Problems at the U.S. Patent Office affect medical-device businesses on both sides of the patent fence. Businesses trying to protect their innovations must grapple with delays in patent examinations and uneven examination quality. On the other hand, businesses seeking to develop new products sometimes must contend with patents of dubious merit. While Congress and the Patent Office have both put proposed patent reforms on the table, it is more likely that it will take an increase in Patent Office funding and staffing to bring the needed changes to the examination process and improvements in patent quality that will benefit the entire industry.

The Patent Office traces the root of its problems to the enormous backlog of patent applications of ever-increasing complexity — 700,000 last year. This backlog has the Patent Office struggling to balance conflicting goals of reducing pending applications while improving examination quality. Medical-device innovators in particular are feeling the pinch. The Patent Office estimates that applications for medical instruments and diagnostic equipment wait an average of 38 to 47 months for substantive review (a first “Office Action”), which is much longer than the 22-month goal and the 22.6-month average for all applications.

To identify problems and improve examiner training the Office of Patent Quality Assurance within the Patent Office performs a quality review by conducting random sample reviews of both in-process and allowed patent applications. In-process applications that are found to be properly examined, that is, the examiner has made appropriate rejections, are deemed “in compliance.” Allowed applications that should not have been allowed, because the examiner should have made or maintained a rejection, are deemed an “erroneous allowance.” While the Patent Office reports relatively high examination quality in the medical-device field (86.6% compliance rate compared to an office-wide average of 82%), it also reports a slightly higher rate of erroneous allowances (6.43% as compared to an office-wide average of 5.32%). The Patent Office also reports that 28% of first Actions being issued in this area are for applications that are some type of continuation of a previous application. Thus, medical-device patents are a prime target for patent reform.

The Patent Office proposed rule changes designed “to make its operations more efficient, ensure the patent-application process promotes innovation, and improve the quality of issued patents,” but it is not clear how they will solve these issues. The four major rule changes relate to Claims Practice, Continuation Practice, Information Disclosure Practice, and Accelerated Examination. Although the proposed rules apply to different aspects of the examination process, they all shift burdens from the Patent Office to patent applicants.

The Claims Practice rules would require applicants to identify “representative claims” for the patent examiner to focus on. Only after those claims are found patentable would other claims be considered. Continuation Practice rules would limit the number of continuing applications an entity may file, making each exchange with the Patent Office more important and potentially more expensive. Information Disclosure Practice rules would require applicants to explain the relevance of submitted documents, and to prove the invention's uniqueness. Accelerated Examination rules, which are the only proposed rules to have taken effect, force applicants seeking accelerated examination to conduct a pre-filing search and submit an analysis of the “most closely related” references. While it's easy to see how these rules will lighten the Patent Office's burden, it's not clear the benefits will outweigh the significant costs they impose on medical-device inventors, in terms of increased patent prosecution costs and risks of litigation.

Each of the proposed rules will markedly raise prosecution costs and inventors will have to budget for it. For example, Information Disclosure Practice rules dramatically increase patent attorney input needed to prepare an Information Disclosure Statement. That's because the new rules would require an explanation of cited documents and their relevance to each patent claim. In some cases, this may require consultation with inventors. Thus, medical-device companies may also see higher costs in terms of the time they or their employees have to spend on patent matters.

The proposed rules also are likely to increase the risks of litigation, particularly with respect to charges that a patent is unenforceable due to “inequitable conduct,” which means the patent applicant withheld important information from the Patent Office or misled the examiner. For example, the designation of certain claims as “representative” under the Claims Practice rules, the explanations required by the Information Disclosure Practice rules, and the search and analysis required by the Accelerated Examination rules require the patent applicant (and patent attorney) to make selections, present explanations and submit arguments that, if characterized as incomplete or misleading, could form the basis of an inequitable-conduct charge. In this way, the rules may undermine the value of new patents, at least until the courts reject frivolous challenges on these grounds.

While the costs these rules would impose are easy to identify, the benefits of these rules to the public are much less clear. It is difficult to see how any of the proposed rules would increase patent quality or reduce the number of questionable patents. Why should medical-device manufacturers expect inventors to do a better job at uncovering and analyzing relevant prior art than the Patent Office has been able to do? Some say that shifting burdens to the applicant will ease the workload on individual patent examiners, leaving them more time to conduct more thorough examinations. However, any saved examination time simply may be spent on examining more applications, particularly with political pressure to reduce the ballooning application backlog.

Congressional patent reform also is not likely to improve patent quality. The proposed Patent Reform Act of 2007 would significantly change U.S. patent law. As currently drafted, the law would:

• move the U.S. toward a first-to-file system

• limit patent damages

• restrict the definition of willful infringement

• provide a new way to do post-grant reviews

• permit immediate (interlocutory) appeal of claim construction decisions before the trial court reaches a final decision.

The only provisions directly related to patent quality — the post-grant review provisions — make the public identify and challenge dubious patents. Moreover, the new “cancellation” proceedings would be conducted by the already over-burdened Patent Office, which would be put in the uncomfortable position of second-guessing the work of its own staff.

Details of the proposed post-grant review may concern both medical-device inventors and manufacturers. Inventors may find their patents more vulnerable to attack because there will be no presumption of validity in a cancellation proceeding. This means a patent could be challenged under the “preponderance-of-the-evidence” standard instead of the more stringent “clear-and-convincing-evidence” standard that applies in most patent challenges today. Manufacturers or others seeking to challenge a patent will be constrained by laws setting forth time limits for starting a cancellation proceeding, thus giving them only one bite at the apple, foreclosing even challenges via reexamination or civil action after a cancellation proceeding that did not result in the patent being canceled.

Courtenay Brinckerhoff is a partner in Foley's Washington, D.C. office. She is a member of the firm's Biotechnology & Pharmaceutical, Chemical & Pharmaceutical and Appellate Practices, and the Life Sciences Industry Team.