If you buy or sell on eBay, or are a BlackBerry user, the odds are that you are aware of the potential impact of patent law on your day to day living. The lawsuit of MercExchange against eBay has the potential to disrupt about a third of eBay's business if a permanent injunction were granted. The threat of such an injunction against it caused the Canadian company RIM to settle with NTP for $612.5 million in order to keep its BlackBerry buiness going.

By June of 2005, there was legislation introduced in the US House of Representatives to reform some of the perceived difficulties. For example, Lamar Smith introduced H.R. 2795. Because powerful interest groups had divergent viewpoints on the injunction issue, the proposed legislation went no where.

The US Patent Office [USPTO] itself is proposing some changes to fix perceived problems. In January 2006, the USPTO presented proposed changes, and solicited comments, upon rules which would limit patent applicants to no more than one continuing application.

For all the talk about problems with the US patent system, and proposed solutions, certain topics are not being discussed. Since about 1991, the Patent Office has been run on fees it collects from users. HOWEVER, in that time period, Congress has been diverting some of the fees the USPTO collects to general revenue. In recent years the diversion has represented approximately ten percent of all the user fees paid to the PTO. [see for example Heath W. Hoglund, 83 JPTOS 725]. HR 2795 did not address fee diversion, and as such would have left the USPTO with its 10% yearly shortfall.

Similarly, the USPTO's proposed change has nothing to do with the fee diversion. In fact, it proposes to limit the number of continuation applications that can be filed, so a result will be a decrease in the fees taken in by the USPTO.

But the USPTO is facing a desparate situation. With the strangulation from fee diversion, the backlog of unexamined applications has increased.

Limiting the number of continuation applications is supposed to address the problem. However, one may question whether this tactic is of sufficient scope to resolve the problem.

I had written in Intellectual Property Today in Nov. 2005, based on numbers I got from the PTO for FY2004:

About 7% of applications were "second" continuations. As a result, the USPTO is evaluating the possibility of limiting continuations. One notes that the combination of RCEs/R129s/CPAs comprises 14% of the applications, with true continuations under Rule 1.53 amounting to 8%. Divisionals comprise 5% and continuations-in-part 4% of the applications. The single most predominant form, a continued examination of an application, comprises 45% (14/31) of these examples of re-work.@ Dudas noted that the average time spent on each case is 19.7 hours. Although some of the re-work may arise from overreaching by patent applicants, some may be caused by the insufficiency of 19.7 hours, on average, to allow examiner and applicant to come to a meeting of the minds on proper claim scope. Deciding what is new and non-obvious is not an easy job, as a recent episode in the study of Civil War history illustrates.

The number for FY 2005 is even smaller: 5.8 % (21,800/376,000).

Thus, even if the USPTO got its wish, there are not enough "second" continuations to outlaw that would impact the growing number of unexamined applications.

There is a further issue. Examination of a first or second continuation application is easier than examination of a previously unseen application. The examiner has read the case and understands a lot of what is going on. Issues have been joined. The March 2006 newsletter of the Patent Office Professional Organization [POPA] noted that examiners usually process such cases more quickly. Curiously, academics Lemley and Moore, in writing about ending abuse of continuations, denied this obvious inference, and suggested examiners would forget what they had learned in the two years that might pass between initial application and continuation. [One notes that Lemley himself did forget about the problems associated with the multiple continuations used in the Axel patent, when he praised the Axel patent in "Patenting Nanotechnology" in 2005, although the district court in the Axel case had (ironically) cited Lemley's "Ending Abuse" for depicting the evils associated with the sort of thing Axel and Columbia University had done in keeping the patent alive.]

At the end of the day, interested observers of the patent system will need to keep their eye on the ball to identify what are, and are not, problems with the patent system. Reform is needed, but one needs to ensure that the reform will actually solve the real problems.

Lawrence B. Ebert is a registered patent attorney in central New Jersey. He maintains a blog at IPBiz.blogspot.com, and has a recent article on the Hwang scandal in embryonic stem cells published in 88 JPTOS 239. He has discussed issues in patent reform in the New Jersey Law Journal in an article published on July 18, 2005.