[Federal Register Volume 77, Number 28 (Friday, February 10, 2012)]
[Proposed Rules]
[Pages 7080-7095]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2532]


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DEPARTMENT OF COMMERCE

Patent and Trademark Office

37 CFR Part 42

[Docket No. PTO-P-2011-0085]
RIN 0651-AC73


Changes To Implement Transitional Program for Covered Business 
Method Patents

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 transitional post-grant 
review proceeding for covered business method patents 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. These provisions and any 
regulations issued under these provisions will be repealed on September 
16, 2020, with respect to any new petitions under the transitional 
program.

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: TPCBMP_Rules@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, Covered Business Method Patent 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.

[[Page 7081]]

    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 Medley, Administrative Patent Judge, Robert Clarke, 
Administrative Patent Judge, and Joni Chang, 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 
transitional covered business method patent review proceedings. The 
USPTO is engaged in a transparent process to create a timely, cost-
effective alternative to litigation. 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 transitional covered business method review 
proceedings.
    Section 18 of the Leahy-Smith America Invents Act provides that the 
Director will establish regulations establishing and implementing a 
transitional program for the review of covered business method patents. 
Section 18(a)(1) of the Leahy-Smith America Invents Act provides that 
the transitional proceeding will be regarded as, and will employ the 
standards and procedures of, a post-grant review under chapter 32 of 
title 35, United States Code, subject to certain exceptions. For 
instance, a petitioner in a covered business method patent 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) (see 35 U.S.C. 321(b)); and 
the determination by the Director whether to institute a covered 
business method patent review will be final and nonappealable (see 35 
U.S.C. 324(e)). Section 18(a)(1)(A) of the Leahy-Smith America Invents 
Act provides that 35 U.S.C. 321(c) and 35 U.S.C. 325(b), (e)(2), and 
(f) will not apply to a transitional proceeding.
    Section 18(a)(1)(B) of the Leahy-Smith America Invents Act 
specifies that a person may not file a petition for a transitional 
proceeding with respect to a covered business method patent unless the 
person or person's real party in interest or privy has been sued for 
infringement of the patent or has been charged with infringement under 
that patent.
    Section 18(a)(1)(C) of the Leahy-Smith America Invents Act further 
provides that limited prior art shall apply for those challenged 
covered business method patents granted under first-to-invent 
provisions. Specifically, section 18(a)(1)(C) provides:

     A petitioner in a transitional proceeding who 
challenges the validity of 1 or more claims in a covered business 
method patent on a ground raised under section 102 or 103 of title 
35, United States Code, as in effect on the day before the effective 
date set forth in section 3(n)(1), may support such ground only on 
the basis of--
     prior art that is described by section 102(a) of such 
title (as in effect on the day before such effective date); or
     prior art that--
    [cir] discloses the invention more than 1 year before the date 
of the application for patent in the United States; and
    [cir] would be described by section 102(a) of such title (as in 
effect on the day before the effective date set forth in section 
3(n)(1)) if the disclosure had been made by another before the 
invention thereof by the applicant for patent.

    Section 18 of the Leahy-Smith America Invents Act provides that the 
Director may institute a transitional proceeding only for a patent that 
is a covered business method patent. Section 18(d)(1) of the Leahy-
Smith America Invents Act specifies that a covered business method 
patent is a patent that claims a method or corresponding apparatus for 
performing data processing or other operations used in the practice, 
administration, or management of a financial product or service, except 
that the term does not include patents for technological inventions. 
Section 18(d)(2) provides that the Director will issue regulations for 
determining whether a patent is for a technological invention.
    The Leahy-Smith America Invents Act provides that the transitional 
program for the review of covered business method patents will take 
effect on September 16, 2012, one year after the date of enactment, and 
applies to any covered business method patent issued before, on, or 
after September 16, 2012. Section 18 of the Leahy-Smith America Invents 
Act and the regulations issued under Sec.  18 are repealed on September 
16, 2020. Section 18 and the regulations issued will continue to apply 
after September 16, 2020, to any petition for a transitional proceeding 
that is filed before September 16, 2020. The Office will not consider a 
petition for a transitional proceeding that is filed on or after 
September 16, 2020.

Discussion of Specific Rules

    This notice proposes new rules to implement the provisions of the 
Leahy-Smith America Invents Act for the transitional program for 
covered business method patents. As previously discussed, Sec.  
18(a)(1) of the Leahy-Smith America Invents Act provides that the 
Director shall issue regulations establishing and implementing a 
transitional post-grant review proceeding for the review of covered 
business method patents. In particular, this notice proposes to add a 
new subpart D to 37 CFR part 42 to provide rules specific to 
transitional post-grant review of covered business method patents. 
Pursuant to Sec.  18(d)(2) of the Leahy-Smith America Invents Act, the 
Office in a separate rulemaking is proposing the definition of a 
technological invention (RIN 0651-AC75).
    Additionally, the Office in a separate rulemaking is proposing to 
add part 42, including subpart A, (0651-AC70) that would include a 
consolidated set of rules relating to Board trial practice. More 
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

[[Page 7082]]

subpart B to 37 CFR part 42 (RIN 0651-AC71) to provide rules specific 
to inter partes review, a new subpart C to 37 CFR part 42 (RIN 0651-
AC72) to provide rules specific to post-grant review, and a new subpart 
E to 37 CFR part 42 (RIN 0651-AC74) to provide rules specific to 
derivation. The notices of proposed rulemaking are available on the 
USPTO Internet Web site at www.uspto.gov.
    Title 37 of the Code of Federal Regulations, Chapter I, Part 42, 
Subpart D, entitled ``Transitional Program for Covered Business Method 
Patents'' is proposed to be added as follows:
    Section 42.300: Proposed Sec.  42.300 would set forth policy 
considerations for covered business method patent review proceedings.
    Proposed Sec.  42.300(a) would provide that a covered business 
method patent review is a trial and subject to the rules set forth in 
subpart A and also subject to the post-grant review procedures set 
forth in subpart C except for Sec. Sec.  42.200, 42.201, 42.202, and 
42.204. This is consistent with Sec.  18(a)(1) of the Leahy-Smith 
America Invents Act, which provides that the transitional proceeding 
shall be regarded as, and shall employ the standards and procedures of, 
a post-grant review with certain exceptions.
    Proposed Sec.  42.300(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. See, e.g., 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.  42.300(c) would provide a one-year timeframe for 
administering the proceeding after institution, with a six-month 
extension for good cause. This proposed rule is consistent with 35 
U.S.C. 326(a)(11), which sets forth statutory timeframes for post-grant 
review.
    Proposed Sec.  42.300(d) would provide that the rules in subpart D 
are in effect until September 15, 2020, except that the rules shall 
continue to apply to any covered business method patent review filed 
before the date of repeal. This is consistent with Sec.  18(a)(3) of 
the Leahy-Smith America Invents Act, which provides that the 
regulations issued are repealed effective upon the expiration of the 
eight-year period beginning on the date that the regulations take 
effect.
    Section 42.301: Proposed Sec.  42.301 would provide definitions 
specific to covered business method patent reviews.
    Proposed Sec.  42.301(a) would adopt the definition for covered 
business method patents provided in Sec.  18(d)(1) of the Leahy-Smith 
America Invents Act. Specifically, the proposed definition would 
provide that covered business method patent means a patent that claims 
a method or corresponding apparatus for performing data processing or 
other operations used in the practice, administration, or management of 
a financial product or service, except that the term does not include 
patents for technological inventions.
    Pursuant to Sec.  18(d)(2) of the Leahy-Smith America Invents Act, 
the Office in a separate rulemaking is proposing the definition of a 
technological invention, which would be set forth in proposed Sec.  
42.301(b).
    Section 42.302: Proposed Sec.  42.302 would identify who may file a 
petition for a covered business method patent review.
    Proposed Sec.  42.302(a) would provide that a petitioner may not 
file a petition to institute a covered business method patent review of 
the patent unless the petitioner, the petitioner's real party in 
interest, or a privy of the petitioner has been sued for infringement 
of the patent or has been charged with infringement under that patent. 
This proposed rule is consistent with Sec.  18(a)(1)(B) of the Leahy-
Smith America Invents Act.
    Proposed Sec.  42.302(b) would provide that a petitioner may not 
file a petition to institute a covered business method patent review of 
the patent 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), which provides for estoppel based 
upon a final written decision in a post-grant review.
    Section 42.303: Proposed Sec.  42.303 would provide that a petition 
for a covered business method patent review may be filed at any time 
prior to or after the time a petition for a post-grant review of the 
patent would satisfy the requirements of 35 U.S.C. 321(c). This 
proposed rule is consistent with Sec.  18(a)(2) of the Leahy-Smith 
America Invents Act.
    Section 42.304: Proposed Sec.  42.304 would provide for the content 
of petitions to institute a covered business method patent 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 to institute a covered business patent review.
    Proposed Sec.  42.304(a) would provide that a petition under this 
section must demonstrate that the petitioner has grounds for standing. 
To establish standing, a petitioner, at a minimum, would be required to 
certify that the patent is available for covered business method patent 
review and that the petitioner meets the eligibility requirements of 
Sec.  42.302. This proposed requirement attempts to ensure that a party 
has standing to file the covered business method patent review and 
would help prevent spuriously instituted reviews. Facially improper 
standing would be a basis for denying the petition without proceeding 
to the merits of the decision.
    Proposed Sec.  42.304(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, why the claims as 
construed are unpatentable, 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 supporting a prima facie case 
of relief and would provide the patent owner with a minimum level of 
notice as to the basis for the challenge to the claims.
    Proposed Sec.  42.304(c) would provide that a petitioner seeking to 
correct clerical or typographical mistakes could file a 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.

Rulemaking Considerations

    A. Administrative Procedure Act (APA): This notice proposes rules 
of practice concerning the procedure for requesting a covered business 
method patent review, and the trial process after

[[Page 7083]]

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 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. The 
estimated number of 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 in 
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.
    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 covered business method 
patent review, it is estimated that 16 petitions for 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.

                  Table 1--Inter partes Reexamination Requests Filed With Parent Entity Type *
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                                                         Inter partes     Number filed where     Percent small
                     Fiscal year                         reexamination     parent patent  is    entity type of
                                                        requests filed     small entity type         total
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2011................................................                 329                 123               37.39
2010................................................                 255                  94               36.86
2009................................................                 240                  62               25.83
2008................................................                 155                  52               33.55

[[Page 7084]]

 
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
                                                     -----------------------------------------------------------
    Totals..........................................               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 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 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 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 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 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 
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 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

[[Page 7085]]

(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 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 
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 covered business method proceedings. 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 covered business method patent review.
    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 review petitions 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 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 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 or 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 
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.
    After a trial has been instituted but prior to a final written 
decision, parties to a 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 covered business method 
patent reviews instituted in fiscal year 2013.
    Parties to a 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

[[Page 7086]]

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 
estimatesthat 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 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 
decisions of the Board would be appealed. The reduction in appeal rate 
is based on 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 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 
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: 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 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 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 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 Office's consideration of the 
work required to prepare and file such a request, the Office estimates 
that the cost of preparing a petition for 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 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 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 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

[[Page 7087]]

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 desirability 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 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 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 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 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(b). 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 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, 5 page limit for miscellaneous issues, and 10 
page limit 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,

[[Page 7088]]

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 covered business method patent review 
petition would be based upon most grounds identified in 35 U.S.C. 
321(b), e.g., failure to comply with 35 U.S.C. 101, 102 (based on 
certain references), 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 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.
    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

[[Page 7089]]

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 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 determine 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 on 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 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 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 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 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

[[Page 7090]]

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 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 time 
frame, 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 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 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 Invent Act that the Director, in prescribing rules 
for the 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:

[[Page 7091]]

    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, 
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 initially 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 covered business method patent review 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.
    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

[[Page 7092]]

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 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);
    (2) 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);
    (3) 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);
    (4) 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 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 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 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

[[Page 7093]]

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 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 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 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 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 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 
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 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 covered business method patent review........             180.4                50           9,020
Reply to initial covered business method patent review....             100                  45           4,500
Request for Reconsideration...............................              80                  14           1,120
Motions, replies and oppositions after institution in                  130                 342          44,460
 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.,                     0.1                 5               0.5
 notice of appeal under 35 U.S.C. 142)....................
                                                           -----------------------------------------------------

[[Page 7094]]

 
    Totals................................................  ................               515          60,016.5
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                Estimated                           Estimated
                           Item                                  annual          Fee amount       annual filing
                                                                responses                             costs
----------------------------------------------------------------------------------------------------------------
Petition for covered business method patent review........                50           $47,100        $2,355,000
Reply to covered business method patent review petition...                45                 0                 0
Request for Reconsideration...............................                14                 0                 0
Motions, replies and oppositions after initiation in                     342                 0                 0
 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.,                       5                 0                 0
 notice of 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, 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: TPCBMP_Rules@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, Covered Business Method Patent 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).

    2. A new subpart D is added to read as follows:

Subpart D--Transitional Program for Covered Business Method Patents

Sec.
42.300 Procedure; pendency.
42.301 Definitions.
42.302 Who may petition for a covered business method patent review.
42.303 Time for filing.
42.304 Content of petition.


Sec.  42.300  Procedure; pendency.

    (a) A covered business method patent review is a trial subject to 
the procedures set forth in subpart A of this part and is also subject 
to the post-grant review procedures set forth in subpart C except for 
Sec. Sec.  42.200, 42.201, 42.202, and 42.204.
    (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 covered business method patent 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 by the Chief Administrative Patent Judge for good cause.
    (d) The rules in this subpart are effective until September 15, 
2020, except that the rules shall continue to apply to any petition for 
a covered business method patent review filed before the date of 
repeal.


Sec.  42.301  Definitions.

    In addition to the definitions in Sec.  42.2, the following 
definitions apply to proceedings under this subpart:
    (a) Covered business method patent means a patent that claims a 
method or corresponding apparatus for performing data processing or 
other operations used in the practice, administration, or management of 
a financial product or service, except that the term does not include 
patents for technological inventions.
    (b) [Reserved].


Sec.  42.302  Who may petition for a covered business method patent 
review.

    (a) A petitioner may not file with the Office a petition to 
institute a covered

[[Page 7095]]

business method patent review of the patent unless the petitioner, the 
petitioner's real party in interest, or a privy of the petitioner has 
been sued for infringement of the patent or has been charged with 
infringement under that patent.
    (b) A petitioner may not file a petition to institute a covered 
business method patent review of the patent 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.


Sec.  42.303  Time for filing.

    A petition requesting a covered business method patent review may 
be filed any time except during the period in which a petition for a 
post-grant review of the patent would satisfy the requirements of 35 
U.S.C. 321(c).


Sec.  42.304  Content of petition.

    In addition to any other notices required by subparts A and C of 
this part, a petition must request judgment against one or more claims 
of a patent identified by patent number. In addition to the 
requirements of Sec.  42.22, the petition must set forth:
    (a) Grounds for standing. The petitioner must demonstrate that the 
patent for which review is sought is a covered business method patent, 
and that the petitioner meets the eligibility requirements of Sec.  
42.302.
    (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, paragraph 6, 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 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 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 mistake in the 
petition where the mistake is of a clerical or typographical nature. 
The grant of such a motion does not change the filing date of the 
petition.

    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. 2012-2532 Filed 2-9-12; 8:45 am]
BILLING CODE 3510-16-P