Does appealing a patent application lead to a more valuable patent?

The savvy patent practitioner will tell you that it is difficult to predict which type of patent will be really valuable, so it is best to draft and prosecute every application with utmost care, as if it were the most valuable. But budgets for many patent applications, especially defensive applications for companies amassing patent arsenals, have been capped and fixed. With these incentives, often times applicants end up pursuing a strategy that sacrifices valuable claims for a quick Notice of Allowance.

Such a tradeoff may very well be justified, but do some prosecution strategies preserve high value while balancing other competing factors? Here, we propose that appeals may be such a strategy that can result in a higher-valued eventual patent.

A recent paper noted that going through the USPTO appeals process during examination is associated with a nearly 50-percent increase in the odds that the resulting patent will be litigated. See Alan C. Marco and Richard D. Miller, “Patent Examination Quality and Litigation: Is There a Link?”, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2995698 (June 2017). This is important because it is well known that patents that are litigated are more valuable. (Cooter and Rubinfeld, 1989; Lanjouw and Schankerman, 1997; Lerner 2008). Why might appealing an application lead to a more valuable patent? We discuss three possible explanations.

Appealed claims lead to broader claims?
A first explanation relates to the breadth of the patent claims and the incentives for the patent being pursued. While difficult to empirically prove, it is expected that patents with broader claim scope are more likely to be litigated (Lanjouw and Schankerman, 1997). Appealing an application to allowance could result in broader claims than pursuing rounds of narrowing claim amendments because it is possible that some claim amendments that the examiner asserts are needed in fact are not needed by the Board to get an allowed case.

When a patent is being planned to be used (especially offensively), having this breadth can be a critical reason for having the patent at all. And one important way that such breadth can be preserved is by fighting for it through an appeal rather than settling for claim amendments.

Board stamp of approval means less likely invalid patent?
An explanation proposed by Marco and Miller is that an eventual patent is more valuable as a direct result of appealing. Under this theory, by virtue of the PTAB judges scrutinizing the patent application during prosecution, the later patentee is emboldened in thinking that the patent is much less likely to be invalidated by the courts.

This explanation is possible, especially because PTAB judges are technically- and legally-trained and could very well serve as a strengthener of patent applications. However, it seems simplistic to think that just because the PTAB has reviewed a particular set of rejections being appealed, that the patent is somehow protected–especially as many judges only decide the merits of the appealed rejection. Further research investigating this theory is needed.

Correlation not causation?
A third explanation relates to higher value patents merely being correlated with the appeal process. Here, applicants with higher value applications may happen to pursue appeals as a strategy more often than other applicants. This may be due to exhausting other prosecution procedures and resorting to appealing as a last resort. Or it could be due to applicants with high value inventions having counsel that is more sophisticated and more likely to propose and succeed on appeal.

If a valuable patent is on the menu, do not discount appealing rejections in the prosecution of your application. You may find that you don’t have to go for the Examiner’s head-fake all the time. Instead, you might get better claims.

USPTO increases fees for ex parte appeals less than initially proposed, thanks to AIPLA and IPO

Yesterday, the United States Patent and Trademark Office (USPTO) issued a final rule on fees, titled “Setting and Adjusting Patent Fees during Fiscal Year 2017”. One of the changes related to the ex parte appeal fees. The USPTO considered comments from stakeholders and then altered the proposed increases to ex parte appeal fees presented in the Notice of Proposed Rule Making (of October 3, 2016). Thanks in part to two important points raised by AIPLA and IPO, the final rule did not raise the Notice of Appeal fee and only increased the appeal forwarding fee by $240 (for large entity).

The first point raised in the comments related to the Notice of Appeal fee. Under this argument, the Notice of Appeal fee should not be increased because many applications never make it to the Board after the appeal conference (after the appeal brief has been filed). The AIPLA comment put the figure at 33% for 2016 of applications with filed appeal briefs that resulted in reopened prosecution or a notice of allowance. Presumably, these applications that get kicked out of the appeal process have faulty rejections. With such a high figure, it makes little sense to punish the applicant for these faulty rejections discovered by the USPTO after filing a Notice of Appeal.

The USPTO heard this point. Thus, instead of increasing the Notice of Appeal fee to $1,000, the fee will stay at $800.

The second point was a more fundamental argument against appeal fees being increased. The commenters argued that the appellants should not have to pay a greater share of the appeal cost. The USPTO had previously showed that only 58% of the appeal costs are covered by the appeal fees. And it had recommended increasing that to a total of 72% of the costs. Not so fast, argued both AIPLA and IPO.

AIPLA and IPO pointed to the low affirmance rate of Examiners on appeal, arguing that appellants should not cover a greater share of the appeal cost when so many of the rejections are improper. In other words, such appeal costs are necessitated by rejections that should never have been introduced, as evidenced by low affirmance rates. Both cited to the official USPTO statistics on affirmance rates around 40%. Further increasing fees will only make the poor examination worse as it deters applicants from pursuing appeals.

As we have pointed out before, when trying to measure poor rejections overturned, affirmance rates are actually an underestimated figure. This is because if only one rejection among others gets affirmed to all claims, that can mask the other rejections that get reversed. Thus, 40% affirmance rate is a very conservative figure. And some grounds of rejection are consistently overturned much higher than others.

The USPTO appeared to be receptive to this argument as well. The USPTO decided to increase the fee for forwarding an Appeal to the Board to $2,240 (+$240) instead of $2,500 as proposed in the NPRM. This translates into a compromise of covering 63% of the total appeal costs–higher than the current 58%, but lower than the originally proposed 72%.

Prosecution strategy has always been tightly linked to official fees. A fee increase for a particular procedure will undoubtedly decrease interest in the procedure, at least to some extent. Here, as the fees for appealing did not significantly rise, appeals remain a viable course of action in certain situations. This is especially true as the fees for RCEs rose proportionately higher and as the backlog for ex parte appeals continues to plummet.

Here are quotes from the comments.

From AIPLA’s comment: it is unfair for the Office to equate the full cost of an appeal to the appellant. Current statistics from the Office indicate that Examiners are affirmed in 57.4% of PTAB decisions. See https://www.uspto.gov/sites/default/files/documents/fy2016_sep_e.pdf. Thus, in a significant number of cases, appellants are subjected to appeal fees that could have been avoided if a correct decision was made at the examination level.

From IPO’s comment: The reversal rate of Ex Parte Appeals by PTAB indicates that a large number of appeals are pursued to correct invalid rejections. Although the FRN states that “the true cost of Ex Parte Appeals is being significantly subsidized,” they might be in effect “subsidizing” improper examination processes to correct improper rejections. Moreover, many appeals never reach the PTAB because the examiner withdraws the final rejection upon receipt of the Appeal Brief to reopen prosecution or issue a Notice of Allowance.

Rare split panel at PTAB reverses abstract idea rejection

 

Rarely do the three-judge panels at the PTAB offer differing opinions in ex parte appeal decisions. It’s not necessarily that these judges all agree with each other all the time. Instead, it’s because the USPTO production quota system does not reward judges for separate concurrences or dissents. So any time that a judge decides to spend in writing a separate opinion is in essence off-the-clock work. But this does not deter some judges from branching out from the panel, as shown in a recent case that reversed an abstract idea rejection: Ex Parte Boucher et al, Appeal No. 2017-003484 (PTAB Oct. 31, 2017).

In Ex Parte Boucher, the majority reversal of the Examiner’s rejection under Section 101, authored by Joseph L. Dixon and joined by Larry J. Hume, was brief. It held that the Examiner had provided insufficient factual findings and analysis on patent eligibility. The Examiner’s asserted abstract idea “manipulating data for the purpose of fault detection” oversimplified the claimed invention, according to the majority.

The majority further agreed with the appellant’s arguments that the claims are directed to new and useful improvements for detecting or diagnosing faults of items or of functions implemented by the items of an aircraft. Thus, the claims were not solely directed to an abstract idea.

Judge Joyce Craig disagreed with the majority on Section 101. The dissent would have characterized the claim as existing information in a database, analogizing the claims to Intellectual Ventures I LLC v. Erie Indemnity Co., 850 F.3d 1315, 1327 (Fed. Cir. 2017). The dissent would have characterized a remaining part of the claims as using a mathematical algorithm to manipulate existing information to generate additional information, citing to Digitech Image Techs., LLC v. Elecs. for Imaging, Inc., 758 F.3d 1344, 1351 (Fed. Cir. 2014). Thus, the dissent would have concluded that the claims are directed to an abstract idea under the Step 1 analysis of Mayo/Alice.

Under step 2, the dissent looked at the claim elements taken individually and saw nothing more than “routine computer functions and amount to no more than the performance of well-understood, routine, and conventional activities in known to the industry.” Thus, the dissent would have agreed with the Examiner and sustained the rejection.

The Federal Circuit and district courts are not the only judicial bodies that are at odds with each other with regard to applying a consistent and cohesive framework for assessing the two-step analysis of patent-eligibility. It can thus be useful to have additional knowledge at to guide your chances for appeal.

With Anticipat Research, you can see which judges are deciding cases in your tech center to give you a better sense of what your chances on appeal are. For example, if you are appealing a Section 101 rejection, will you get a Judge Craig type of panel that tends to agree with the Examiner’s analysis, or will you get a Judge Dixon type of panel that sides with the appellant’s analysis. See below interface.

filters  Try Anticipat Research today to see which judges are on the reversed panel decisions, specific to a tech center of interest. Then you can search for how often these judges appear both in panels and as authoring judges in your tech center.

Recent Rehearing Decision Reverses Panel’s Previous Affirmance on Section 101

Losing a Section 101 appeal at the PTAB can sting. In many cases, continued examination is off the table as further amendments may not help the cause. And appealing up to the courts involves spending a lot of time and money. But there is another option: filing a request for rehearing. A recent decision shows that this procedure is not fruitless for Section 101 rejections, even if it may seem like it is. 

Recently decided Ex parte MacKay, Appeal No. 2015-008232 (September 20, 2017) reversed a Section 101 rejection that it had previously affirmed in its initial decision. In the rehearing decision, the panel was less than wordy when it acknowledged that it realized that the relied-upon identification of an abstract idea (i.e., “rules for playing a game”) may not be affiliated with the limitations recited in the claims on appeal. Instead, the claim recites the creation of a game board surface image. The panel concluded that the record failed to adequately establish that the claims at issue are directed to an abstract idea, and the rejection under 35 U.S.C. § 101 was not sustained. 

On the face, intuition might suggest that requests for rehearing are a futile endeavor. And perhaps the numbers reflect this futility. The percentage of applications that get appealed to the PTAB is quite low, 1-2%. But the percentage of appeals where the applicant files a request for rehearing is that much lower, about 1-2% of the appealed decisions. On the surface it makes sense why this procedure is rarely used. But it should not be taken out of consideration for the following two reasons. 

First, appellants may present a new argument based on a recent relevant decision of either the Board or the Federal Circuit. But unless a case comes out that supports the appellant’s position and is directly on point, the rehearing panel can easily distinguish. Plus, with such a short window between the appeal decision and the rehearing decision, unless the Board failed to consider a key case in its original decision, it would seem less likely that an appellant’s new argument saves the day.
The second reason an appellant should consider rehearing is to show that the Board misapprehended or overlooked points. See 37 C.F.R. § 41.52(a)(1). Because the same panel of judges that rendered the initial decision rules in the request for rehearing, it might seem less likely that the panel admits that it misapprehended points in their earlier decision. But it turns out that it does work, as shown in the above case.

In conclusion, if you’re feeling out of options after an unsuccessful appeal to the PTAB, consider filing a request for rehearing. It’s fast (only a few extra months of wait time for a decision) and as shown above, there’s a chance that it helps reverse the rejection. Plus the cost is miniscule compared to appealing to the Federal Circuit or Eastern District of Virginia (the other options for seeking redress of the unfavorable PTAB decision). 

Will You Get C-Delay Patent Term Adjustment After Your Appeal?

An advantage of appealing a patent application is to avoid unnecessary and narrower claim amendments and prosecution history estoppel. So rather than seek to appease an Examiner in an effort to overcome a particular rejection (with no guarantee of an allowance), appellants can ask the Board to directly overturn the Examiner. But an appeal comes with a sometimes heavy cost of significant time spent in the appeal process. For this reason, PTA can compensate for this time if the appeal is successful. In some industries, this PTA translates into big money. But when exactly does an appeal result in an applicant getting the patent term adjustment?

While appeal outcomes come in varying degrees of wins and losses for the appellant, C delay is an all-or-nothing reward. In short, C delay is rewarded whenever the Board overturns an unpatentability finding of at least one claim. This is how the USPTO interprets the statutory and rule language of “delay due to the review reversing an adverse determination of patentability”. See 35 U.S.C. § 154(b)(1)(C) and 37 CFR § 1.702. When only one ground of rejection is being decided, this means that either an affirmed-in-part (at least one claim reversed) or a wholly reversed outcome (all claims reversed) will lead to the C delay. When the Board decides multiple grounds of rejection, as long as none of the Examiner’s rejections survives with respect to one claim, an appellant will get PTA C delay.

Another way of looking at it is that an applicant will get C delay as long as the decision is not designated “affirmed.” We previously reported how the USPTO’s designation of “affirmed” is misleading and overly simplistic, which means that the appellant must be aware of simple procedural techniques that could deprive of precious PTA.When considering an appeal with the best chance of securing C delay, you should use Anticipat.com to help you consider three things.

First, assess the rejection depth of the claims. By rejection depth, the number of rejections associated with each claim (the greater the depth, the more rejections for each claim on appeal). The higher the rejection depth, the more likely you’ll get an affirmance and no C delay. This is because if all claims stand rejected under multiple grounds of rejection, there is a high chance that one of the rejections will stick. While it is possible for the Board to overturn each and every ground of rejection, with more rejections applied to the claims, the less likely this happens. This is in part due to the grounds of rejection having remarkably stable reversal rates, whether the appeal includes one or more grounds. In a recent decision, where four grounds of rejection were on appeal, the 101 rejection was affirmed, which masked the Board’s reversal of the 112(b) indefiniteness rejection, the 102 anticipation rejection and the 103 obviousness rejection. This meant that the application is ineligible for C delay for this appeal. All it takes is one rejection to carry the day against C delay.

Second, look at the track record for your application’s specific appeals–whole reversals and partial reversals. Some rejections (such as Section 101 patent-eligibility and obviousness-type double patenting) are all or nothing: all claims get reversed or all claims get affirmed. This is reflected in the percentage of “affirmed-in-part” outcomes for these grounds of rejection. For example some rejections, such as 102 or 112, have a relatively large affirmed-in-part category, creating a wide spread of the likelihood of overturning at least one claim. Other grounds, such as a Section 101 rejection, have a relatively low chance of being overturned even including affirmed-in-part. And this also includes the affirmed-in-part spread. Because it only takes one reversed claim to avoid an affirmed outcome (and hence qualify for C-delay PTA), look to the total combined statistic between pure reversals and affirmed-in-part outcomes. See the below graphs to see the different spreads for overturning at least one claim. The thick orange sections add significantly to the overall reversal rate of the rejection. For Section 102 and 112, the overall reversal rate approaches 60%.

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Third, render moot grounds of rejection you do not plan to contest before appealing or argue all of your grounds of rejection in the appeal brief. For one reason or another, quite a few appellants choose not to argue an appealed ground of rejection. This can be because they plan to make a minor claim amendment (such as to overcome a 112 rejection), they plan to file a Terminal Disclaimer (to overcome a double patenting rejection), or they plan to make an amendment to avoid a nonstatutory subject matter rejection (such as by adding non-transitory). This can be a mistake. In these cases, if these non-substantive outcomes apply to all the claims at issue, the entire case is affirmed and there is no PTA C-delay. For example, in Ex Parte Le Bot et al, the appellant did not argue a Section 112(b) indefiniteness argument even though its arguments succeeded in reversing the 103(a) argument. The result was an affirmance for the appeal and no possible chance for C-delay. A practice tip is that if you have a loose end to wrap up, resist the urge to take care of this loose end before or after the appeal.

It is good practice to be strategic about appeals, especially when patent term is important. Since it is difficult to predict which patents will eventually find this added patent term to be precious, better to be safe than sorry.