New USPTO subject matter memo in light of Vanda Pharms. v. West-Ward

After a relatively long break of over a year from issuing subject matter eligibility memos after Amdocs, the USPTO looks like it’s back on track. This year has already seen the Berkheimer memo. Now its latest memo from Bob Bahr was issued yesterday June 7, 2018 in light of Vanda Pharms. v. West-Ward Pharms (Fed. Cir. Apt. 13, 2018). 

The memo includes guidance to examiners for examining diagnostics applications under Section 101. The memo is nothing revolutionary for examining under the Mayo/Alice framework as it closely follows the Vanda holding. But the memo does clarify that examiners should consider an “application” of a natural relationship as satisfying step 2A of the Alice test, without having to go to the “routine, conventional, and well-known” analysis of Step 2B. Specifically, the memo states that practically applying a natural relationship should be considered eligible–it is not necessary for such method of treatment claims to include non-routine or unconventional steps. 

The recent memos offer some hope that USPTO will continue to improve the predictability of applying Section 101 rejections.

Recent critiques of the PTAB ex parte appeal process focus on Examiner involvement post-appeal

In the past month, two complementary but distinct criticisms of the ex parte appeal process have emerged. They deal with the way the Board treats appeals where the Examiner embellishes/modifies the rejections in between the last rejection on the record but before forwarding to the Board. These are serious criticisms that deserve serious attention. As people learn more about current Examiner practices, expect change at some level at the PTAB.

open Baltic sea at the sunset

The first criticism comes from Bill Smith and Allen Sokal on Law360 in a piece titled “A Way to Improve PTAB Ex Parte Appeals.” In the article, the authors decry the practice of examiners at the Examiner Answer stage. Examiners will copy and paste the written rejection from the appealed office action into the “statement of the rejection” section and state new facts and reasons in support of the rejection in the “response to arguments” section.

In essence, the Examiner gets to clean up the rejection before being heard by the Board. And for the most part, the Examiner can get away with introducing new analysis and new facts (new ground of rejection) without reopening prosecution. Then the Board decides the enhanced rejections as if it were part of the original rejection being appealed. According to the authors, this practice “injects unpredictability into the board’s decision since the appeal brief addressed the as-stated record rejection, not the rejection based on the expanded facts and reasons.”

The solution that the authors propose: limit its review of the merits to the facts and reasons in the as-stated rejections in the “statement of rejection” section of the examiner’s answer. If an Examiner raises anything else in the Examiner Answer, do not let the Board give it weight.

The second criticism is interrelated and comes from a recent lawsuit Odyssey Logistics & Tech. Corp. v. Andre Iancu, (E.D. Va. May 11, 2018). This lawsuit challenges the above-noted practice at a more fundamental level by hitting against the the Amended Ex Parte Appeal Rules enacted on January 23, 2012.

The complaint cites U.S. Patent Application No. 11/458,603 as an example of the appeal process running afoul. In this Examiner Answer, the Examiner, for the first time, apparently cited three patents as new evidence to be considered in support of his rejection. The Examiner’s Answer also allegedly included changes in the Examiner’s rationale for his rejections.

While this fact pattern is eerily similar to the fact pattern proposed by Sokal and Smith, here the complaint alleges that these new grounds of rejection would not be proper but for the Amended Ex Parte Appeals Rules and their retroactive application to the ‘603 application. According to the complaint, the Amended Rules included changes to 37 C.F.R. §41.35(a) that change the start of the Board’s jurisdiction. Modifications were also allegedly made to the provisions for new grounds of rejection in 37 C.F.R. §41.39, and new definitions were provided for the terms “Evidence” and “Record” in 37 C.F.R. §41.30.

According to the complaint, the Examiner, the official whose rejection is challenged in the appeal, will always have the jurisdiction necessary to change the rejection challenged on appeal or provide entirely new grounds of rejection, and may add arguments, dictionaries, or other documents to the record, even after the applicant has filed an appeal brief. 76 Fed. Reg. at 72276-78.

The complaint then proceeds to raise a very interesting point that is consistent with the points raised by Sokal and Smith.

In this event, the decision rendered by the PTAB is not a decision affirming or reversing the original rejection(s) challenged on appeal but instead is a decision on the new and different grounds of rejection. If the PTAB’s decision is on different grounds of rejection, the applicant’s right to obtain a patent term adjustment is frustrated since there is no reversal of the original rejection on the written record. See 35 U.S.C. §154(b)(1)(C). Therefore, the Amended Jurisdiction Rule interferes with applicant’s statutory right to appeal and to obtain a patent term adjustment if the appeal is of a rejection that should be reversed.

 

In reviewing tens of thousands of final decisions at the PTAB, we at Anticipat.com confirm the unpredictability in how rejections are decided (More on this in a forthcoming piece). Being a relatively obscure procedure in a relatively dry practice, this issue does not get too many headlines. But as a new administration seeks to foster greater predictability and strength to the patent system, watch for this issue to become more prominent with some sort of change in the horizon.

 

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.