A centerpiece of the Leahy-Hatch/Berman-Smith Patent Reform Act of 2007 (S. 1145 and H.R. 1908) is the establishment of an injudicious post-grant opposition procedure (also known as a “second window”). According to Chairman Howard L. Berman (D-CA) of the House Subcommittee on Courts, the Internet, and Intellectual Property, a new layer of review is needed because:
In an effort to address the questionable quality of patents issued by the USPTO, the bill establishes a check on the quality of a patent immediately after it is granted or in circumstances where a party can establish significant economic harm resulting from assertion of the patent. [emphasis added.]
There are several key problems with the proposed new procedure for post-grant review contained in sec. 6 of the Patent Reform Act of 2007.
First, someone can challenge a patent anytime, throughout the patent’s life if they can show they are likely to suffer “significant economic harm” from the patent. This is extraordinary, because prosecutions of all but a few of the most egregious crimes (e.g., war crimes; murder; rape, in some jurisdictions) are governed by statutes of limitation which say that causes of action aren’t permitted after a certain period of time. Statutes of limitation are necessary because memories fade and evidence becomes stale, is lost or more easily corrupted as the years pass. Some crimes are so heinous they aren’t subject to a statute of limitations. But patent disputes hardly fit in this category.
Aside from the enormous uncertainty that would arise from an open-ended opportunity for post-grant opposition, sec. 6 also strips patent holders of two important protections they have under current law.
Proof and evidentiary standards ‘‘(a) IN GENERAL.—The presumption of validity set forth in section 282 shall not apply in a challenge to any patent claim under this chapter. ‘‘(b) BURDEN OF PROOF.—The party advancing a proposition under this chapter shall have the burden of proving that proposition by a preponderance of the evidence.
Courts now presume that patents must be valid or they wouldn’t have been issued by the Patent & Trademark Office. A plaintiff has to provide “clear and convincing” evidence that a particular patent doesn’t meet the legal requirements for validity. Sec. 6 eliminates the presumption and sets a lower evidentiary threshold. This sets up a situation where a decision of the PTO has little if any significance because the courts will be considering patent claims anew as if no PTO proceeding ever occurred. If this is what we want, the question arises why are we retaining the PTO? Normally, courts defer to the expertise of administrative agencies unless an abuse of discretion is apparent. This policy tends to reduce litigation by increasing the importance for all parties to fully participate in agency deliberations. The Patent Reform Act of 2007 would eliminate any such incentive.
Professor Adam B. Jaffe justifies this duplication on the grounds that it would be inefficient to subject trivial patents to heightened scrutiny:
Effective reform must start with the recognition that much of the information needed to decide if a given application should be approved is in the hands of competitors of the applicant, rather than the PTO. A review process with multiple potential review levels efficiently balances the need to bring in outside information with the reality that most patents are unimportant. Multilevel review, with the barriers to invoking review and the thoroughness of that review both increasing at higher levels, would naturally focus attention on the most potentially important applications. Most patents would never receive anything other than the most basic examinations. But for those applications that really mattered, parties would have an incentive and opportunities to bring information in their possession before the PTO, and the PTO would have more resources to help it make the right decision.
Professor Jaffe makes a good argument, for an economist. But there is a compelling public policy favoring finality in government decision-making so people can plan for the future. The general rule requires interested parties to make their views known and submit their challenges during the pendency of agency decision-making, not whenever it is convenient. An innovator trying to market his or her idea needs financing and talent, but by subjecting patents to opposition at any time and making the outcome less predictable a Sword of Damocles will hang over the patent holder and innocent collaborators (such as investors and employees) who help market his or her innovation. This will invariably impact capital formation that is vital for innovation.
A new post-grant opposition procedure would also be highly duplicative, since Congress created a re-examination procedure in 1981 which is still with us (also for the purpose of reducing litigation) and the Patent Reform Act of 2007 includes separate provisions for pre-grant opposition in sec. 9.
Finally, it should be noted that even Chairman Berman seems to understand that a post-grant opposition procedure could lead to the abuse of patent holders:
Many have expressed concerns about the possibility of harassment of patent owners who want to assume quiet title over their invention. In an effort to address those concerns, the bill prohibits multiple bites at the apple by restricting the cancellation petitioner to opt for only one window one time. The bill also requires that the Director prescribe regulations for sanctions for abuse of process or harassment.
If history is any guide, this may lead to hundreds or thousands of pages of new regulations, in which case the only thing Chairman Berman may have accomplished is to substitute one problem for another.