Link alone turns case---patent delays cause investment uncertainty and deck innovation

Why should we care about patent pendency?: Reducing patent pendency has been a major goal of the Kappos directorship. However, it is probably useful to pause for a moment to consider whether we should care about pendency and backlog. Certainly we want to know and understand the delay in order to advise our clients on how to order their affairs. But, should we care whether the delay is relatively longer or shorter? In my view, the major harm of long delay is not felt by patent applicants, but rather by parties releasing new products who cannot rely upon parties who cannot rely on

Most of the backlog delay occurs between the time that the patent application is filed and the mailing of the first action on the merits (FAOM). From a patentee’s perspective, that delay can actually be good. It allows the patent applicant to delay payment of certain fees (such as issue fees) and costs (such as attorney fees for prosecution) and provides the applicant with additional time to consider whether or not to pursue rights based upon the additional expected costs of patenting. When taking market developments into account, the delay also provides the applicant with time to adjust claim scope to better capture the market value of the invention. One potential problem with delays in prosecution is a reduction in patent term. However, the Patent Act generously compensates patentees for any term lost due to PTO delays (by adding additional time to the end of the term). Sometimes applicants have good reasons to want quick patent issuance. For those instances, the USPTO allows the applicant to pay a fee in order to skip the backlog queue. The so-called “track one” fee is a hefty $4.8k, but it is an option and my pre-AIA survey found that charge not unreasonable. At least in a somewhat simplified world, this $4.8k limits the per-application loss to applicants caused by the delay. I.e., if an applicant was going to be harmed by more than $4.8k due to the lengthy backlog, then the applicant can simply pay the fee to avoid that harm. This is a simplified world because, inter alia, applicants might not know from the outset that there is any benefit to a more rapid patent issuance.

The real problem with the backlog is that the resulting prosecution delays create uncertainty for product developers and marketers – those that actually create new products and sell them on the market. The long pendency allows patent applicants to watch the market and shift patent rights to cover activity that was previously considered legitimately open. During that time, manufacturers simply cannot know whether their products will be covered by patents held by some third party. For many market areas, this greatly increases the risk that products legitimately released into the stream of commerce and placed in the hands of consumers will – some years later – become infringing because of third-party patents that eventually issue. Many of the policy justifications that support old statutory bar of 35 U.S.C. 102(b) would also discourage a system that allows this result.