to provide rules specific to inter partes reviews, a
new subpart D to 37 CFR part 42 (RIN 0651-AC73; RIN 0651-AC75) to
provide rules specific to the transitional program for covered business
method patents, and a new subpart E to 37 CFR part 42 (RIN 0651-AC74)
to provide rules specific to derivation proceedings.
Title 37 of the Code of Federal Regulations, Chapter I, Part 42,
Subpart C, entitled ``Post-Grant Review'' is proposed to be added as
follows:
Section 42.200: Proposed Sec. 42.200 would set forth policy
considerations for post-grant review proceedings.
Proposed Sec. 42.200(a) would provide that a post-grant review is
a trial and subject to the rules set forth in subpart A.
Proposed Sec. 42.200(b) would provide that a claim in an unexpired
patent shall be given its broadest reasonable construction in light of
the specification in which it appears. This proposed rule would be
consistent with longstanding established principles of claim
construction before the Office. In re Am. Acad. of Sci. Tech Ctr., 367
F.3d 1359, 1364 (Fed. Cir. 2004); In re Yamamoto, 740 F.2d 1569, 1571
(Fed. Cir. 1984). As explained in Yamamoto, a party's ability to amend
claims to avoid prior art distinguishes Office proceedings from
district court proceedings and justifies the difficult standard for
claim interpretation. Yamamoto, 740 F.2d at 1572.
Proposed Sec. 42.200(c) would provide a one-year timeframe for
administering the proceeding after institution, with up to a six-month
extension for good cause. This proposed rule is consistent with 35
U.S.C. 326(a)(11), which sets forth statutory time frames for post-
grant review.
Proposed Sec. 42.200(d) would provide that interferences commenced
within one year of enactment of the Leahy-Smith America Invents Act
shall proceed under part 41 of 37 CFR except as the Chief
Administrative Patent Judge may otherwise order in the interests of
justice. The expectation is that dismissal will be rarely, if ever,
ordered. Hence, any case where such an order arises would be
exceptional and should be handled as its circumstances require. This
proposed rule is consistent with Sec. 6(f)(3) of the Leahy-Smith
America Invents Act, which provides that the Director shall include in
regulations the procedures under which an interference commenced before
the effective date of the act is to proceed.
Section 42.201: Proposed Sec. 42.201 would provide who may file a
petition for post-grant review.
Proposed Sec. 42.201(a) would provide that a person who is not the
patent owner may file a petition to institute a post-grant review,
unless the petitioner or real party in interest had already filed a
civil action challenging the validity of a claim of the patent. The
proposed rule would follow the statutory language of 35 U.S.C.
325(a)(1), which provides that post-grant reviews are barred by prior
civil action.
Proposed Sec. 42.201(b) would provide that a petition may not be
filed where the petitioner, the petitioner's real party in interest, or
a privy of the petitioner is estopped from challenging the claims on
the grounds identified in the petition. The proposed rule is consistent
with 35 U.S.C. 325(e)(1) and 315(e)(1), as amended, which provide for
estoppel based upon a final written decision in a post-grant review, a
covered business method review, or inter partes review.
Section 42.202: Proposed Sec. 42.202 would set forth the
timeliness requirement for filing a post-grant review petition.
Proposed Sec. 42.202(a) would provide that a petition for a post-
grant review of a patent must be filed no later than the date that is
nine months after the date of the grant of a patent or of the issuance
of a reissue patent. Proposed Sec. 42.202(a) would also provide that a
petition may not request a post-grant review for a claim in a reissue
patent that is identical to or narrower than a claim in the original
patent from which the reissue patent was issued unless the petition is
filed not later than the date that is nine months after the date of the
grant of the original patent. The proposed rule would be consistent
with the requirements of 35 U.S.C. 321(c).
Proposed Sec. 42.202(b) would provide that the Director may limit
the number of post-grant reviews that may be instituted during each of
the first four 1-year periods after post-grant review takes effect.
This proposed rule is consistent with Sec. 6(f)(2)(B) of the Leahy-
Smith America Invents Act (Pub. L. 112-29, 125 Stat. 284, 311 (2011)),
which provides for graduated implementation of post-grant reviews. The
Office, however, does not expect to limit the number of petitions at
this time.
Section 42.203: Proposed Sec. 42.203 would provide that a fee must
accompany a petition for post-grant review and that no filing date will
be accorded until full payment is received. This proposed rule is
consistent with 35 U.S.C. 322(a)(1), which provides that a petition may
only be considered if the petition is accompanied by the payment of the
fee established by the Director.
Section 42.204: Proposed Sec. 42.204 would provide for the content
of petitions to institute a post-grant review. The proposed rule is
consistent with 35 U.S.C. 322(a)(4), which allows the Director to
prescribe regulations concerning the information provided with the
petition.
Proposed Sec. 42.204(a) would provide that a petition must
demonstrate that the petitioner has standing. To establish standing, a
petitioner, at a minimum, must certify that the patent is available for
post-grant review and that the petitioner is not barred or estopped
from requesting a post-grant review. This proposed requirement attempts
to ensure that a party has standing to file the post-grant review and
would help prevent spuriously-instituted post-grant reviews. Facially,
improper standing is a basis for denying the petition without
proceeding to the merits of the petition.
Proposed Sec. 42.204(b) would require that the petition identify
the precise relief requested for the claims challenged. Specifically,
the proposed rule would require that the petition identify each claim
being challenged, the specific grounds on which each claim is
challenged, how the claims are to be construed, how the claims as
construed are unpatentable, why the claims as construed are
unpatentable under the identified grounds, and the exhibit numbers of
the evidence relied upon with a citation to the portion of the evidence
that is relied upon to support the challenge. This proposed rule is
consistent with 35 U.S.C. 322(a)(3), which requires that the petition
identify, in writing and with particularity, each claim challenged, the
grounds on which the challenge to each claim is based, and the evidence
supporting the challenge. It is also consistent with 35 U.S.C.
322(a)(4), which allows the Director to require additional information
as part of the petition. The proposed rule would provide an efficient
means for identifying the legal and factual basis satisfying the
threshold for instituting a proceeding and would provide the patent
owner with a minimum level of notice as to the basis for the challenge
to the claims.

[[Page 7065]]

Proposed Sec. 42.204(c) would provide that a petitioner seeking to
correct clerical or typographical mistakes in a petition could file a
procedural motion to correct the mistakes. The proposed rule would also
provide that the grant of such a motion would not alter the filing date
of the petition.
Section 42.205: Proposed Sec. 42.205 would provide petition and
exhibit service requirements in addition to the service requirements of
Sec. 42.6.
Proposed Sec. 42.205(a) would require the petitioner to serve the
patent owner at the correspondence address of record for the patent,
and permits service at any other address known to the petitioner as
likely to effect service as well. Once a patent has issued,
communications between the Office and the patent owner often suffer.
Ray v. Lehman, 55 F.3d 606 (Fed. Cir. 1995) (patentee's failure to
maintain correspondence address contributed to failure to pay
maintenance fee and therefore expiration of the patent). While the
proposed rule requires service at the correspondence address of record
in the patent, the petitioner will already be in communication with the
patent owner, in many cases, at a better service address than the
official correspondence address.
Proposed Sec. 42.205(b) would address the situation where service
to a patent's correspondence address does not result in actual service
on the patent owner. When the petitioner becomes aware of a service
problem, it must promptly advise the Board of the problem. The
petitioner may be required to certify that it is not aware of any
better address for service of the patent owner. The Board may authorize
other forms of service, such as service by publication in the Official
Gazette of the United States Patent and Trademark Office.
Section 42.206: Proposed Sec. 42.206 would provide for the filing
date requirements of a post-grant review petition.
Proposed Sec. 42.206(a) would set forth the requirements for a
complete petition. 35 U.S.C. 322 states that a petition may only be
considered when the petition identifies all the real parties in
interest, when a copy of the petition is provided to the patent owner
or the owner's representative, and that the petition be accompanied by
the fee established by the Director. Consistent with the statute, the
proposed rule would require that a complete petition be filed along
with the fee and that it be served upon the patent owner.
Proposed Sec. 42.206(b) would provide one month to correct
defective requests to institute a post-grant review, unless the
statutory deadline in which to file a petition for post-grant review
has expired. The proposed rule is consistent with the requirement of 35
U.S.C. 322 that the Board may not consider a petition that fails to
meet the statutory requirements for a petition. In determining whether
to grant a filing date, the Board would review a petition for
procedural compliance. Where a procedural defect is noted, e.g.,
failure to state the claims being challenged, the Board would notify
the petitioner that the petition was incomplete and identify any non-
compliance issues.
Section 42.207: Proposed Sec. 42.207(a) would provide that the
patent owner may file a preliminary response to the petition. The rule
is consistent with 35 U.S.C. 323, which provides for such a response.
Proposed Sec. 42.207(b) would provide that the due date for the
preliminary response to petition is no later than two months from the
date of the notice that the request to institute a post-grant review
has been granted a filing date. This proposed rule is consistent with
35 U.S.C. 323, which provides that the Director shall set a time period
for filing the preliminary patent owner response.
Within three months from the filing of the preliminary patent owner
response, or three months from the date such a response was due, the
Board would determine whether to institute the review. A patent owner
seeking a shortened period for the determination may wish to file a
preliminary response well before the date the response is due,
including filing a paper stating that no preliminary response will be
filed. No adverse inference will be drawn where a patent owner elects
not to file a response or elects to waive the response.
Proposed Sec. 42.207(c) would provide that the preliminary patent
owner response would not be allowed to present new testimony evidence,
for example, expert witness testimony on patentability. 35 U.S.C. 323
provides that a preliminary patent owner response set forth reasons why
no post-grant review should be instituted. In contrast, 35 U.S.C.
326(a)(8) provides for a patent owner response after institution and
requires the presentation, through affidavits or declarations, of any
additional factual evidence and expert opinions on which the patent
owner relies in support of the response. The difference in statutory
language demonstrates that 35 U.S.C. 323 does not permit for the
presentation of evidence as a matter of right in the form of testimony
in support of a preliminary patent owner response, and the proposed
rule reflects this distinction. In certain instances, however, a patent
owner may be granted additional discovery before filing their
preliminary response and submit any testimonial evidence obtained
through the discovery. For example, additional discovery may be
authorized where patent owner raises sufficient concerns regarding the
petitioner's certification of standing.
Although 35 U.S.C. 324 does not require that a preliminary patent
owner response be considered, the Board expects to consider such a
response in all but exceptional cases.
Proposed Sec. 42.207(d) would provide that the preliminary patent
owner response would not be allowed to include any amendment. See
proposed Sec. 42.221 for filing a motion to amend the patent after a
post-grant review has been instituted.
Proposed Sec. 42.207(e) would provide that the patent owner may
file a statutory disclaimer under 35 U.S.C. 253(a) in compliance with
Sec. 1.321(a), disclaiming one or more claims in the patent, and no
post-grant review will be instituted based on disclaimed claims.
Section 42.208: Proposed Sec. 42.208 would provide for the
institution of a post-grant review.
35 U.S.C. 324(a), as amended, states that the Director may not
authorize a post-grant review to be instituted, unless the Director
determines that the information in the petition, if such information is
not rebutted, demonstrate that it is more likely than not at least one
of the claims challenged in the petition is unpatentable.
Alternatively, the Director may institute a post-grant review by a
showing that the petition raises a novel or unsettled legal question
that is important to other patents or patent applications. Proposed
Sec. 42.208 is consistent with this statutory requirement and
identifies how the Board may authorize such a review to proceed.
Proposed Sec. 42.208(a) would provide that the Board may authorize
the review to proceed on all or some of the challenged claims and on
all or some of the grounds of unpatentability asserted for each claim.
Specifically, in instituting the review, the Board would authorize the
review to proceed on the challenged claims for which the threshold
requirements for the proceeding have been met. The Board would identify
which of the grounds the review will proceed upon on a claim-by-claim
basis. Any claim or issue not included in the authorization for review
would not be part of the post-grant review. The Office intends to
publish a notice of the institution of a post-grant review in the
Official Gazette.
Proposed Sec. 42.208(b) would provide that the Board, prior to
institution of a

[[Page 7066]]

review, may deny some or all grounds for unpatentability on some or all
of the challenged claims. This proposed rule is consistent with the
efficient administration of the Office, which is a consideration in
prescribing post-grant review regulations under 35 U.S.C. 326(b).
Proposed Sec. 42.208(c) would provide that the institution may be
based on a more likely than not standard and is consistent with the
requirements of 35 U.S.C. 324(a).
Proposed Sec. 42.208(d) would provide that a determination under
Sec. 42.208(c) may be satisfied by a showing that the petition raises
a novel or unsettled legal question that is important to other patents
or patent applications. This proposed rule is consistent with 35 U.S.C.
324(b). The expectation is that this ground for a post-grant review
would be used sparingly.
Section 42.220: Proposed Sec. 42.220 would set forth the procedure
in which the patent owner may file a patent owner response.
Proposed Sec. 42.220(a) would provide for a patent owner response
and is consistent with the requirements of 35 U.S.C. 326(a)(8).
Proposed Sec. 42.220(b) would provide that if no time for filing a
patent owner response to a petition is provided in a Board order, the
default time for filing the response would be two months from the date
the post-grant review is instituted. The Board's experience with patent
owner responses is that two months provides a sufficient amount of time
to respond in a typical case, especially as the patent owner would
already have been provided two months to file a preliminary patent
owner response prior to institution. Additionally, the proposed time
for response is consistent with the requirement that the trial be
conducted such that the Board renders a final decision within one year
of the institution of the review. 35 U.S.C. 326(a)(11).
Section 42.221: Proposed Sec. 42.221 would provide a procedure for
a patent owner to file motions to amend the patent.
Proposed Sec. 42.221(a) would make it clear that the first motion
to amend need not be authorized by the Board. If the motion complies
with the timing and procedural requirements, the motion would be
entered. Additional motions to amend would require prior Board
authorization. All motions to amend, even if entered, will not
automatically result in entry of the proposed amendment into the
patent.
The requirement to consult the Board reflects the Board's need to
regulate the substitution of claims and the amendment of the patent to
control unnecessary proliferation of issues and abuses. The proposed
rule aids in the efficient administration of the Office and the timely
completion of the review. 35 U.S.C. 326(b).
Proposed Sec. 42.221(b) would provide that a motion to amend the
claims must set forth: (1) The support in the original disclosure of
the patent for each claim that is added or amended, and (2) the support
in an earlier filed disclosure for each claim for which benefit of the
filing date of the earlier filed disclosure is sought.
Proposed Sec. 42.221(c) would provide that a motion to amend the
claims will not be authorized where the amendment does not respond to
the ground of unpatentability involved in the trial or seeks to enlarge
the scope of the claims or introduce new matter.
The proposed rule aids the efficient administration of the Office
and the timely completion of the review, 35 U.S.C. 326(b), and is also
consistent with 35 U.S.C. 326(d)(3), which prohibits enlarging the
scope of claims or introducing new matter.
Under the proposed rules, a patent owner may request filing more
than one motion to amend its claims during the course of the
proceeding. Additional motions to amend may be permitted upon a
demonstration of good cause by the patent owner. In considering whether
good cause is shown, the Board will take into account how the filing of
such motions would impact the timely completion of the proceeding and
the additional burden placed on the petitioner. Specifically, belated
motions to amend may cause the integrity and efficiency of the review
to suffer as the petitioner may be required to devote significant time
and resources on claims that are of constantly changing scope.
Furthermore, due to time constraints, motions to amend late in the
process may not provide a petitioner a full and fair opportunity to
respond to the newly presented subject matter. Accordingly, the longer
a patent owner waits to request authorization to file an additional
motion to amend, the higher the likelihood the request will be denied.
Similarly, motion to amend may be permitted upon a joint request of the
petitioner and the patent owner to advance settlement where the motion
does not jeopardize the ability of the Office to timely complete the
proceeding.
Section 42.222: Proposed Sec. 42.222 would prescribe a rule
consistent with the requirements of 35 U.S.C. 325(d) regarding multiple
proceedings involving the subject patent. When there is a question of a
stay concerning a matter for which a statutory time period is running
in one of the proceedings, where the stay would impact the ability of
the Office to meet the statutory deadline, it is expected that the
Director would be consulted prior to issuance of a stay, given that the
stay would impact the ability of the Office to meet the statutory
deadline for completing the post-grant review. For example, it is
expected that the Board would consult the Director prior to the
issuance of a stay in an ex parte reexamination proceeding where the
three month statutory time period under 35 U.S.C. 303 is running.
Section 42.223: Proposed Sec. 42.223 would provide for the filing
of supplemental information. 35 U.S.C. 326(a)(3) provides that the
Director shall establish regulations establishing procedures for filing
supplemental information after the petition is filed. 35 U.S.C. 324(a)
provides that the institution of a post-grant review is based upon the
information filed in the petition under 35 U.S.C. 321 and any response
filed under 35 U.S.C. 323. As the institution of the post-grant review
is not based upon supplemental information, the proposed rule would
provide that motions identifying supplemental information be filed
after the institution of the post-grant review.
Section 42.224: Proposed Sec. 42.224 would provide that additional
discovery in a post-grant review is limited to evidence directly
related to factual assertions advanced by a party to the proceeding and
that the standard for additional discovery is good cause. The proposed
rule is consistent with 35 U.S.C. 326(a)(5), which provides that the
Director shall prescribe regulations setting forth the standards and
procedures for discovery of relevant evidence that is directly related
to factual assertions by either party.
While an interests-of-justice standard will be employed in granting
additional discovery in inter partes reviews and derivation
proceedings, new subpart C will provide that a good cause standard is
employed in post-grant reviews, and by consequence, in covered business
method patent reviews. Good cause and interests of justice are closely
related standards, but on balance, the interests-of-justice standard is
slightly higher than good cause. While a good cause standard requires a
party to show a specific factual reason to justify the needed
discovery, interests of justice would mean that the Board would look at
all relevant factors. The interests-of-justice standard covers
considerable more ground than the good cause standard, and in using
such a standard

[[Page 7067]]

the Board will attempt to consider whether the additional discovery is
necessary in light of ``the totality of the relevant circumstances.''
U.S. v. Roberts, 978 F.2d 17, 22 (1st Cir. 1992).

Rulemaking Considerations

A. Administrative Procedure Act (APA): This notice proposes rules
of practice concerning the procedure for requesting a post-grant or
covered business method patent review, and the trial process after
initiation of such a review. The changes being proposed in this notice
do not change the substantive criteria of patentability. These proposed
changes involve rules of agency practice and procedure and/or
interpretive rules. See Bachow Commc'ns Inc. v. FCC, 237 F.3d 683, 690
(DC Cir. 2001) (rules governing an application process are procedural
under the Administrative Procedure Act); Inova Alexandria Hosp. v.
Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (rules for handling appeals
were procedural where they did not change the substantive standard for
reviewing claims); Nat'l Org. of Veterans' Advocates v. Sec'y of
Veterans Affairs, 260 F.3d 1365, 1375 (Fed. Cir. 2001) (rule that
clarifies interpretation of a statute is interpretive).
Accordingly, prior notice and opportunity for public comment are
not required pursuant to 5 U.S.C. 553(b) or (c) (or any other law), and
thirty-day advance publication is not required pursuant to 5 U.S.C.
553(d) (or any other law). See Cooper Techs. Co. v. Dudas, 536 F.3d
1330, 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35
U.S.C. 2(b)(2)(B), does not require notice and comment rulemaking for
``interpretative rules, general statements of policy, or rules of
agency organization, procedure, or practice'') (quoting 5 U.S.C.
553(b)(A)). The Office, however, is publishing these changes and the
Initial Regulatory Flexibility Act analysis, below, for comment as it
seeks the benefit of the public's views on the Office's proposed
implementation of these provisions of the Leahy-Smith America Invents
Act.
B. Regulatory Flexibility Act: The Office estimates that 50
petitions for post-grant and covered business method patent review will
be filed in fiscal year 2013. This will be the first fiscal year in
which the review proceeding will be available for an entire fiscal
year.
In fiscal year 2013, it is expected that no post-grant review
petitions will be received, other than those filed under the
transitional program for covered business method patents. Thus, the
estimated number of post-grant and covered business method patent
review petitions is based on the number of inter partes reexamination
requests filed in fiscal year 2011 for patents having an original
classification in class 705 of the United States Patent Classification
System. Class 705 is the classification for patents directed to data
processing in the following areas: financial, business practice,
management, or cost/price determination. See http://www.uspto.gov/web/patents/classification/uspc705/sched705.pdf.
The following is the class definition and description for Class
705:

This is the generic class for apparatus and corresponding
methods for performing data processing operations, in which there is
a significant change in the data or for performing calculation
operations wherein the apparatus or method is uniquely designed for
or utilized in the practice, administration, or management of an
enterprise, or in the processing of financial data.
This class also provides for apparatus and corresponding methods
for performing data processing or calculating operations in which a
charge for goods or services is determined.
This class additionally provides for subject matter described in
the two paragraphs above in combination with cryptographic apparatus
or method.
Subclasses 705/300-348 were established prior to complete
reclassification of all project documents. Documents that have not
yet been reclassified have been placed in 705/1.1. Until
reclassification is finished a complete search of 705/300-348 should
include a search of 705/1.1. Once the project documents in 705/1.1
have been reclassified they will be moved to the appropriate
subclasses and this note will be removed.
SCOPE OF THE CLASS
1. The arrangements in this class are generally used for
problems relating to administration of an organization, commodities
or financial transactions.
2. Mere designation of an arrangement as a ``business machine''
or a document as a ``business form'' or ``business chart'' without
any particular business function will not cause classification in
this class or its subclasses.
3. For classification herein, there must be significant claim
recitation of the data processing system or calculating computer and
only nominal claim recitation of any external art environment.
Significantly claimed apparatus external to this class, claimed in
combination with apparatus under the class definition, which perform
data processing or calculation operations are classified in the
class appropriate to the external device unless specifically
excluded therefrom.
4. Nominally claimed apparatus external to this class in
combination with apparatus under the class definition is classified
in this class unless provided for in the appropriate external class.
5. In view of the nature of the subject matter included herein,
consideration of the classification schedule for the diverse art or
environment is necessary for proper search.

See Classification Definitions (Feb. 2011) available at http://www.uspto.gov/web/patents/classification/uspc705/defs705.htm.
Accordingly, patents subject to covered business method patent
review are anticipated to be typically classifiable in Class 705. It is
anticipated that the number of patents in Class 705 that do not qualify
as covered business method patents would approximate the number of
patents classified in other classes that do qualify.
The Office received 20 requests for inter partes reexamination of
patents classified in Class 705 in fiscal year 2011. The Office is
estimating the number of petitions for covered business method patent
review to be higher than 20 requests due to an expansion of the grounds
for which review may be requested including subject matter eligibility
grounds, the greater coordination with litigation, and the provision
that patents will be eligible for the proceeding regardless of filing
date of the application which resulted in the patent. It is not
anticipated that any post-grant review petitions will be received in
fiscal year 2013 as only patents issuing based on certain applications
filed on or after March 16, 2013 are eligible for post-grant review, or
certain applications involved in an interference proceeding commenced
before September 12, 2012. Public Law 112-29, Sec. 6(f), 125 Stat.
284, 311 (2011).
The Office has reviewed the entity status of patents for which
inter partes reexamination was requested from October 1, 2000, to
September 23, 2011. This data only includes filings granted a filing
date in the particular year rather than filings in which a request was
received in the year. The first inter partes reexamination was filed on
July 27, 2001. A summary of that review is provided in Table 1 below.
As shown by Table 1, patents known to be owned by a small entity
represented 32.79% of patents for which inter partes reexamination was
requested. Based on an assumption that the same percentage of patents
owned by small entities will be subject to post-grant and covered
business method patent review, it is estimated that 16 petitions for
post-grant and covered business method patent review would be filed to
seek review of patents owned by a small entity in fiscal year 2013, the
first full fiscal year that these proceedings will be available.

[[Page 7068]]

Table 1--Inter partes Reexamination Requests Filed With Parent Entity Type *
----------------------------------------------------------------------------------------------------------------
Number filed
Inter partes where parent Percent small
Fiscal year reexamination patent is entity type
requests small entity of total
filed type
----------------------------------------------------------------------------------------------------------------
2011............................................................ 329 123 37.39
2010............................................................ 255 94 36.86
2009............................................................ 240 62 25.83
2008............................................................ 155 52 33.55
2007............................................................ 127 35 27.56
2006............................................................ 61 17 27.87
2005............................................................ 59 18 30.51
2004............................................................ 26 5 19.23
2003............................................................ 21 12 57.14
2002............................................................ 4 1 25.00
2001............................................................ 1 0 0.00
-----------------------------------------------
1,278 419 32.79
----------------------------------------------------------------------------------------------------------------
* Small entity status determined by reviewing preexamination small entity indicator for the parent patent.

Based on the number of patents issued during fiscal years 1995
through 1999 that paid the small entity third stage maintenance fee,
the number of patents issued during fiscal years 2000 through 2003 that
paid the small entity second stage maintenance fee, the number of
patents issued during fiscal years 2004 through 2007 that paid the
first stage maintenance fee, and the number of patents issued during
fiscal years 2008 through 2011 that paid a small entity issue fee,
there are no less than 375,000 patents owned by small entities in force
as of October 1, 2011.
Furthermore, the Office recognizes that there would be an offset to
this number for patents that expire earlier than 20 years from their
filing date due to a benefit claim to an earlier application or due to
a filing of a terminal disclaimer. The Office likewise recognizes that
there would be an offset in the estimate in the opposite manner due to
the accrual of patent term extension and adjustment. The Office,
however, does not maintain data on the date of expiration by operation
of a terminal disclaimer. Therefore, the Office has not adjusted the
estimate of 375,000 patents owned by small entities in force as of
October 1, 2011. While the Office maintains information regarding
patent term extension and adjustment accrued by each patent, the Office
does not collect data on the expiration date of patents that are
subject to a terminal disclaimer. As such, the Office has not adjusted
the estimated of 375,000 patents owned by small entities in force as of
October 1, 2011, for accrual of patent term extension and adjustment,
because in view of the incomplete terminal disclaimer data issue, would
be incomplete and any estimate adjustment would be administratively
burdensome. Thus, it is estimated that the number of small entity
patents in force in fiscal year 2013 will be at least 375,000.
Based on the estimated number of patents in force, the number of
small entity owned patents impacted by post-grant and covered business
method patent review in fiscal year 2013 (16 patents) would be less
than 0.005% (16/375,000) of all patents in force that are owned by
small entities. The USPTO nonetheless has undertaken an Initial
Regulatory Flexibility Act Analysis of the proposed rule.
1. Description of the Reasons That Action by the Office Is Being
Considered: On September 16, 2011, the Leahy-Smith America Invents Act
was enacted into law (Pub. L. 112-29, 125 Stat. 284 (2011)). Section 6
of the Leahy-Smith America Invents Act amends title 35, United States
Code, by adding chapter 32 to create a new post-grant review
proceeding. Section 18 of the Leahy-Smith America Invents Act provides
for a transitional program for covered business method patents which
will employ the standards and procedures of the post-grant review
proceeding with a few exceptions. For the implementation, Sec. 6(f) of
the Leahy-Smith America Invents Act requires that the Director issue
regulations to carry out chapter 32 of title 35, United States Code,
within one year after the date of enactment. Public Law 112-29, Sec.
6(f), 125 Stat. 284, 311 (2011).
2. Succinct Statement of the Objectives of, and Legal Basis for,
the Proposed Rules: The proposed rules seek to implement post-grant and
covered business method patent review as authorized by the Leahy-Smith
America Invents Act. The Leahy-Smith America Invents Act requires that
the Director prescribe rules for the post-grant and covered business
method patent reviews that result in a final determination not later
than one year after the date on which the Director notices the
institution of a proceeding. The one-year period may be extended for
not more than 6 months if good cause is shown. See 35 U.S.C.
326(a)(11). The Leahy-Smith America Invents Act also requires that the
Director, in prescribing rules for post-grant and covered business
method patent reviews, consider the effect of the rules on the economy,
the integrity of the patent system, the efficient administration of the
Office, and the ability of the Office to complete timely the instituted
proceedings. See 35 U.S.C. 326(b). Consistent with the time periods
provided in 35 U.S.C. 326(a)(11), the proposed rules are designed to,
except where good cause is shown to exist, result in a final
determination by the Patent Trial and Appeal Board within one year of
the notice of initiation of the review. This one-year review will
enhance the effect on the economy, and improve the integrity of the
patent system and the efficient administration of the Office.
3. Description and Estimate of the Number of Affected Small
Entities: The Small Business Administration (SBA) small business size
standards applicable to most analyses conducted to comply with the
Regulatory Flexibility Act are set forth in 13 CFR 121.201. These
regulations generally define small businesses as those with fewer than
a specified maximum number of employees or less than a specified level
of annual receipts for the entity's industrial sector or North American
Industry Classification System (NAICS) code. As provided by the
Regulatory Flexibility Act, and after consultation

[[Page 7069]]

with the Small Business Administration, the Office formally adopted an
alternate size standard as the size standard for the purpose of
conducting an analysis or making a certification under the Regulatory
Flexibility Act for patent-related regulations. See Business Size
Standard for Purposes of United States Patent and Trademark Office
Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR
67109 (Nov. 20, 2006), 1313 Off. Gaz. Pat. Office 60 (Dec. 12, 2006).
This alternate small business size standard is SBA's previously
established size standard that identifies the criteria entities must
meet to be entitled to pay reduced patent fees. See 13 CFR 121.802. If
patent applicants identify themselves on a patent application as
qualifying for reduced patent fees, the Office captures this data in
the Patent Application Location and Monitoring (PALM) database system,
which tracks information on each patent application submitted to the
Office.
Unlike the SBA small business size standards set forth in 13 CFR
121.201, the size standard for USPTO is not industry-specific. The
Office's definition of a small business concern for Regulatory
Flexibility Act purposes is a business or other concern that: (1) Meets
the SBA's definition of a ``business concern or concern'' set forth in
13 CFR 121.105; and (2) meets the size standards set forth in 13 CFR
121.802 for the purpose of paying reduced patent fees, namely an
entity: (a) Whose number of employees, including affiliates, does not
exceed 500 persons; and (b) which has not assigned, granted, conveyed,
or licensed (and is under no obligation to do so) any rights in the
invention to any person who made it and could not be classified as an
independent inventor, or to any concern which would not qualify as a
non-profit organization or a small business concern under this
definition. See Business Size Standard for Purposes of United States
Patent and Trademark Office Regulatory Flexibility Analysis for Patent-
Related Regulations, 71 FR at 67112 (Nov 20, 2006), 1313 Off. Gaz. Pat.
Office at 63 (Dec. 12, 2006).
As discussed above, it is anticipated that 50 petitions for post-
grant and covered business method patent review will be filed in fiscal
year 2013. The Office has reviewed the percentage of patents for which
inter partes reexamination was requested from October 1, 2000 to
September 23, 2011. A summary of that review is provided in Table 1
above. As demonstrated by Table 1, patents known to be owned by a small
entity represent 32.79% of patents for which inter partes reexamination
was requested. Based on an assumption that the same percentage of
patents owned by small entities will be subject to the new review
proceedings, it is estimated that 16 patents owned by small entities
would be affected by a post-grant or covered business method patent
review.
The USPTO estimates that 2.5% of patent owners will file a request
for adverse judgment prior to a decision to institute and that another
2.5% will file a request for adverse judgment or fail to participate
after initiation. Specifically, an estimated 2 patent owners will file
a request for adverse judgment or fail to participate after institution
in post-grant and covered business method patent review proceedings
combined. Based on the percentage of small entity owned patents that
were the subject of inter partes reexamination (32.79%) from October 1,
2000 to September 23, 2011, it is estimated that 1 small entity will
file such requests or fail to participate in post-grant and covered
business method patent review combined.
Under the proposed rules, prior to determining whether to institute
a review, the patent owner may file an optional patent owner
preliminary response to the petition. Given the new time period
requirements to file a petition for review before the Board relative to
patent enforcement proceedings and the desire to avoid the cost of a
trial and delays to related infringement actions, it is anticipated
that 90% of petitions, other than those for which a request for adverse
judgment is filed, will result in the filing of a patent owner
preliminary response. Specifically, the Office estimates that 45 patent
owners will file a preliminary response to a post-grant or covered
business method petition. Based on the percentage of small entity owned
patents that were the subject of inter partes reexamination (32.79%),
it is estimated that 15 small entities will file a preliminary response
to a post-grant or covered business method patent review petition filed
in fiscal year 2013.
Under the proposed rules, the Office will determine whether to
institute a trial within three months after the earlier of: (1) The
submission of a patent owner preliminary response, (2) the waiver of
filing a patent owner preliminary response, or (3) the expiration of
the time period for filing a patent owner preliminary response. If the
Office decides not to institute a trial, the petitioner may file a
request for reconsideration of the Office's decision. In estimating the
number of requests for reconsideration, the Office considered the
percentage of inter partes reexaminations that were denied relative to
those that were ordered (24 divided by 342, or 7%) in fiscal year 2011.
See Reexamination--FY 2011, http://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf. The
Office also considered the impact of: (1) Patent owner preliminary
responses under newly authorized in 35 U.S.C. 323, (2) the enhanced
thresholds for instituting reviews set forth in 35 U.S.C. 324(a), which
would tend to increase the likelihood of dismissing a petition for
review, and (3) the more restrictive time period for filing a petition
for review in 35 U.S.C. 325(b), which would tend to reduce the
likelihood of dismissing a petition. Based on these considerations, it
is estimated that 10% of the petitions for review (5 divided by 49)
would be dismissed.
During fiscal year 2011, the Office issued 21 decisions following a
request for reconsideration of a decision on appeal in inter partes
reexamination. The average time from original decision to decision on
reconsideration was 4.4 months. Thus, the decisions on reconsideration
were based on original decisions issued from July 2010 until June 2011.
During this time period, the Office mailed 63 decisions on appeals in
inter partes reexamination. See BPAI Statistics--Receipts and
Dispositions by Technology Center, http://www.uspto.gov/ip/boards/bpai/stats/receipts/index.jsp (monthly data). Based on the assumption that
the same rate of reconsideration (21 divided by 63 or 33.333%) will
occur, the Office estimates that 2 requests for reconsideration will be
filed. Based on the percentage of small entity owned patents that were
the subject of inter partes reexamination (32.79%), it is estimated
that 1 small entity will file a request for a reconsideration of a
decision dismissing the petition for post-grant and covered business
method patent review filed in fiscal year 2013.
The Office reviewed motions, oppositions, and replies in a number
of contested trial proceedings before the trial section of the Board.
The review included determining whether the motion, opposition, and
reply were directed to patentability grounds and non-priority non-
patentability grounds. Based on the review, it is anticipated that
post-grant and covered business method patent reviews will have an
average of 8.89 motions, oppositions, and replies per trial after
institution. Settlement is estimated to occur in 20% of instituted
trials at various points of the trial. In the trials that are settled,
it is estimated that only 50% of the noted motions, oppositions, and
replies would be filed.

[[Page 7070]]

After a trial has been instituted but prior to a final written
decision, parties to a post-grant or covered business method patent
review may request an oral hearing. It is anticipated that 45 requests
for oral hearings will be filed based on the number of requests for
oral hearings in inter partes reexamination, the stated desirability
for oral hearings during the legislative process, and the public input
received prior to this notice of proposed rulemaking. Based on the
percentage of small entity owned patents that were the subject of inter
partes reexamination (32.79%), it is estimated that 15 small entities
will file a request for oral hearing in the post-grant or covered
business method patent reviews instituted in fiscal year 2013.
Parties to a post-grant or covered business method patent review
may file requests to treat a settlement as business confidential, and
request for adverse judgment. A written request to make a settlement
agreement available may also be filed. Given the short time period set
for conducting trials, it is anticipated that the alternative dispute
resolution options will be infrequently used. The Office estimates that
2 requests to treat a settlement as business confidential, and 10
requests for adverse judgment, default adverse judgment, or settlement
notices will be filed. The Office also estimates that 2 requests to
make a settlement available will be filed. Based on the percentage of
small entity owned patents that were the subject of inter partes
reexamination (32.79%), it is estimated that 1 small entity will file a
request to treat a settlement as business confidential and 3 small
entities will file a request for adverse judgment, default adverse
judgment notices, or settlement notices in the reviews instituted in
fiscal year 2013.
Parties to a post-grant or covered business method patent review
may seek judicial review of the final decision of the Board.
Historically, 33% of examiner's decisions in inter partes reexamination
proceedings have been appealed to the Board. It is anticipated that 16%
of final decision of the Board would be appealed. The reduction in
appeal rate is based the higher threshold for institution, the focused
process, and the experience of the Board in conducted contested cases.
Therefore, it is estimated that 5 parties would seek judicial review of
the final decisions of the Board in post-grant or covered business
method patent reviews instituted in fiscal year 2013. Furthermore,
based on the percentage of small entity owned patents that were the
subject of inter partes reexamination (32.79%), it is estimated that 2
small entities would seek judicial review of final decisions of the
Board in the post-grant or covered business method patent reviews
instituted in fiscal year 2013.
4. Description of the Reporting, Recordkeeping, and Other
Compliance Requirements of the Proposed Rule, Including an Estimate of
the Classes of Small Entities Which Will Be Subject to the Requirement
and the Type of Professional Skills Necessary for Preparation of the
Report or Record: Based on the filing trends of inter partes
reexamination requests, it is anticipated that petitions for post-grant
review will be filed across all technologies with approximately 50%
being filed in electrical technologies, approximately 30% in mechanical
technologies, and the remaining 20% in chemical technologies and
design. Under the proposed rules, a person who is not the owner of a
patent may file a petition to institute a review of the patent, with a
few exceptions. Given this, a petition for review is likely to be filed
by an entity practicing in the same or similar field as the patent.
Therefore, it is anticipated that 50% of the petitions for review will
be filed in the electronic field, 30% in the mechanical field, and 20%
in the chemical or design fields for post-grant review.
Covered business method patent reviews would be limited to business
method patents that are not patents for technological inventions. Under
the proposed rules, a person who is not the owner of a patent may file
a petition to institute a review of the patent, with a few exceptions.
Given this, it is anticipated that a petition for review is likely to
be filed by an entity practicing in the business method field for
covered business methods.
Preparation of the petition would require analyzing the patent
claims, locating evidence supporting arguments of unpatentability, and
preparing the petition seeking review of the patent. This notice
provides the proposed procedural requirements that are common for the
new trials. Additional requirements are provided in contemporaneous
trial specific proposed rulemaking. The procedures for petitions to
institute a post-grant review are proposed in Sec. Sec. 42.5, 42.6,
42.8, 42.11, 42.13, 42.20, 42.21, 42.22, 42.24(a)(2)), 42.63, 42.65,
and 42.201 through 42.205. The procedures for petitions to institute a
covered business method patent review are proposed in Sec. Sec. 42.5,
42.6, 42.8, 42.11, 42.13, 42.20, 42.21, 42.22, 42.24(a)(3), 42.63,
42.65, 42.203, 42.205, and 42.302 through 42.304.
The skills necessary to prepare a petition for review and to
participate in a trial before the Patent Trial and Appeal Board would
be similar to those needed to prepare a request for inter partes
reexamination, to represent a party in an inter partes reexamination,
and to represent a party in an interference proceeding before the
Patent Trial and Appeal Board. The level of skill is typically
possessed by a registered patent practitioner having devoted
professional time to the particular practice area, typically under the
supervision of a practitioner skilled in the particular practice area.
Where authorized by the Board, a non-registered practitioner may be
admitted pro hac vice, on a case-by-case basis based on the facts and
circumstances of the trial and party, as well as the skill of the
practitioner.
The cost of preparing a petition for post-grant or covered business
method patent review is estimated to be 33.333% higher than the cost of
preparing an inter partes review petition because the petition for
post-grant or covered business method patent review may seek to
institute a proceeding on additional grounds such as subject matter
eligibility. The American Intellectual Property Law Association's AIPLA
Report of the Economic Survey 2011 reported that the average cost of
preparing a request for inter partes reexamination was $46,000. Based
on the work required to prepare and file such a request, the Office
considers the reported cost as a reasonable estimate. Therefore, the
Office estimates that the cost of preparing a petition for post-grant
or covered business method patent review would be $61,333 (including
expert costs).
The filing of a petition for review would also require payment by
the petitioner of the appropriate petition fee to recover the aggregate
cost for providing the review. The appropriate petition fee would be
determined by the number of claims for which review is sought and the
type of review. The proposed fees for filing a petition for post-grant
or covered business method patent review would be: $35,800 to request
review of 20 or fewer claims, $44,750 to request review of 21 to 30
claims, $53,700 to request review of 31 to 40 claims, $71,600 to
request review of 41 to 50 claims, $89,500 to request review of 51 to
60 claims, and an additional $35,800 to request review of additional
groups of 10 claims.
In setting fees, the estimated information technology cost to
establish the process and maintain the filing and storage system
through 2017 is to be recovered by charging each petition $2,270. The
remainder of the fee is to recover the cost for judges to determine
whether to institute a review and

[[Page 7071]]

conduct the review, together with a proportionate share of indirect
costs, e.g., rent, utilities, additional support, and administrative
costs. Based on the direct and indirect costs, the fully burdened cost
per hour for judges to decide a petition and conduct a review is
estimated to be $258.32.
For a petition for post-grant or covered business method patent
review with 20 or fewer challenged claims, it is anticipated that 121
hours of judge time would be required. For 21 to 30 challenged claims,
an additional 30 hours is anticipated for a total of 151 hours of judge
time. For 31 to 40 challenged claims, an additional 60 hours is
anticipated for a total of 181 hours of judge time. For 41 to 50
challenged claims, an additional 121 hours is anticipated for a total
of 242 hours of judge time. For 51 to 60 challenged claims, an
additional 181 hours is anticipated for a total of 302 hours of judge
time. The increase in adjustment reflects the added complexity that
typically occurs as more claims are in dispute.
The proposed rules would permit the patent owner to file a
preliminary response to the petition setting forth the reasons why no
review should be initiated. The procedures for a patent owner to file a
preliminary response as an opposition are proposed in Sec. Sec. 42.6,
42.8, 42.11, 42.13, 42.21, 42.23, 42.24(b), 42.51, 42.52, 42.53, 42.54,
42.63, 42.64, 42.65, 42.107, 42.120, 42.207, and 42.220. The patent
owner is not required to file a preliminary response. The Office
estimates that the preparation and filing of a patent owner preliminary
response would require 100 hours of professional time and cost $34,000
(including expert costs). The AIPLA Report of the Economic Survey 2011
reported that the average cost for inter partes reexamination including
of the request ($46,000), the first patent owner response, and third-
party comments was $75,000 (see I-175) and the median billing rate for
professional time of $340 per hour for attorneys in private firms (see
8). Thus, the cost of the first patent owner reply and the third party
statement is $29,000. The Office finds these costs to be reasonable
estimates. The patent owner reply and third party statement, however,
occur after the examiner has made an initial threshold determination
and made only the appropriate rejections. Accordingly, it is
anticipated that filing a patent owner preliminary response to a
petition for review would cost more than the initial reply in a
reexamination, or an estimated $34,000 (including expert costs).
The Office will determine whether to institute a trial within three
months after the earlier of: (1) The submission of a patent owner
preliminary response, (2) the waiver of filing a patent owner
preliminary response, or (3) the expiration of the time period for
filing a patent owner preliminary response. If the Office decides not
to institute a trial, the petitioner may file a request for
reconsideration of the Office's decision. It is anticipated that a
request for reconsideration will require 80 hours of professional time
to prepare and file, for a cost of $27,200. This estimate is based on
the complexity of the issues and desire to avoid time bars imposed by
35 U.S.C. 325(b).
Following institution of a trial, the parties may be authorized to
file various motions, e.g., motions to amend and motions for additional
discovery. Where a motion is authorized, an opposition may be
authorized, and where an opposition is authorized, a reply may be
authorized. The procedures for filing a motion are proposed in
Sec. Sec. 42.6, 42.8, 42.11, 42.13, 42.21, 42.22, 42.24(a)(5), 42.51,
42.52, 42.53, 42.54, 42.63, 42.64, 42.65, 42.221, and 42.223. The
procedures for filing an opposition are proposed in Sec. Sec. 42.6,
42.8, 42.11, 42.13, 42.21, 42.23, 42.24(b), 42.51, 42.52, 42.53, 42.54,
42.63, 42.64, 42.65, 42.207, and 42.220. The procedures for filing a
reply are proposed in Sec. Sec. 42.6, 42.8, 42.11, 42.13, 42.21,
42.23, 42.24(c), 42.51, 42.52, 42.53, 42.54, 42.63, and 42.65. As
discussed previously, the Office estimates that the average post-grant
or covered business method patent review will have 8.89 motions,
oppositions, and replies after institution.
The AIPLA Report of the Economic Survey 2011 reported that the
average cost in contested cases before the trial section of the Board
prior to the priority phase was $322,000 per party. Because of the
overlap of issues in patentability grounds, it is expected that the
cost per motion will decline as more motions are filed in a proceeding.
It is estimated that a motion, opposition, or reply in a derivation
would cost $34,000, which is estimated by dividing the total public
cost for all motions in current contested cases divided by the
estimated number of motions in derivations under 35 U.S.C. 135, as
amended. The cost of a motion, opposition, or reply in a post-grant or
covered business method patent review is estimated at $44,200
(including expert costs), reflecting the reduction in overlap between
motions relative to derivation. Based on the work required to file and
prepare such briefs, the Office considers the reported cost as a
reasonable estimate.
After a trial has been instituted but prior to a final written
decision, parties to a post-grant or covered business method patent
review may request an oral hearing. The procedure for filing requests
for oral argument is proposed in Sec. 42.70. The AIPLA Report of the
Economic Survey 2011 reported that the third quartile cost of an ex
parte appeal with an oral argument is $12,000, while the third quartile
cost of an ex parte appeal without an oral argument is $6,000. In view
of the reported costs, which the Office finds reasonable, and the
increased complexity of an oral hearing with multiple parties, it is
estimated that the cost per party for oral hearings would be $6,800 or
$800 more than the reported third quartile cost for an ex parte oral
hearing.
Parties to a post-grant or covered business method patent review
may file requests to treat a settlement as business confidential, or
file a request for adverse judgment. A written request to make a
settlement agreement available may also be filed. The procedures to
file requests that a settlement be treated as business confidential are
proposed in Sec. 42.74(c). The procedures to file requests for adverse
judgment are proposed in Sec. 42.73(b). The procedures to file
requests to make a settlement agreement available are proposed in Sec.
42.74(c)(2). It is anticipated that requests to treat a settlement as
business confidential will require 2 hours of professional time or
$680. It is anticipated that requests for adverse judgment will require
1 hour of professional time or $340. It is anticipated that requests to
make a settlement agreement available will require 1 hour of
professional time or $340. The requests to make a settlement agreement
available will also require payment of a fee of $400 specified in
proposed Sec. 42.15(d).
Parties to a review proceeding may seek judicial review of the
judgment of the Board. The procedures to file notices of judicial
review of a Board decision, including notices of appeal and notices of
election provided for in 35 U.S.C. 141, 142, 145, and 146, are proposed
in Sec. Sec. 90.1 through 90.3. The submission of a copy of a notice
of appeal or a notice of election is anticipated to require 6 minutes
of professional time at a cost of $34.
5. Description of Any Significant Alternatives to the Proposed
Rules Which Accomplish the Stated Objectives of Applicable Statutes and
Which Minimize Any Significant Economic Impact of the Rules on Small
Entities:
Size of petitions and motions: The Office considered whether to
apply a page limit and what an appropriate page

[[Page 7072]]

limit would be. The Office does not currently have a page limit on
inter partes reexamination requests. The inter partes reexamination
requests from October 1, 2010 to June 30, 2011, averaged 246 pages.
Based on the experience of processing inter partes reexamination
requests, the Office finds that the very large size of the requests has
created a burden on the Office that hinders the efficiency and
timeliness of processing the requests, and creates a burden on patent
owners. The quarterly reported average processing time from the filing
of a request to the publication of a reexamination certificate ranged
from 28.9 months to 41.7 months in fiscal year 2009, from 29.5 months
to 37.6 months in fiscal year 2010, and from 31.9 to 38.0 months in
fiscal year 2011. See Reexaminations--FY 2011, http://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf.
By contrast, the Office has a page limit on the motions filed in
contested cases, except where parties are specifically authorized to
exceed the limitation. The typical contested case proceeding is subject
to a standing order that sets a 50 page limit for motions and
oppositions on priority, a 15 page limit for miscellaneous motions
(Sec. 41.121(a)(3)) and oppositions (Sec. 41.122), and a 25 page
limit for other motions (Sec. 41.121(a)(2)) and oppositions to other
motions. In typical proceedings, replies are subject to a 15 page limit
if directed to priority, a 5 page limit for miscellaneous issues, and
10 pages for other motions. The average contested case was terminated
in 10.1 months in fiscal year 2009, in 12 months in fiscal year 2010,
and 9 months in fiscal year 2011. The percentage of contested cases
terminated within 2 years was 93.7% in fiscal year 2009, 88.0% in
fiscal year 2010, and 94.0% in fiscal year 2011. See BPAI Statistics--
Performance Measures, http://www.uspto.gov/ip/boards/bpai/stats/perform/index.jsp.
Comparing the average time period for terminating a contested case,
10.0 to 12.0 months, with the average time period, during fiscal years
2009 through 2011, for completing an inter partes reexamination, 28.9
to 41.7 months, indicates that the average interference takes from 24%
(10.0/41.7) to 42% (12.0/28.9) of the time of the average inter partes
reexamination. While several factors contribute to the reduction in
time, limiting the size of the requests and motions is considered a
significant factor. Proposed Sec. 42.24 would provide page limits for
petitions, motions, oppositions, and replies. 35 U.S.C. 326(b) provides
considerations that are to be taken into account when prescribing
regulations including the integrity of the patent system, the efficient
administration of the Office, and the ability to complete timely the
trials. The page limits proposed in these rules are consistent with
these considerations.
Federal courts routinely use page limits in managing motions
practice as ``[e]ffective writing is concise writing.'' Spaziano v.
Singletary, 36 F.3d 1028, 1031 n.2 (11th Cir. 1994). Many district
courts restrict the number of pages that may be filed in a motion
including, for example, the District of Delaware, the District of New
Jersey, the Eastern District of Texas, the Northern, Central, and
Southern Districts of California, and the Eastern District of Virginia.
Federal courts have found that page limits ease the burden on both
the parties and the courts, and patent cases are no exception. Eolas
Techs., Inc. v. Adobe Sys., Inc., No. 6:09-CV-446, at 1 (E.D. Tex.
Sept. 2, 2010) (``The Local Rules' page limits ease the burden of
motion practice on both the Court and the parties.''); Blackboard, Inc.
v. Desire2Learn, Inc., 521 F. Supp. 2d 575, 576 (E.D. Tex. 2007) (The
parties ``seem to share the misconception, popular in some circles,
that motion practice exists to require federal judges to shovel through
steaming mounds of pleonastic arguments in Herculean effort to uncover
a hidden gem of logic that will ineluctably compel a favorable ruling.
Nothing could be farther from the truth.''); Broadwater v. Heidtman
Steel Prods., Inc., 182 F. Supp. 2d 705, 710 (S.D. Ill. 2002)
(``Counsel are strongly advised, in the future, to not ask this Court
for leave to file any memoranda (supporting or opposing dispositive
motions) longer than 15 pages. The Court has handled complicated patent
cases and employment discrimination cases in which the parties were
able to limit their briefs supporting and opposing summary judgment to
10 or 15 pages.'' (Emphasis omitted)).
The Board's contested cases experience with page limits in motions
practice is consistent with that of the federal courts. The Board's use
of page limits has shown it to be beneficial without being unduly
restrictive for the parties. Page limits have encouraged the parties to
focus on dispositive issues, easing the burden of motions practice on
the parties and on the Board.
The Board's contested cases experience with page limits is informed
by its use of different approaches over the years. In the early 1990s,
page limits were not routinely used for motions, and the practice
suffered from lengthy and unacceptable delays. To reduce the burden on
the parties and on the Board and thereby reduce the time to decision,
the Board instituted page limits in the late 1990s for every motion.
Page limit practice was found to be effective in reducing the burdens
on the parties and improving decision times at the Board. In 2006, the
Board revised the page limit practice and allowed unlimited findings of
fact and generally limited the number of pages containing argument. Due
to abuses of the system, the Board recently reverted back to page
limits for the entire motion (both argument and findings of fact).
The Board's current page limits are consistent with the 25 page
limits in the Northern, Central, and Southern Districts of California,
and the Middle District of Florida and exceed the limits in the
District of Delaware (20), the Northern District of Illinois (15), the
District of Massachusetts (20), the Eastern District of Michigan (20),
the Southern District of Florida (20), and the Southern District of
Illinois (20).
In a typical proceeding before the Board, a party may be authorized
to file a single motion for unpatentability based on prior art, a
single motion for unpatentability based upon failure to comply with 35
U.S.C. 112, lack of written description, and/or enablement, and
potentially another motion for lack of compliance with 35 U.S.C. 101,
although a 35 U.S.C. 101 motion may be required to be combined with the
35 U.S.C. 112 motion. Each of these motions is currently limited to 25
pages in length, unless good cause is shown that the page limits are
unduly restrictive for a particular motion.
A petition requesting the institution of a trial proceeding would
be similar to motions currently filed with the Board. Specifically,
petitions to institute a trial seek a final written decision that the
challenged claims are unpatentable, where derivation is a form of
unpatentability. Accordingly, a petition to institute a trial based on
prior art would, under current practice, be limited to 25 pages, and by
consequence, a petition raising unpatentability based on prior art and
unpatentability under 35 U.S.C. 101 and/or 112 would be limited to 50
pages.
Under the proposed rules, a post-grant review petition would be
based upon any grounds identified in 35 U.S.C. 321(b), e.g., failure to
comply with 35 U.S.C. 101, 102, 103, and 112 (except best mode). Under
current practice, a party would be limited to filing two or three
motions, each limited to 25 pages, for a maximum of 75 pages. Where
there is more than one motion for unpatentability based upon different
statutory grounds, the Board's

[[Page 7073]]

experience is that the motions contain similar discussions of
technology and claim constructions. Such overlap is unnecessary where a
single petition for unpatentability is filed. Thus, the proposed 70
page limit is considered sufficient in all but exceptional cases.
Covered business method patent review is similar in scope to that
of post-grant review as there is substantial overlap in the statutory
grounds permitted for review. Thus, the proposed page limit for
proposed covered business method patent reviews is 70 pages, which is
the same as that proposed for post-grant review.
The proposed rule would provide that petitions to institute a trial
must comply with the stated page limits but may be accompanied by a
motion that seeks to waive the page limits. The petitioner must show in
the motion how a waiver of the page limits is in the interests of
justice. A copy of the desired non-page limited petition must accompany
the motion. Generally, the Board would decide the motion prior to
deciding whether to institute the trial.
Current Board practice provides a limit of 25 pages for other
motions and 15 pages for miscellaneous motions. The Board's experience
is that such page limits are sufficient for the parties filing them and
do not unduly burden the opposing party or the Board. Petitions to
institute a trial would generally replace the current practice of
filing motions for unpatentability, as most motions for relief are
expected to be similar to the current interference miscellaneous motion
practice. Accordingly, the proposed 15 page limit is considered
sufficient for most motions but may be adjusted where the limit is
determined to be unduly restrictive for the relief requested.
Proposed Sec. 42.24(b) would provide page limits for oppositions
filed in response to motions. Current contested cases practice provides
an equal number of pages for an opposition as its corresponding motion.
This is generally consistent with motions practice in federal courts.
The proposed rule would continue the current practice.
Proposed Sec. 42.24(c) would provide page limits for replies.
Current contested cases practice provides a 15 page limit for priority
motion replies, a 5 page limit for miscellaneous (procedural) motion
replies, and a 10 page limit for all other motions. The proposed rule
is consistent with current contested case practice for procedural
motions. The proposed rule would provide a 15 page limit for reply to
petitions requesting a trial, which the Office believes is sufficient
based on current practice. Current contested cases practice has shown
that such page limits do not unduly restrict the parties and, in fact,
have provided sufficient flexibility to parties to not only reply to
the motion but also help to focus on the issues. Thus, it is
anticipated that default page limits would minimize the economic impact
on small entities by focusing on the issues in the trials.
The Leahy-Smith America Invents Act requires that the Director, in
prescribing rules for post-grant and covered business method patent
reviews, consider the effect of the rules on the economy, the integrity
of the patent system, the efficient administration of the Office, and
the ability of the Office to complete timely the instituted
proceedings. See 35 U.S.C. 326(b). In view of the actual results of the
duration of proceedings in inter partes reexamination (without page
limits) and contested cases (with page limits), proposing procedures
with reasonable page limits would be consistent with the objectives set
forth in the Leahy-Smith America Invents Act. Based on our experience
on the time needed to complete a non-page limited proceeding, the
option of non-page limited proceedings was not adopted.
Fee Setting: 35 U.S.C. 321(a) requires the Director to establish
fees to be paid by the person requesting the review in such amounts as
the Director determines to be reasonable, considering the aggregate
costs of the review. In contrast to current 35 U.S.C. 311(b) and
312(c), the Leahy-Smith America Invents Act requires the Director to
establish more than one fee for reviews based on the total cost of
performing the reviews, and does not provide for refund of any part of
the fee when the Director determines that the review should not be
initiated.
35 U.S.C. 322(a)(1) further requires that the fee established by
the Director under 35 U.S.C. 321 accompany the petition on filing.
Accordingly, in interpreting the fee setting authority in 35 U.S.C.
321(a), it is reasonable that the Director should set a number of fees
for filing a petition based on the anticipated aggregate cost of
conducting the review depending on the complexity of the review, and
require payment of the fee upon filing of the petition.
Based on experience with contested cases and inter partes
reexamination proceedings, the following characteristics of requests
were considered as potential factors for fee setting as each would
likely impact the cost of providing the new services. The Office also
considered the relative difficulty in administrating each option in
selecting the characteristics for which different fees should be paid
for requesting review.
I. Adopted Option. Number of claims for which review is requested.
The number of claims often impacts the complexity of the request and
increases the demands placed on the deciding officials. Cf. In re Katz
Interactive Call Processing Patent Litig., 639 F.3d 1303, 1309 (Fed.
Cir. 2011) (limiting number of asserted claims is appropriate to
efficiently manage a case). Moreover, the number of claims for which
review is requested can be easily determined and administered, which
avoids delays in the Office and the impact on the economy or patent
system that would occur if an otherwise meritorious request is refused
due to improper fee payment. Any subsequent petition would be time
barred in view 35 U.S.C. 325.
II. Alternative Option I. Number of grounds for which review is
requested. The Office has experience with large numbers of cumulative
grounds being presented in inter partes reexaminations, which often add
little value to the proceedings. Allowing for a large number of grounds
to be presented on payment of an additional fee(s) is not favored.
Determination of the number of grounds in a request may be contentious
and difficult and may result in a large amount of high-level petition
work. As such, the option would have a negative impact on small
entities. Moreover, interferences instituted in the 1980s and early
1990s suffered from this problem as there was no page limit for motions
and the parties had little incentive to focus the issues for decision.
The resulting interference records were often a collection of disparate
issues and evidence. This led to lengthy and unwarranted delays in
deciding interference cases as well as increased costs for parties and
the Office. Accordingly, this alternative is inconsistent with
objectives of the Leahy-Smith America Invents Act that the Director, in
prescribing rules for the post-grant and covered business method patent
reviews, consider the effect of the rules on the economy, the integrity
of the patent system, the efficient administration of the Office, and
the ability of the Office to timely complete the instituted
proceedings.
III. Alternative Option II. Pages of argument. The Office has
experience with large requests in inter partes reexamination in which
the merits of the proceedings could have been resolved in a shorter
request. Allowing for unnecessarily large requests on payment of an
additional fee(s) is not favored. Moreover, determination of

[[Page 7074]]

what should be counted as ``argument'' as compared with ``evidence''
has often proven to be contentious and difficult as administered in the
current inter partes reexamination appeal process.
In addition, the trial section of the Board recently experimented
with motions having a fixed page limit for the argument section and an
unlimited number of pages for the statement of facts. Unlimited pages
for the statement of facts led to a dramatic increase in the number of
alleged facts and pages associated with those facts. For example, one
party used approximately 10 pages for a single ``fact'' that merely cut
and pasted a portion of a declarant's cross-examination. Based upon the
trial section's experience with unlimited pages of facts, the Board
recently reverted back to a fixed page limit for the entire motion
(argument and facts). Accordingly, this alternative is inconsistent
with objectives of the Leahy-Smith America Invents Act that the
Director, in prescribing rules for the post-grant and covered business
method patent reviews, consider the effect of the rules on the economy,
the integrity of the patent system, the efficient administration of the
Office, and the ability of the Office to complete timely the instituted
proceedings.
IV. Alternative Option III. The Office considered an alternative
fee setting regime in which fees would be charged at various steps in
the review process, a first fee on filing of the petition, a second fee
if instituted, a third fee on filing a motion in opposition to amended
claims, etc. The alternative fee setting regime would hamper the
ability of the Office to complete timely reviews, would result in
dismissal of pending proceedings with patentability in doubt due to
non-payment of required fees by third parties, and would be
inconsistent with 35 U.S.C. 322 that requires the fee established by
the Director be paid at the time of filing the petition. Accordingly,
this alternative is inconsistent with objectives of the Leahy-Smith
America Invents Act that the Director, in prescribing rules for post-
grant and covered business method patent reviews, consider the effect
of the rules on the economy, the integrity of the patent system, the
efficient administration of the Office, and the ability of the Office
to complete timely the instituted proceedings.
V. Alternative Option IV. The Office considered setting reduced
fees for small and micro entities and to provide refunds if a review is
not instituted. The Office may set the fee to recover the cost of
providing the services under 35 U.S.C. 41(d)(2)(a). Fees set under this
authority are not reduced for small entities, see 35 U.S.C. 42(h)(1),
as amended. Moreover, the Office does not have authority to refund fees
that were not paid by mistake or in excess of that owed. See 35 U.S.C.
42(d).
Discovery: The Office considered a procedure for discovery similar
to the one available during district court litigation. Discovery of
that scope has been criticized sharply, particularly when attorneys use
discovery tools as tactical weapons, which hinder the ``just, speedy,
and inexpensive determination of every action and proceedings.'' See
Introduction to An E-Discovery Model Order available at http://www.cafc.uscourts.gov/images/stories/announcements/Ediscovery_Model_Order.pdf. Accordingly, this alternative would have been inconsistent
with objectives of the Leahy-Smith America Invents Act that the
Director, in prescribing rules for the post-grant and covered business
method patent reviews, consider the effect of the rules on the economy,
the integrity of the patent system, the efficient administration of the
Office, and the ability of the Office to complete timely the instituted
proceedings.
Additional discovery increases trial costs and increases the
expenditures of time by the parties and the Board. To promote effective
discovery, the proposed rule would require a showing of good cause to
authorize additional requested discovery. To show good cause, a party
must make a particular and specific demonstration of fact. The moving
party must also show that it was fully diligent in seeking discovery,
and that there is no undue prejudice to the non-moving party.
The Office has proposed a default scheduling order to provide
limited discovery as a matter of right and also the ability to seek
additional discovery on a case-by-case basis. In weighing the need for
additional discovery, should a request be made, the economic impact on
the opposing party would be considered which would tend to limit
additional discovery where a party is a small entity.
Pro Hac Vice: The Office considered whether to allow counsel to
appear pro hac vice. In certain cases, highly skilled, but non-
registered, attorneys have appeared satisfactorily before the Board in
contested cases. The Board may recognize counsel pro hac vice during a
proceeding upon a showing of good cause. Proceedings before the Office
can be technically complex. Consequently, the grant of a motion to
appear pro hac vice is a discretionary action taking into account the
specifics of the proceedings. Similarly, the revocation of pro hac vice
is a discretionary action taking into account various factors,
including incompetence, unwillingness to abide by the Office's Rules of
Professional Conduct, prior findings of misconduct before the Office in
other proceedings, and incivility.
The Board's past practice has required the filing of a motion by a
registered patent practitioner seeking pro hac vice representation
based upon a showing of: (1) How qualified the unregistered
practitioner is to represent the party in the proceeding when measured
against a registered practitioner, and, (2) whether the party has a
genuine need to have the particular unregistered practitioner represent
it during the proceeding. This practice has proven effective in the
limited number of contested cases where such requests have been
granted. The proposed rule, if adopted, would allow for this practice
in the new proceedings authorized by the Leahy-Smith America Invents
Act.
The proposed rules would provide a limited delegation to the Board
under 35 U.S.C. 2(b)(2) and 32 to regulate the conduct of counsel in
Board proceedings. The proposed rule would delegate to the Board the
authority to conduct counsel disqualification proceedings while the
Board has jurisdiction over a proceeding. The rule would also delegate
to the Chief Administrative Patent Judge the authority to make final a
decision to disqualify counsel in a proceeding before the Board for the
purposes of judicial review. This delegation would not derogate from
the Director the prerogative to make such decisions, nor would it
prevent the Chief Administrative Patent Judge from further delegating
authority to an administrative patent judge.
The Office considered broadly permitting practitioners not
registered to practice by the Office to represent parties in trial as
well as categorically prohibiting such practice. A prohibition on the
practice would be inconsistent with the Board's experience, and more
importantly, might result in increased costs particularly where a small
entity has selected its district court litigation team for
representation before the Board and has a patent review filed after
litigation efforts have commenced. Alternatively, broadly making the
practice available would create burdens on the Office in administering
the trials and in completing the trial within the established
timeframe, particularly if the selected practitioner does not have the
requisite skill. In weighing the desirability of admitting a
practitioner pro hac vice, the economic impact on the party in interest
would be considered which would tend to

[[Page 7075]]

increase the likelihood that a small entity could be represented by a
non-registered practitioner. Accordingly, the alternatives to eliminate
pro hac vice practice or to permit it more broadly would have been
inconsistent with objectives of the Leahy-Smith America Invents Act
that the Director, in prescribing rules for the post-grant and covered
business method patent reviews, consider the effect of the rules on the
economy, the integrity of the patent system, the efficient
administration of the Office, and the ability of the Office to complete
timely the instituted proceedings.
Threshold for Instituting a Review: The Office considered whether
the threshold for instituting a review could be set as low as or lower
than the threshold for ex parte reexamination. This alternative could
not be adopted in view of the statutory requirements in 35 U.S.C. 324.
Default Electronic Filing: The Office considered a paper filing
system and a mandatory electronic filing system (without any
exceptions) as alternatives to the proposed requirement that all papers
are to be electronically filed, unless otherwise authorized.
Based on the Office's experience, a paper based filing system
increases delay in processing papers, delay in public availability, and
the chance that a paper may be misplaced or made available to an
improper party if confidential. Accordingly, the alternative of a paper
based filing system would have been inconsistent with objectives of the
Leahy-Smith America Invents Act that the Director, in prescribing rules
for the post-grant and covered business method patent reviews, consider
the effect of the rules on the economy, the integrity of the patent
system, the efficient administration of the Office, and the ability of
the Office to complete timely the instituted proceedings.
An electronic filing system (without any exceptions) that is
rigidly applied would result in unnecessary cost and burdens,
particularly where a party lacks the ability to file electronically. By
contrast, if the proposed option is adopted, it is expected that the
entity size and sophistication would be considered in determining
whether alternative filing methods would be authorized.
6. Identification, to the Extent Practicable, of All Relevant
Federal Rules Which May Duplicate, Overlap, or Conflict With the
Proposed Rules:
37 CFR 1.99 provides for the submission of information after
publication of a patent application during examination by third
parties.
37 CFR 1.171-1.179 provide for applications to reissue a patent to
correct errors, including where a claim in a patent is overly broad.
37 CFR 1.291 provides for the protest against the issuance of a
patent during examination.
37 CFR 1.321 provides for the disclaimer of a claim by a patentee.
37 CFR 1.501 and 1.502 provide for ex parte reexamination of
patents. Under these rules, a person may submit to the Office prior art
consisting of patents or printed publications that are pertinent to the
patentability of any claim of a patent, and request reexamination of
any claim in the patent on the basis of the cited prior art patents or
printed publications. Consistent with 35 U.S.C. 302-307, ex parte
reexamination rules provide a different threshold for initiation,
require the proceeding to be conducted by an examiner with a right of
appeal to the Patent Trial and Appeal Board, and allow for limited
participation by third parties.
37 CFR 1.902-1.997 provide for inter partes reexamination of
patents. Similar to ex parte reexamination, inter partes reexamination
provides a procedure in which a third party may request reexamination
of any claim in a patent on the basis of the cited prior art patents
and printed publication. The inter partes reexamination practice will
be eliminated, except for requests filed before the effective date of
September 16, 2012. See Sec. 6(c)(3)(C) of the Leahy-Smith America
Invents Act.
Other countries have their own patent laws, and an entity desiring
a patent in a particular country must make an application for patent in
that country, in accordance with the applicable law. Although the
potential for overlap exists internationally, this cannot be avoided
except by treaty (such as the Paris Convention for the Protection of
Industrial Property, or the Patent Cooperation Treaty (PCT)).
Nevertheless, the Office believes that there are no other duplicative
or overlapping foreign rules.
C. Executive Order 12866 (Regulatory Planning and Review): This
rulemaking has been determined to be significant for purposes of
Executive Order 12866 (Sept. 30, 1993), as amended by Executive Order
13258 (Feb. 26, 2002) and Executive Order 13422 (Jan. 18, 2007).
Based on the petition and other filing requirements for initiating
a review proceeding, the USPTO estimates the burden of the proposed
rules on the public to be $22,761,410 in fiscal year 2013 which
represents the sum of the estimated total annual (hour) respondent cost
burden ($20,405,610) plus the estimated total annual non-hour
respondent cost burden ($2,355,800) provided in Part O, Section II, of
this notice, infra.
The USPTO expect several benefits to flow from the Leahy-Smith
America Invents Act and these proposed rules. It is anticipated that
the proposed rules will reduce the time for reviewing patents at the
USPTO. Specifically, 35 U.S.C. 326(a) provides that the Director
prescribe regulations requiring a final determination by the Board
within one year of initiation, which may be extended for up to six
months for good cause. In contrast, currently for inter partes
reexamination, the average time from the filing to the publication of a
certificate ranged from 28.9 to 41.7 months during fiscal years 2009-
2011. See Reexaminations--FY 2011, http://www.uspto.gov/patents/Reexamination_operational_statistic_through_FY2011Q4.pdf.
Likewise, it is anticipated that the proposed rules will minimize
duplication of efforts. In particular, the Leahy-Smith America Invents
Act provides more coordination between district court infringement
litigation and post-grant or covered business method patent reviews to
reduce duplication of efforts and costs.
The AIPLA Report of the Economic Survey 2011 reports that the total
cost of patent litigation where the damages at risk are less than
$1,000,000 average $916,000, where the damages at risk are between
$1,000,000 and $25,000,000 average $2,769,000, and where the damages at
risk exceed $25,000,000 average $6,018,000. There may be a significant
reduction in overall burden if, as intended, the Leahy-Smith America
Invents Act and the proposed rules reduce the overlap between review at
the USPTO of issued patents and validity determination during patent
infringement actions. Data from the United States district courts
reveals that 2,830 patent cases were filed in 2006, 2,896 in 2007,
2,909 in 2008, 2,792 in 2009, and 3,301 in 2010. See U.S. Courts,
Judicial Business of the United States Courts, www.uscourts.gov/uscourts/Statistics/JudicialBusiness/2010/appendices/C02ASep10.pdf
(last visited Nov. 11, 2011) (hosting annual reports for 1997 through
2010). Thus, the Office estimates that no more than 3,300 patent cases
(the highest number of yearly filings between 2006 and 2010 rounded to
the nearest 100) are likely to be filed annually. The aggregate burden
estimate above ($22,761,410) was not offset by a reduction in burden
based on improved coordination between district court patent litigation
and the new inter partes review proceedings.

[[Page 7076]]

D. Executive Order 13563 (Improving Regulation and Regulatory
Review): The Office has complied with Executive Order 13563.
Specifically, the Office has, to the extent feasible and applicable:
(1) Made a reasoned determination that the benefits justify the costs
of the rule; (2) tailored the rule to impose the least burden on
society consistent with obtaining the regulatory objectives; (3)
selected a regulatory approach that maximizes net benefits; (4)
specified performance objectives; (5) identified and assessed available
alternatives; (6) involved the public in an open exchange of
information and perspectives among experts in relevant disciplines,
affected stakeholders in the private sector, and the public as a whole,
and provided online access to the rulemaking docket; (7) attempted to
promote coordination, simplification, and harmonization across
government agencies and identified goals designed to promote
innovation; (8) considered approaches that reduce burdens and maintain
flexibility and freedom of choice for the public; and (9) ensured the
objectivity of scientific and technological information and processes.
E. Executive Order 13132 (Federalism): This rulemaking does not
contain policies with federalism implications sufficient to warrant
preparation of a Federalism Assessment under Executive Order 13132
(Aug. 4, 1999).
F. Executive Order 13175 (Tribal Consultation): This rulemaking
will not: (1) Have substantial direct effects on one or more Indian
tribes; (2) impose substantial direct compliance costs on Indian tribal
governments; or (3) preempt tribal law. Therefore, a tribal summary
impact statement is not required under Executive Order 13175 (Nov. 6,
2000).
G. Executive Order 13211 (Energy Effects): This rulemaking is not a
significant energy action under Executive Order 13211 because this
rulemaking is not likely to have a significant adverse effect on the
supply, distribution, or use of energy. Therefore, a Statement of
Energy Effects is not required under Executive Order 13211 (May 18,
2001).
H. Executive Order 12988 (Civil Justice Reform): This rulemaking
meets applicable standards to minimize litigation, eliminate ambiguity,
and reduce burden as set forth in sections 3(a) and 3(b)(2) of
Executive Order 12988 (Feb. 5, 1996). This rulemaking carries out a
statute designed to lessen litigation. See H.R. Rep. No. 112-98, at 45-
48.
I. Executive Order 13045 (Protection of Children): This rulemaking
does not concern an environmental risk to health or safety that may
disproportionately affect children under Executive Order 13045 (Apr.
21, 1997).
J. Executive Order 12630 (Taking of Private Property): This
rulemaking will not effect a taking of private property or otherwise
have taking implications under Executive Order 12630 (Mar. 15, 1988).
K. Congressional Review Act: Under the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801-808), prior to issuing any final rule, the United
States Patent and Trademark Office will submit a report containing the
final rule and other required information to the U.S. Senate, the U.S.
House of Representatives, and the Comptroller General of the Government
Accountability Office. The changes in this notice are not expected to
result in an annual effect on the economy of 100 million dollars or
more, a major increase in costs or prices, or significant adverse
effects on competition, employment, investment, productivity,
innovation, or the ability of United States-based enterprises to
compete with foreign based enterprises in domestic and export markets.
Therefore, this notice is not expected to result in a ``major rule'' as
defined in 5 U.S.C. 804(2).
L. Unfunded Mandates Reform Act of 1995: The changes proposed in
this notice do not involve a Federal intergovernmental mandate that
will result in the expenditure by State, local, and tribal governments,
in the aggregate, of 100 million dollars (as adjusted) or more in any
one year, or a Federal private sector mandate that will result in the
expenditure by the private sector of 100 million dollars (as adjusted)
or more in any one year, and will not significantly or uniquely affect
small governments. Therefore, no actions are necessary under the
provisions of the Unfunded Mandates Reform Act of 1995. See 2 U.S.C.
1501-1571.
M. National Environmental Policy Act: This rulemaking will not have
any effect on the quality of the environment and is thus categorically
excluded from review under the National Environmental Policy Act of
1969. See 42 U.S.C. 4321-4370h.
N. National Technology Transfer and Advancement Act: The
requirements of section 12(d) of the National Technology Transfer and
Advancement Act of 1995 (15 U.S.C. 272 note) are not applicable because
this rulemaking does not contain provisions which involve the use of
technical standards.
O. Paperwork Reduction Act: The Paperwork Reduction Act of 1995 (44
U.S.C. 3501-3549) requires that the USPTO consider the impact of
paperwork and other information collection burdens imposed on the
public. This proposed rulemaking involves information collection
requirements which are subject to review by the Office of Management
and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3549). The collection of information involved in this notice has
been submitted to OMB under OMB control number 0651-00xx. In the Notice
``Rules of Practice for Trials before the Patent Trial and Appeal Board
and Judicial Review of Patent Trial and Appeal Board Decisions,'' RIN
0651-AC70, the information collection for all of the new trials
authorized by the Leahy-Smith America Invents Act were provided. In the
Notice ``Changes to Implement Post-Grant Review Proceedings,'' RIN
0651-AC72, the information collection for post-grant review and covered
business method patent review combined authorized by the Leahy-Smith
America Invents Act were provided. This notice also provides the subset
of burden created by the covered business method patent review
provisions. The proposed collection will be available at the OMB's
Information Collection Review Web site (www.reginfo.gov/public/do/PRAMain).
The USPTO is submitting the information collection to OMB for its
review and approval because this notice of proposed rulemaking will add
the following to a collection of information:
(1) Petitions to institute a post-grant review (Sec. Sec. 42.6,
42.8, 42.11, 42.13, 42.21, 42.22, 42.24(a)(2), 42.63, 42.65, and 42.201
through 42.205);
(2) petitions to institute a covered business method patent review
(Sec. Sec. 42.5, 42.6, 42.8, 42.11, 42.13, 42.20, 42.21, 42.22,
42.24(a)(3), 42.63, 42.65, 42.203, 42.205, and 42.302 through 42.304);
(3) motions (Sec. Sec. 42.6, 42.8, 42.11, 42.13, 42.21, 42.22,
42.24(a)(5), 42.51 through 42.54, 42.63, 42.64, 42.65, 42.221, 42.123,
and 42.223);
(4) oppositions (Sec. Sec. 42.6, 42.8, 42.11, 42.13, 42.21, 42.23,
42.24(b), 42.51, 42.52, 42.53, 42.54, 42.63, 42.64, 42.65, 42.207, and
42.220);
(5) replies provided for in 35 U.S.C. 321-329 (Sec. Sec. 42.6,
42.8, 42.11, 42.13, 42.21, 42.23, 42.24(c), 42.51, 42.52, 42.53, 42.54,
42.63, and 42.65).
The proposed rules also permit filing requests for oral argument
(Sec. 42.70) provided for in 35 U.S.C. 326(a)(10), requests for
rehearing (Sec. 42.71(c)), requests for adverse judgment (Sec.
42.73(b)), and requests that a

[[Page 7077]]

settlement be treated as business confidential (Sec. 42.74(b))
provided for in 35 U.S.C. 327.
I. Abstract: The USPTO is required by 35 U.S.C. 131 and 151 to
examine applications and, when appropriate, issue applications as
patents.
Chapter 32 of title 35 U.S.C. in effect on September 16, 2012,
provides for post-grant review proceedings allowing third parties to
petition the USPTO to review the patentability of an issued patent
under any ground authorized under 35 U.S.C. 282(b)(2). If a trial is
initiated by the USPTO based on the petition, as authorized by the
USPTO, additional motions may be filed by the petitioner. A patent
owner may file a response to the petition and if a trial is instituted,
as authorized by the USPTO, may file additional motions.
Section 18 of the Leahy-Smith America Invents Act provides for a
transitional program for covered business method patents, which will
employ the standards and procedures of the post-grant review proceeding
with a few exceptions.
In estimating the number of hours necessary for preparing a
petition to institute a post-grant or covered business method patent
review, the USPTO considered the estimated cost of preparing a request
for inter partes reexamination ($46,000), the median billing rate
($340/hour), and the observation that the cost of inter partes
reexamination has risen the fastest of all litigation costs since 2009
in the AIPLA Report of the Economic Survey 2011. Since additional
grounds are provided in post-grant or covered business method patent
review, the Office estimates the cost of preparing a petition to
institute a review will be 33.333% more than the estimated cost of
preparing a request for inter partes reexamination, or $61,333.
In estimating the number of hours necessary for preparing motions
after instituting and participating in the review, the USPTO considered
the AIPLA Report of the Economic Survey 2011 which reported the average
cost of a party to a two-party interference to the end of the
preliminary motion phase ($322,000) and inclusive of all costs
($631,000). The Office considered that the preliminary motion phase is
a good proxy for patentability reviews since that is the period of
current contested cases before the trial section of the Board where
most patentability motions are currently filed.
The USPTO also reviewed recent contested cases before the trial
section of the Board to make estimates on the average number of motions
for any matter including priority, the subset of those motions directed
to non-priority issues, the subset of those motions directed to non-
priority patentability issues, and the subset of those motions directed
to patentability issues based on a patent or printed publication on the
basis of 35 U.S.C. 102 or 103. The review of current contested cases
before the trial section of the Board indicated that approximately 15%
of motions were directed to prior art grounds, 18% of motions were
directed to other patentability grounds, 27% were directed to
miscellaneous issues, and 40% were directed to priority issues. It was
estimated that the cost per motion to a party in current contested
cases before the trial section of the Board declines because of overlap
in subject matter, expert overlap, and familiarity with the technical
subject matter. Given the overlap of subject matter, a proceeding with
fewer motions will have a somewhat less than proportional decrease in
costs since the overlapping costs will be spread over fewer motions.
It is estimated that the cost of an inter partes review would be
60% of the cost of current contested cases before the trial section of
the Board to the end of the preliminary motion period. An inter partes
review should have many fewer motions since only one party will have a
patent that is the subject of the proceeding (compared with each party
having at least a patent or an application in current contested cases
before the trial section of the Board). Moreover, fewer issues can be
raised since inter partes review will not have priority-related issues
that must be addressed in current contested cases before the trial
section of the Board. Consequently, a 60% weighting factor should
capture the typical costs of an inter partes review.
It is estimated that the cost of a post-grant or covered business
method patent review would be 75% of the cost of current contested
cases before the trial section of the Board to the end of the
preliminary motion period. A post-grant or covered business method
patent review should have many fewer motions since only one party will
have a patent that is the subject of the proceeding (compared with each
party having at least a patent or an application in current contested
cases before the trial section of the Board). Moreover, fewer issues
can be raised since post-grant and covered business method patent
reviews will not have the priority-related issues that must be
addressed in current contested cases before the trial section of the
Board before the priority phase. Again, a 75% weighting factor should
capture the typical costs of a post-grant or covered business method
patent review.
The title, description, and respondent description of the
information collection are shown below with an estimate of the annual
reporting burdens for the post-grant and covered business method patent
review provisions. Included in this estimate is the time for reviewing
instructions, gathering and maintaining the data needed, and completing
and reviewing the collection of information. The principal impact of
the proposed changes in this notice of proposed rulemaking is to
implement the changes to Office practice necessitated by Sec. Sec.
6(d) and 18 of the Leahy-Smith America Invents Act.
The public uses this information collection to request review and
derivation proceedings and to ensure that the associated fees and
documentation are submitted to the USPTO.

II. Data

Needs and Uses: The information supplied to the USPTO by a petition
to institute a review as well as the motions authorized following the
institution is used by the USPTO to determine whether to initiate a
review under 35 U.S.C. 324 and to prepare a final decision under 35
U.S.C. 328.
OMB Number: 0651-00xx.
Title: Patent Review and Derivation Proceedings.
Form Numbers: None.
Type of Review: New Collection.
Likely Respondents/Affected Public: Individuals or households,
businesses or other for profit, not-for-profit institutions, farms,
Federal Government, and state, local, or tribal governments.
Estimated Number of Respondents/Frequency of Collection: 100
respondents and 515 responses per year.
Estimated Time per Response: The USPTO estimates that it will take
the public from 0.1 to 180.4 hours to gather the necessary information,
prepare the documents, and submit the information to the USPTO.
Estimated Total Annual Respondent Burden Hours: 60,016.5 hours per
year.
Estimated Total Annual (Hour) Respondent Cost Burden: $20,405,610
per year. The USPTO expects that the information in this collection
will be prepared by attorneys. Using the professional rate of $340 per
hour for attorneys in private firms, the USPTO estimates that the
respondent cost burden for this collection will be approximately
$20,405,610 per year (60,016.5 hours per year multiplied by $340 per
hour).
Estimated Total Annual Non-hour Respondent Cost Burden: $2,355,800

[[Page 7078]]

per year. There are no capital start-up or maintenance costs associated
with this information collection. However, this collection does have
annual (non-hour) costs in the form of filing fees. There are filing
fees associated with petitions for post-grant and covered business
method patent review and for requests to treat a settlement as business
confidential. The total fees for this collection are calculated in the
accompanying table. The USPTO estimates that the total fees associated
with this collection will be approximately $2,355,800 per year.
Therefore, the total estimated cost burden in fiscal year 2013 is
estimated to be $22,761,410 (the sum of the estimated total annual
(hour) respondent cost burden ($20,405,610) plus the estimated total
annual non-hour respondent cost burden ($2,355,800)).

----------------------------------------------------------------------------------------------------------------
Estimated time Estimated Estimated
Item for response annual annual burden
(hours) responses hours
----------------------------------------------------------------------------------------------------------------
Petition for post-grant or covered business method patent review 180.4 50 9,020
Reply to initial post-grant or covered business method patent 100 45 4,500
review.........................................................
Request for Reconsideration..................................... 80 14 1,120
Motions, replies and oppositions after institution in post-grant 130 342 44,460
or covered business method patent review.......................
Request for oral hearing........................................ 20 45 900
Request to treat a settlement as business confidential.......... 2 2 4
Request for adverse judgment, default adverse judgment or 1 10 10
settlement.....................................................
Request to make a settlement agreement available................ 1 2 2
Notice of judicial review of a Board decision (e.g., notice of 0.1 5 0.5
appeal under 35 U.S.C. 142)....................................
-----------------------------------------------
Totals...................................................... .............. 515 60,016.5
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
Estimated Estimated
Item annual Fee amount annual filing
responses costs
----------------------------------------------------------------------------------------------------------------
Petition for post-grant or covered business method patent review 50 $47,100 $2,355,000
Reply to post-grant or covered business method patent review 45 0 0
petition.......................................................
Request for Reconsideration..................................... 14 0 0
Motions, replies and oppositions after initiation in post-grant 342 0 0
or covered business method patent review.......................
Request for oral hearing........................................ 45 0 0
Request to treat a settlement as business confidential.......... 2 0 0
Request for adverse judgment, default adverse judgment or 10 0 0
settlement.....................................................
Request to make a settlement agreement available................ 2 400 800
Notice of judicial review of a Board decision (e.g., notice of 5 0 0
appeal under 35 U.S.C. 142)....................................
-----------------------------------------------
Totals...................................................... 515 .............. $2,355,800
----------------------------------------------------------------------------------------------------------------

III. Solicitation

The agency is soliciting comments to: (1) Evaluate whether the
proposed information requirement is necessary for the proper
performance of the functions of the agency, including whether the
information will have practical utility; (2) evaluate the accuracy of
the agency's estimate of the burden; (3) enhance the quality, utility,
and clarity of the information to be collected; and (4) minimize the
burden of collecting the information on those who are to respond,
including by using appropriate automated, electronic, mechanical, or
other technological collection techniques or other forms of information
technology.
Interested persons are requested to send comments regarding this
information collection by April 10, 2012, to: (1) The Office of
Information and Regulatory Affairs, Office of Management and Budget,
New Executive Office Building, Room 10202, 725 17th Street NW.,
Washington, DC 20503, Attention: Nicholas A. Fraser, the Desk Officer
for the United States Patent and Trademark Office, and via email at
nfraser@omb.eop.gov; and (2) The Board of Patent Appeals and
Interferences by electronic mail message over the Internet addressed
to: post_grant_review@uspto.gov, or by mail addressed to: Mail Stop
Patent Board, Director of the United States Patent and Trademark
Office, P.O. Box 1450, Alexandria, VA 22313-1450, marked to the
attention of ``Lead Judge Michael Tierney, Post-Grant Review Proposed
Rules.''
Notwithstanding any other provision of law, no person is required
to respond to nor shall a person be subject to a penalty for failure to
comply with a collection of information subject to the requirements of
the Paperwork Reduction Act unless that collection of information
displays a currently valid OMB control number.

List of Subjects in 37 CFR Part 42

Administrative practice and procedure, Inventions and patents,
Lawyers.

Proposed Amendments to the Regulatory Text

For the reasons stated in the preamble, the Under Secretary of
Commerce for Intellectual Property and Director of the United States
Patent and Trademark Office propose to amend 37 CFR part 42 as proposed
to be added in the February 9, 2012, issue of the Federal Register as
follows:

PART 42--TRIAL PRACTICE BEFORE THE PATENT TRIAL AND APPEAL BOARD

1. The authority citation for 37 CFR part 42 continues to read as
follows:

Authority: 35 U.S.C. 2(b)(2), 6, 21, 23, 41, 135, 311, 312, 316,
321-326 and Leahy-Smith America Invents Act, Pub. L. 112-29,
sections 6(c), 6(f), and 18, 125 Stat. 284, 304, 311, and 329
(2011).

[[Page 7079]]

2. A subpart C is added to read as follows:
Subpart C--Post-Grant Review

General

Sec.
42.200 Procedure; pendency.
42.201 Who may petition for a post-grant review.
42.202 Time for filing.
42.203 Post-grant review fee.
42.204 Content of petition.
42.205 Service of petition.
42.206 Filing date.
42.207 Preliminary response to petition.

Instituting Post-Grant Review

42.208 Institution of post-grant review.

After Institution of Post-Grant Review

42.220 Patent owner response.
42.221 Amendment of the patent.
42.222 Multiple proceedings.
42.223 Filing of supplemental information.
42.224 Discovery.

Subpart C--Post-Grant Review

General

Sec. 42.200 Procedure; pendency.

(a) A post-grant review is a trial subject to the procedures set
forth in subpart A of this part.
(b) A claim in an unexpired patent shall be given its broadest
reasonable construction in light of the specification of the patent in
which it appears.
(c) A post-grant review proceeding shall be administered such that
pendency before the Board after institution is normally no more than
one year. The time can be extended by up to six months for good cause
by the Chief Administrative Patent Judge.
(d) Interferences commenced before September 16, 2012, shall
proceed under part 41 of this chapter except as the Chief
Administrative Patent Judge, acting on behalf of the Director, may
otherwise order in the interests of justice.

Sec. 42.201 Who may petition for a post-grant review.

A person who is not the owner of a patent may file with the Office
a petition to institute a post-grant review of the patent unless:
(a) Before the date on which the petition for review is filed, the
petitioner or real party in interest filed a civil action challenging
the validity of a claim of the patent; or
(b) The petitioner, the petitioner's real party in interest, or a
privy of the petitioner is estopped from challenging the claims on the
grounds identified in the petition.

Sec. 42.202 Time for filing.

(a) A petition for a post-grant review of a patent must be filed no
later than the date that is nine months after the date of the grant of
a patent or of the issuance of a reissue patent. A petition, however,
may not request a post-grant review for a claim in a reissue patent
that is identical to or narrower than a claim in the original patent
from which the reissue patent was issued unless the petition is filed
not later than the date that is nine months after the date of the grant
of the original patent.
(b) The Director may impose a limit on the number of post-grant
reviews that may be instituted during each of the first four one-year
periods in which 35 U.S.C. 321 is in effect by providing notice in the
Office's Official Gazette or Federal Register. Petitions filed after an
established limit has been reached will be deemed untimely.

Sec. 42.203 Post-grant review fee.

(a) A post-grant review fee set forth in Sec. 42.15(b) must
accompany the petition.
(b) No filing date will be accorded to the petition until full
payment is received.

Sec. 42.204 Content of petition.

In addition to the requirements of Sec. Sec. 42.8 and 42.22, the
petition must set forth:
(a) Grounds for standing. The petitioner must certify that the
patent for which review is sought is available for post-grant review
and that the petitioner is not barred or estopped from requesting a
post-grant review of the patent.
(b) Identification of challenge. Provide a statement of the precise
relief requested for each claim challenged. The statement must identify
the following:
(1) The claim;
(2) The specific statutory grounds permitted under paragraph (2) or
(3) of 35 U.S.C. 282(b) on which the challenge to the claim is based;
(3) How the challenged claim is to be construed. Where the claim to
be construed contains a means-plus-function or step-plus-function
limitation as permitted under 35 U.S.C. 112, sixth paragraph, the
construction of the claim must identify the specific portions of the
specification that describe the structure, material, or acts
corresponding to each claimed function;
(4) How the construed claim is unpatentable under the statutory
grounds identified in paragraph (b)(2) of this section. Where the
grounds for unpatentability are based on prior art, the petition must
specify where each element of the claim is found in the prior art. For
all other grounds of unpatentability, the petition must identify the
specific part of the claim that fails to comply with the statutory
grounds raised and state how the identified subject matter fails to
comply with the statute; and
(5) The exhibit number of the supporting evidence relied upon to
support the challenge and state the relevance of the evidence to the
challenge raised, including identifying specific portions of the
evidence that support the challenge. The Board may exclude or give no
weight to the evidence where a party has failed to state its relevance
or to identify specific portions of the evidence that support the
challenge.
(c) A motion may be filed that seeks to correct a clerical or
typographical mistake in the petition. The grant of such a motion does
not change the filing date of the petition.

Sec. 42.205 Service of petition.

In addition to the requirements of Sec. 42.6, the petitioner must
serve the petition and exhibits relied upon in the petition as follows:
(a) The petition and supporting evidence must be served on the
patent owner at the correspondence address of record for the subject
patent. The petitioner may additionally serve the petition and
supporting evidence on the patent owner at any other address known to
the petitioner as likely to effect service.
(b) If the petitioner cannot effect service of the petition and
supporting evidence on the patent owner at the correspondence address
of record for the subject patent, the petitioner must immediately
contact the Board to discuss alternate modes of service.

Sec. 42.206 Filing date.

(a) Complete petition. A petition to institute a post grant review
will not be accorded a filing date until the petition satisfies all of
the following requirements:
(1) Complies with Sec. 42.204 or Sec. 42.304,
(2) Service of the petition on the correspondence address of record
as provided in Sec. 42.205(a); and
(3) Is accompanied by the filing fee in Sec. 42.15(b).
(b) Incomplete request. Where a party files an incomplete petition,
no filing date will be accorded and the Office will dismiss the request
if the deficiency in the petition is not corrected within the earlier
of either one month from the notice of an incomplete petition, or the
expiration of the statutory deadline in which to file a petition for
post-grant review.

[[Page 7080]]

Sec. 42.207 Preliminary response to petition.

(a) The patent owner may file a preliminary response to the
petition. The response is limited to setting forth the reasons why no
post-grant review should be instituted under 35 U.S.C. 324. The
response can include evidence except as provided in paragraph (c) of
this section. The preliminary response is an opposition for purposes of
determining page limits under Sec. 42.24.
(b) Due date. The preliminary response must be filed no later than
two months after the date of a notice indicating that the request to
institute a post-grant review has been granted a filing date. A patent
owner may expedite the proceeding by filing an election to waive the
preliminary patent owner response.
(c) No new testimonial evidence. The preliminary response shall not
present new testimony evidence beyond that already of record.
(d) No amendments. The preliminary response shall not include any
amendment.
(e) Disclaim Patent Claims. The patent owner may file a statutory
disclaimer under 35 U.S.C. 253(a) in compliance with Sec. 1.321(a),
disclaiming one or more claims in the patent. No post-grant review will
be instituted based on disclaimed claims.

Instituting Post-Grant Review

Sec. 42.208 Institution of post-grant review.

(a) When instituting post-grant review, the Board may authorize the
review to proceed on all or some of the challenged claims and on all or
some of the grounds of unpatentability asserted for each claim.
(b) At any time prior to institution of post-grant review, the
Board may deny some or all grounds for unpatentability for some or all
of the challenged claims. Denial of a ground is a Board decision not to
institute post-grant review on that ground.
(c) Sufficient grounds. Post-grant review shall not be instituted
for a ground of unpatentability, unless the Board decides that the
petition supporting the ground would, if unrebutted, demonstrate that
it is more likely than not that at least one of the claims challenged
in the petition is unpatentable. The Board's decision will take into
account a preliminary patent owner response where such a response is
filed.
(d) Additional grounds. Sufficient grounds under Sec. 42.208(c)
may be a showing that the petition raises a novel or unsettled legal
question that is important to other patents or patent applications.

After Institution of Post-Grant Review

Sec. 42.220 Patent owner response.

(a) Scope. A patent owner may file a response to the petition
addressing any ground for unpatentability not already denied. A patent
owner response is filed as an opposition and is subject to the page
limits provided in Sec. 42.24.
(b) Due date for response. If no date for filing a patent owner
response to a petition is provided in a Board order, the default date
for filing a patent owner response is two months from the date the
post-grant review is instituted.

Sec. 42.221 Amendment of the patent.

(a) A patent owner may file one motion to amend a patent but only
after conferring with the Board. Any additional motions to amend may
not be filed without Board authorization.
(b) A motion to amend must set forth:
(1) The support in the original disclosure of the patent for each
claim that is added or amended; and
(2) The support in an earlier filed disclosure for each claim for
which benefit of the filing date of the earlier filed disclosure is
sought.
(c) A motion to amend the claims of a patent will not be authorized
where:
(1) The amendment does not respond to a ground of unpatentability
involved in the trial; or
(2) The amendment seeks to enlarge the scope of the claims of the
patent or introduce new subject matter.

Sec. 42.222 Multiple proceedings.

Where another matter involving the patent is before the Office, the
Board may during the pendency of the post-grant review enter any
appropriate order regarding the additional matter including providing
for the stay, transfer, consolidation, or termination of any such
matter.

Sec. 42.223 Filing of supplemental information.

Once a trial has been instituted, a petitioner may request
authorization to file a motion identifying supplemental information
relevant to a ground for which the trial has been instituted. The
request must be made within one month of the date the trial is
instituted.

Sec. 42.224 Discovery.

Notwithstanding the discovery provisions of subpart A:
(a) Requests for additional discovery may be granted upon a showing
of good cause as to why the discovery is needed; and
(b) Discovery is limited to evidence directly related to factual
assertions advanced by either party in the proceeding.

Dated: January 31, 2012.
David J. Kappos,
Under Secretary of Commerce for Intellectual Property and Director of
the United States Patent and Trademark Office.
[FR Doc. 2012-2529 Filed 2-9-12; 8:45 am]
BILLING CODE 3510-16-P