Big business is losing the fight to make patent applications public. But it's gaining on its goal of creating a better funded, better operated U.S. Patent and Trademark Office.
By Stephen Barlas, Contributing Editor
E.I. du Pont de Nemours & Co. files an average of about 20 patent applications a year for potential new products for its packaging and industrial polymers division. One hundred of those patents undergird the products that keep the division alive and kicking. So it is understandable that DuPont-and other developers and users of packaging-are following the debate in Congress over patent reform with more than a little bit of anxiety. The real fireworks were apt to start in July when members of a Senate-House conference committee were scheduled to sit down together to reconcile differences in the bills (H.R. 400/S. 507) they passed. There were a number of key issues to negotiate all of which will be important to companies who develop new packaging and even to those who buy that packaging. The "mother" of all issues though has to do with whether inventors can continue as they do now to keep their patent applications secret as examiners at the U.S. Patent and Trademark Office (USPTO) decide whether to grant them deny them or ask for more substantiation. Secrecy or publication? The Senate Judiciary Committee in May and the full House in April passed similar amendments on this score both of which are heatedly opposed by companies such as DuPont and Dow. They and the rest of the Fortune 500 wanted the language that was in the original versions of H.R. 400 and S. 507. It would have allowed the USPTO to make patent applications public 18 months after they were filed. The large companies tend to favor this 18-month publication plan because it helps them avoid creating a new product around technology that someone else may be in the process of patenting. But small business and the university research community erupted in opposition in the weeks before the House bill came to the floor. When the vote finally occurred on April 24 the House approved its controversial amendment sponsored by Rep. Marcy Kaptur (D-OH) by a vote of 220-193. The amendment allows only independent inventors small businesses and universities to keep their applications secret and that's only if they do not file the application overseas (where most foreign governments publish it in 18 months) or use delay tactics to complicate and extend the USPTO's consideration of the application. As bad as the Kaptur amendment was considered the Senate Judiciary Committee version was worse. Sen. Orrin Hatch (R-UT) had originally included the 18-month publication provision in his bill (S. 507). But after he saw Kaptur's surprise victory on the House floor Hatch quickly retreated (surrendered is probably a more accurate description). Hatch's amendment allows any company of any size to keep its patent application secret as long as the application is not filed overseas. There is no requirement concerning delay tactics. How industry views amendments "We would have preferred to see H.R. 400 pass without the Kaptur amendment" explains Frank Farfone vice president of trade policy and commercial issues for Dow Chemical whose latest patented polymer family for packaging is the Elite resin. "Our preference is that it not be included in the Senate bill." As this was written S. 507 had not gone to the Senate floor. Big business has vowed to get the 18-month publication language back in. That would also please the Clinton administration. It thinks the Senate amendment is worse than Kaptur and Kaptur worse than 18-month publication. "Even the Kaptur amendment has caps" says Bob Stall the chief legislative official at the USPTO referring to the Kaptur provision which allows the USPTO commissioner to publish an application after five years if the inventor uses delay tactics. Patent application publication has engendered heated emotions for good reason. Today the U.S. is the only major country that does not publish a patent application 18 months after it is filed regardless of whether the patent has been granted. 'Submarine' patents The concern is that some inventors purposely delay USPTO consideration of their patent. They use various delaying tactics to keep their patent application submerged like a submarine within the bowels of the USPTO only to surface it and torpedo a new product sold by someone else. Hence the problem of the "submarine" patent. Small businesses inventors and universities have opposed 18-month publication. They are afraid the big guys will steal their ideas. Rep. Howard Coble (R-NC) the sponsor of the House bill (H.R. 400) and chairman of the Judiciary Committee's Subcommittee on Courts and Intellectual Property tried to accommodate those two groups. When he introduced the bill this year he included a provision that would allow inventors small businesses and universities to prevent publication of their patent application until after the USPTO gave them some indication that the invention was patentable. The inventor would first have to certify though that he was not filing for a patent outside the U.S. (where it would be made public after 18 months anyway). Once the USPTO says patentability is unlikely the inventor would have three months to pull the application and attempt to protect the technology under trade secret laws. Groups like the National Assn. for the Self-Employed National Small Business United and the Small Business Survival Committee were very skittish about the Coble bill even after he had agreed to a concession to mollify Jere Glover the chief counsel for advocacy at the Small Business Administration. Those and other groups wanted Coble to delay a House floor vote until after the House Small Business Committee held hearings on H.R. 400 which turned out to be April 24. Coble refused to wait a couple of days. The rest is history. Other issues Though 18-month publication has been the most controversial issue during the patent reform debate it is not the only one. Both the Coble and Hatch bills turn the USPTO into a government corporation. The Clinton administration had some complaints about the kind of corporation H.R. 400 initially created. But when the bill came to the House floor it was amended so that there will be an Undersecretary of Commerce for Intellectual Property Policy who will have guidance responsibility for the independent corporation. The Senate bill does not contain that provision. "The absence of that provision in the Senate bill causes us some grave concerns" says the USPTO's Stoll. Erwin Berrier Jr. president of the Intellectual Property Owners a trade group representing large companies says the USPTO would have much more operating flexibility as a government corporation. It would not be subject to government ceilings on the number of employees who could be hired. Another important provision in the Coble bill prohibits the White House from siphoning off USPTO user fees for purposes outside USPTO. Hatch's S. 507 omits anything on that topic. But the Utah Republican says he has a promise from Sen. Pete Domenici (R-NM) chairman of the Budget Committee to include language in the fiscal 1998 budget bill prohibiting diversion of USPTO user fees. How much 'diversion'? Here is why diversion is an important issue. In 1990 when taxpayer support for the USPTO was eliminated Congress imposed a massive fee increase-called a surcharge-on users. Today that surcharge totals about $119 million a year and accounts for about 20% of the USPTO's operating budget. The USPTO has to ask the congressional appropriations committees each year for permission to spend that 20% surcharge on patent office responsibilities. Since 1992 Congress has said "Well maybe we'll use some of that for something else." That first year $8 million was diverted. In this current 1997 fiscal year $54 million was diverted. As a result the USPTO is only able to hire about 50% of the patent examiners it needs while patent applications have increased 10%. This of course hurts DuPont as much as the independent inventor. When President Clinton proposed his fiscal 1998 (starts October 1 1997) budget he asked for a diversion of $92 million of USPTO funds. Moreover as part of the five-year budget proposal he submitted at the same time he signaled his intention to push for diversion of the entire $119 million for each of the three years between fiscal 1999-2002. Lengthening 'pendency' Michael Kirk executive director of the American Intellectual Property Law Assn. argues that the "theft" of this funding will result in a lengthening of the average time it takes the USPTO to rule on a patent application-"patent pendency"-to 42 months by the year 2003. He says this flies in the face of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). That agreement committed the U.S. to granting or registration of patent rights "within a reasonable period of time so as to avoid unwarranted curtailment of the period of protection." Kirk asks "Can the United States legitimately argue that a 42-month patent application pendency is 'reasonable' or that it is not an 'unwarranted curtailment of the period of protection'?" President Clinton is likely to sign whatever bill lands in his lap. The Dows and DuPonts of the world are strongly in support of corporatization anti-siphoning and other arcane but important provisions in both bills concerns having to do with "re-examination" and "prior art." That is why Dow's Farfone says his company would want the bill to become law even if the Kaptur amendment remains. c