PTO Director Addresses Fee Diversion, Business Method Patents, Reexams & Databases

(October 23, 2000) USPTO Director Dickinson gave an speech in which he criticized the diversion of fees from the PTO, discussed the likelihood of new legislation affecting patent reexamination, and called for protection of databases. He also addressed business method patents, the first to file system, and other pending intellectual property issues.

Todd Dickinson, the Director of the U.S. Patent and Trademark Office (USPTO), and Under Secretary of Commerce for Intellectual Property, gave a speech at the annual meeting of the American Intellectual Property Law Association (AIPLA), in Crystal City, Virginia, on Friday, October 20.

He addressed the pending appropriations bills that would divert fees collected by the USPTO to fund other government programs, recent changes regarding inter partes reexamination and the chance that Congress will revisit reexamination, and business method patents. He also discusssed the first to invent versus first to file patent systems and the concerns of independent inventors, global harmonization of patent law, international enforcement, domestic law enforcement, and the need for database protection.

Todd Dickinson

"Funding is probably the most important issue that we need to address," said Dickinson. "We can only be of limited help to the IP community if appropriators and those folks who put together the budget continue to limit the access to the fees which and your clients pay."

"Understandably, given our success perhaps, our fee collections have become a fairly inviting target for diversion to these programs. But, as I have said many time over, and many all of you have, we need those fees in order to run our business."

The House has passed an appropriations bill for Commerce, Justice, State, and the Judiciary that diverts an estimated $295 Million in USPTO fees to pay for other government programs. Rep. Howard Coble (R-NC) led an unsuccessful effort last summer on the House floor to reduce the size of the diversion.

The Senate Appropriations Committee, on the other hand, has adopted a bill that would divert about $33 Million in fees. The Senate has not yet passed this bill, but is likely to within a few days. The House and Senate will then have to reconcile the differences between their two bills.

Dickinson also reviewed changes to the reaxamination process. He added that " I think there also may be an opening in the next Congress to visit the term, or the question rather, of expanding reexamination, or even moving forward aggressively towards post grant PTO style oppositions. This, as I said, may be the most important followup to the current legislative discussions regarding business method patents."

He also stated that the chances are slim that the Congress will take up any other patent legislation in the near future. "I think Congress is not probably in the mood now for much in the way of additional patent legislation, after the battles of the recent past."

Earlier this month Rep. Howard Berman (D-CA) and Rep. Rick Boucher (D-VA) introduced HR 5364, the Business Method Patent Improvement Act, which is intended, in part, to reduce the total number of business method patents that are issued. The bill includes a definition of business method patents that includes both computer based systems, and any technique used in athletics, instruction, or personal skills.

Dickinson pointed out that the allowance rate overall for patents is about 67 percent, while for business method patents it is about 57 percent.

Dickinson was asked about business method patents after his address. He stated that "My reading of State Street is all they said is there is no exception for business methods in the statute, and they didn't necessarily link it to software." However, he added that the cases before the court dealt with software based business methods. He continued that "most, if not the vast majority of the applications we see now in this area are indeed software."

Dickinson also addressed protection for databases. He stated that "sooner or later, we also have to get to the question of sui generis protection for databases, and its global applications."

He reviewed actions by the EU on this topic, and recent attempts to pass legislation in the U.S.

"Now, domestically, we have also seen this controversy. While the IP community, the administration, and the scientific community, all agree that we need some kind of domestic protection legislation, specifically as a means to establish statutory fair uses, we have not, however, to this point, obviously, been able to reach a consensus."

He concluded that "we must reach some kind of agreement. If the U.S. does not formulate legislation, over the long haul, the international community will likely will likely move ahead with a standard closer to EU's directive. So, consensus is absolutely necessary in this country if we are to ensure the widespread development and dissemination of databases on the Internet."

Dickinson discussed global harmonization. "Now this is something that simply must happen, if we are going to realize the full potential of intellectual property, and the gifts that it brings to every population in the world. A substantive patent law treaty by 2010 is and should be top priority."

"I believe that substantive harmonization discussions, hopefully leading to an effective treaty, will come to see all aspects of patent application and post grant procedures are necessary, if we are to remain competitive. Harmonization along these lines would simplify the process of obtaining patents, of reduced redundancy and costs, and get us hopefully one day to the adoption of the global patent system."

He added that "one patent which is enforced in some world wide court, I think is very far away."

Dickinson also touched on the first to invent and first to file systems in his address, and in answers to questions. "We must begin the dialogue," said Dickinson, "for interferences, and that is, the potential question of transforming from a first to invent system to a first to file system."

"I am very mindful, very very mindful, of the domestic and legislative challenges, political challenges in particular, which that represents, and I am not, I don't think, naive about the hurdles that have to be gotten over. But I think that that discussion has to start at some time, particularly as we move towards question of substantive harmonization to our law."

He also stated that "Some have argued that we have a de facto first to file system anyway." He cited USPTO statistics that show that in very few cases does the junior party prevail. "We took in three hundred thousand patent applications last year. We declared 400 interferences, the process to determine who the first inventor was."

"25 percent of those 400, or 100 of them, 100 of those cases, was the junior party, was usually the first to invent, but the second to file. In only one hundred of those cases, out of 300,000 did the junior party prevail."

He then stated that any legislative action is difficult because "the concern of the small inventor community has about the impact on them and their work. They genuinely feel they were disadvantaged, relative to large entities, in the filing process. I don't think that is a misplaced fear in some ways."