Real Numbers – High tech Intellectual Property Legal Blog

Patent Statistics in the GAO Report

The GAO just released a report on patent litigation: IP: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality (GAO-13-465).

In this report, the GAO states that “The implication as of now, the year 2013, is that half of all issued patents are software-related, and that the PTO is issuing about 2200 software patents a week.”

Aharonian, in a pointed screed addressing the GOA report, points out that this is inaccurate. He provides a graph of software and non-software electrical patents issued weekly.

As the graph shows, the number of software patents per week (blue line), as of 2012, is about 1100, half of the GAO figure. Further, little has changed in decades in the relative number of software and non-software electronics patents (red line). So not only are software patents not the majority of issued patents, they are not even the majority of issued Electronics patents. That the two lines much correlate reflects the fact that software is part and parcel of technology, so intimate with the rest of the Electronics arts that software patent numbers fluctuate with economic forces that affect patent filings. He notes that his data is based on a few assumptions on what characterizes a software patent.

However, the GAO’s assumption is based on a combination of “a number of entire patent classes that PTO economists have said are most likely to include patents with software-related claims, and this includes method patents. For the list of these classes.” (GAO paper, footnote 27).

The problem, of course, is that there are no “exclusively software” classes. So if an entire patent class is counted, it is extremely likely to include non-software cases as well.

Aharonian concludes his screed by offering to provide all of his data to the GAO, if requested. And even offering to release his software and databases to them, to enable them to recreate and verify his numbers. I hope that the GAO takes him up on his offer.

Patent Term Adjustment: PTO Rule Change via the Courts

In Exelixis, Inc. v. Kappos in the Eastern District of Virginia, Judge Ellis stated that the USPTO’s interpretation of the patent term extension for length of pendency is incorrect.

The rule that controls patent term adjustments for application pendency is 35 USC § 154(b), and section 35 USC §154(b)(1)(B)(i) states:

(B) GUARANTEE OF NO MORE THAN 3-YEAR APPLICATION PENDENCY.- Subject to the limitations under paragraph (2), if the issue of an original patent is delayed due to the failure of the United States Patent and Trademark Office to issue a patent within 3 years after the actual filing date of the application in the United States, not including-

(i) any time consumed by continued examination of the application requested by the applicant under section 132(b)

The Patent Office has interpreted this to mean that an RCE ends the term adjustment for delay by the Patent Office under Section B, regardless of when that RCE was filed.

Judge Ellis said this interpretation is contrary to the plain reading of the statute. The court stated that the statute was not ambiguous, and its interpretation was very strong. The court concluded:

The plain and unambiguous language of subparagraph (B) requires that the time devoted to an RCE tolls the running of the three year clock if the RCE is filed within the three year period. And, put simply, RCE’s have no impact on PTA if filed after the three year deadline has passed.

Though this decision may be appealed, it is significant. Exelixis got a 114 day additional term for its patent. Many other long-pending patents would likely receive equally large if not larger adjustments.

Patent owners can request a recalculation of the PTO’s Patent Term Extension for two months after a patent issues. The Request must be filed as described in MPEP 2735.

Therefore, my recommendation is that you review all patents that have issued in the last two months, and calculate the new patent term adjustment. For older patents, you have up to six months to appeal the determination to the District Court, so if you have a key patent that may get a few more years validity, this path may be an available option.

The new simple term extension calculation is as follows. First, determine whether your patent was pending for more than three years. If so, check whether an RCE was filed within the three years. If no RCE was filed in the first three years, then your patent term adjustment should be a day-for-day adjustment from the expiration of the three year period, until your patent actually issued.

I will update this post if an appeal is filed.

Impact of USPTO Proposed Fee Increases

The USPTO’s published fee increase proposal is going to have an impact on every patent department in every company. You can find the Patent Office’s discussion and a PDF with the fee increases on the AIA microsite. While some fees are untouched, and a few are even reduced, many fees are significantly increased.

Some of the major fee increases:

Many fees are increased by a small amount, those are not listed in the above table. The only noticeable fee reduction is for issue fees. If an application is publishes, the issue fee will be reduced by 50% compared to an issue fee for a non-published application. While publication will still cost $300, the savings of $1,080 on the issue fee is not insignificant. However, this change is not scheduled to start until January 1, 2014, almost a full year after the new fee increases become effective.

The increases in the filing fees, RCEs, and maintenance fees are going to have a large impact on patent budgets. If you budget for prosecution and maintenance fees separately, and I recommend you do, increase your estimates for both, starting in February of 2013. Since many companies set their budgets annually, make sure your next budget cycle includes the likely increases in patent costs.

For prosecution costs, if you work with an outside firm most of the cost is attorney fees. I would estimate that this fee increase will lead to an increase of overall costs by approximately 15% across the board. Of course, if you are handling prosecution in-house, you should be increasing your budget for PTO fees by at least 60%, given the inflation of filing, RCE, and appeals fees.

More significantly, you will need to increase your budget for maintenance fees. If your portfolio is evenly distributed in terms of status, then you should increase your overall maintenance fee budget by ~50%. If your portfolio is younger, with most of your issued patents at the first or second maintenance fee stage, increase your maintenance fee budget by ~35%. If your portfolio is older, more heavily weighted toward patents in their final maintenance fee stage, you will need to increase your budget by 60%. For an evenly distributed portfolio of 100 issued patents, the additional cost would be ~$45,500, raising the annual maintenance fee budget from ~$96,700 to ~$142,200.

While the Patent Office has not finalized these fees, I attended the public hearing and there appeared to be little interest in discussing changing these fees, or acknowledging their likely impact on innovation.