Blueprint of a gear train.

 Robert J. Yarbrough
Patent Attorney

 Patents - Inventions - Trademarks 

Comments to Continuing Application Rulemaking

April 28, 2006
Mail Stop Comments - Patents
Commissioner for Patents
United States Patent and Trademark Office
P.O. Box 1450
Alexandria, VA 22313-1450

Re: Notice of Proposed Rulemaking,
     “Changes to Practice for Continuing Applications…”
     71 Fed. Reg. 48 (January 3, 2006)
     Docket No. 2005-P-066

Dear Mr. Commissioner:

In the above Federal Register Notice dated January 3, 2006, the U.S. Patent and Trademark Office requested public comment regarding the above Notice of Proposed Rulemaking. This letter presents the comments of the Pennsylvania Intellectual Property Forum ("Pennsylvania IP Forum"). The Pennsylvania IP Forum is an organization of patent practitioners and intellectual property attorneys located principally in Southeastern Pennsylvania. While some of us represent large entities, all of us represent individual inventors and small entities. Large entities already have significant advocates in Washington. Our purpose in making these comments is to provide a voice to individual inventors and small entities that otherwise would not be heard.

The Pennsylvania IP Forum appreciates the opportunity to offer comments on the rule and practice changes proposed by the Office. We believe that the proposed changes would adversely affect the patent prosecution process in terms of time and cost, particularly for small business. We are concerned by the continuing shift in burden during prosecution from the Office to applicants having limited resources. We are specifically concerned that the proposed rules will have unintended consequences to small business.

The value of small business entities to the US economy cannot be overstated. The publication entitled “A Guide for Governmental Agencies: How to Comply with the Regulatory Flexibility Act” (“RFA Guide”), promulgated by the Small Business Administration, sets forth Federal agency data on small businesses. In its description of how important small businesses are to the US economy, the RFA Guide indicates that small businesses represent more than 99.7 percent of all employers.  Moreover, on p.99 of the RFA Guide, the research set forth indicates that "small firms produce 13 to 14 times more patents per employee than large patenting firms. Those patents are twice as likely as large firm patents to be among the one (1) percent most cited." It is thus a matter of public record and, indeed, a finding of the Federal government, that the patent activities of our country’s small business entities are crucial to the U.S. economy.
The Pennsylvania IP Forum agrees with and adopts as its own the comments of Robert A. Vanderhye. Mr. Vanderhye’s comments are incorporated herein by reference and a copy of those comments is enclosed as Attachment 1.
a.     The Office has failed to comply with the Regulatory Flexibility Act
The PTO has failed to adequately consider the effect of the above pending rulemaking on the small business community as required by the Regulatory Flexibility Act, 5 U.S.C. 601-612 (hereinafter “RFA”). The rulemaking package in question is crucial to small businesses and a full regulatory flexibility analysis is required. We request that you direct the PTO staff to fully comply with the requirements of the RFA, and that the rulemaking package be republished for public comment after that compliance and prior to final promulgation. We believe that if the PTO fails to perform a full regulatory analysis in compliance with the terms of the RFA, the rulemaking package will be invalid and vulnerable to challenge under 5 U.S.C. 611(a)(4).
The Small Business Administration (“SBA”) has determined that the PTO should conduct a full RFA analysis of the pending rulemaking. See enclosed Attachment 2, a letter of April 27, 2006 to Undersecretary Jon W. Dudas of the PTO from Thomas M. Sullivan, Chief Counsel for Advocacy and Carrol L. Barnes, Assistant Chief Counsel for Advocacy of the SBA. 
b.     The RFA requires the PTO to adequately analyze the effect of rulemakings on small business
When an agency issues a rulemaking proposal, the RFA requires the agency to “prepare and make available for public comment an initial regulatory flexibility analysis (IRFA)” which will “describe the impact of the proposed rule on small entities.” 5 U.S.C. 603(a); Northwest Mining Association v. Babbitt, 5 F. Supp.2d 9 (D.D.C. 1998). Before a proposed regulation is published in the Federal Register, the RFA requires the promulgating agency to identify the entities to be regulated by size and number, estimate the economic impact by size category and determine which size categories will be impacted. The promulgating agency must then ask the following question, “Will the rule changes have a significant economic impact on a substantial number of small entities?” 5 U.S.C. 605(b). If the answer to that query is positive, an initial regulatory flexibility analysis must be performed. If the answer to this question is negative, the head of the agency may then certify that the rule will not have a significant impact. Such a certification must include a statement providing the factual basis for this determination.

The Office of Advocacy of the Small Business Administration is required by Section 612 of the RFA to monitor agency compliance and disseminated the RFA Guide to inform agency action. The RFA Guide provides that the statement accompanying a certification of no impact, at a minimum, must include (a) a description of the affected entities, and (b) the facts that clearly justify the certification that there will be no significant impact. The agency’s reasoning and assumptions underlying the certification must be explicit in order to obtain public comment and thus, receive information that would be used to re-evaluate the certification. See Guide, at pp. 8-9. The decision to certify must be based upon a sound threshold analysis to support a finding of no significant impact and the record an agency builds to support a decision to certify is subject to judicial review under 5 U.S.C. 611(a).  
c.     The PTO certifications do not meet the RFA requirements because proper credible facts to support the certifications are lacking.
The PTO failed to provide facts that clearly justify the certification of no significant impact. The proposed rule change seeks to revise the rules of practice by requiring an applicant, among other things, to pay a large fee and file a petition with a showing “to the satisfaction of the Director” as to why any second or subsequent continuation applications or requests for continued examination should be accepted for filing. The PTO has certified that “the changes proposed in this notice will not affect a substantial number of small entities”.   This conclusion is incorrect because the PTO has not adequately examined the facts surrounding the proposed regulation and misperceives the effect of the proposed rulemaking.

The proposal increases risk, cost and uncertainty for small businesses. To meet enablement and best mode requirements, the prudent patent applicant discloses in the application a great deal of information about his or her invention. If the proposed regulation is finally promulgated, every applicant must claim all of the aspects of an invention that are disclosed or risk never being able to claim the disclosed invention, whether the applicant understands all of those aspects at the time of filing or not. When a small business invents a technology having multiple applications, the small business likely will not know until the technology is fully developed which of those applications, if any, will have value and therefore are worthy of an investment in patent protection.

If the regulation is finally promulgated, the small business will be presented with an expensive and risky dilemma: at great and wasteful cost, the small business can keep its options open by pursuing patent protection for all of the aspects of the technology that the small business can foresee; alternatively, the small business can risk that it has guessed correctly and that the patent for which it has applied will provide the applicant with adequate protection. If the small business guesses wrong, then the mistake is costly and valuable aspects of its invention are not protected. The proposed rulemaking does not address the increased cost to small business of attempting to protect all aspects of an invention and does not address the cost associated with increased risk to small business.

The rulemaking misperceives the effect of the regulation and overstates any benefit from the reduction in the number of applications. First, many applicants will keep their options open by submitting multiple claims addressing multiple patentably distinct inventions in the same application, knowing that the claims likely will draw a restriction from the examiner and require divisional applications. Second, other applicants will submit multiple applications addressed to different aspects of the invention at the earliest stages of the patent process.  Either approach will result in an increase in cost to small businesses and an increase in the number of patent applications that must be reviewed by the PTO.  The PTO will find itself reviewing claims for many dead end and blind alley applications that would not have been filed but for the proposed regulation.

As disclosed by the RFA Guide, small businesses engage in proportionately more patenting activity than large businesses. Restrictions on patenting therefore disproportionately affect small businesses. Contrary to the PTO’s assertions, these changes will have a significant economic impact on a great number of small entities.
d.    The proposed rulemaking does not comply with the RFA because the PTO does not evaluate alternatives.

Under 5 U.S.C. 603(c), the keystone of an initial regulatory flexibility analysis is the description of any significant alternatives to the proposed rule that accomplish the stated objectives and that minimize the rule’s economic impact on small entities. There are no viable alternatives suggested within this rulemaking to provide regulatory relief to small entities as required.

There are several alternatives that the PTO should evaluate that would efficiently and effectively achieve the PTO’s stated goals without unduly burdening small entities or stifling innovation. The first alternative is to exempt small entities. Since, as the PTO alleges, only a small percentage of applications by small entity applicants will be affected, one manner in which to avoid the further scrutiny under the RFA is to exempt small entity applicants from compliance with this proposed rule.
e.    The PTO should conduct the required analyses of impact on small business and republish the proposed regulations for comment.
In making public comment to the proposed rulemaking, the public is entitled to review any and all credible information the PTO relied upon in making its decision to certify that the proposed rule changes will not have a significant effect under the RFA.   The PTO has presented no such credible information in the proposed rulemaking. The PTO also has provided us with no such credible information in response to a Freedom of Information Act request from one of our members. We are left to infer that no such credible information exists.

We believe that the proposed rule change will have a significant impact on a substantial number of small entities both in terms of out of pocket costs as well as in valuable time. The PTO should perform a full regulatory flexibility analysis and should republish for public comment the proposed regulation, including the regulatory flexibility analysis. If the PTO does not comply with these requirements of the RFA, the regulation packages will not be effectively promulgated and will be vulnerable to challenge under 5 U.S.C. 611.

The members of the Pennsylvania IP Forum appreciate the opportunity to comment on the proposed rules and would be pleased to further assist the Office in any manner necessary to consideration of the issues discussed above.

Very truly yours,

Robert J. Yarbrough
PTO Reg. No. 42,241
Pennsylvania Intellectual Property Forum

The following members of the Pennsylvania Intellectual Property Forum concur in the foregoing comments:

 Stuart S. Bowie, Esquire, PTO Reg. No. 22,652
 Brian P. Canniff, Esquire, PTO Reg. No. 43,530
 Richard A. Elder, Esquire, PTO Reg. No. 30255
 Gerry J. Elman, Esquire, PTO Reg. No. 24,404
 Mark A. Garzia, Esquire, PTO Reg. No. 35517
 David Guttman, Esquire, PTO Reg. No. 27479
 Andrew T. Hawkins, Esquire, PTO Reg. No. 51791
 Lawrence Husick, Esquire, PTO Reg. No. 38,374
 Art Kyriazis, Esquire, PTO Reg. No.  53169
 Robert S. Lipton, Esquire, PTO Reg. No. 25,403
 Deborah A. Logan, Esquire, PTO Reg. No. 54,279
 Nils H. Ljungman, Esquire, PTO Reg. No. 25,997
 Loretta Smith, Esquire, PTO Reg. No. 45116
 Ash Tankha, Esquire, PTO Reg. No. 33,802
 Laurence A. Weinberger, Esquire, PTO Reg. No. 27,965
 Patricia A. Wenger, Esquire, PTO Reg. No. 42,218
 Arnold W. Winter, Esquire, PA Atty. ID No. 62,347