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Issue 131 | November 5, 2003
FTC Reports on Balancing Competition and Patent Law
 On October 28, 2003 the U.S. Federal Trade Commission released its report on how to promote innovation by finding the proper balance of competition on patent law and policy.  The FTC is making ten recommendations for legislative and regulatory changes to improve patent quality, limit the award of treble damages for willful patent infringement, and increase communication between the antitrust enforcement agencies and the PTO:

1. Enact legislation to create a new administrative procedure to allow post-grant review of and opposition to patents.

2. Enact legislation to specify that challenges to the validity of a patent are to be determined based on a "preponderance of the evidence."

3. Tighten certain legal standards used to evaluate whether a patent is "obvious:"
  1. in applying the "commercial success" test, 1) evaluate on a case-by-case basis whether commercial success is a valid indicator that the claimed invention is not obvious, and 2) place the burden on the patent holder to prove the claimed invention caused the commercial success.
  2. in applying the "suggestion" test, assume an ability to combine or modify prior art references that is consistent with the creativity and problem-solving skills that in fact are characteristic of those having ordinary skill in the art.
4. Provide adequate funding for the PTO.

5. Modify certain PTO rules and implement portions of the PTO’s 21st century strategic plan:
  1. amend PTO regulations to require that, upon the request of the examiner, applicants submit statements of relevance regarding their prior art references.
  2. encourage the use of examiner inquiries under Rule 105 to obtain more complete information, and reformulate Rule 105 to permit reasonable follow-up.
  3. implement the PTO’s recommendation in its 21st century strategic plan that it expand its "second-pair-of-eyes" review to selected areas.
  4. continue to implement the recognition that the PTO "forges a balance between the public’s interest in intellectual property and each customer’s interest in his/her patent and trademark."
6. Consider possible harm to competition – along with other possible benefits and costs – before extending the scope of patentable subject matter.

7. Enact legislation to require publication of all patent applications 18 months after filing.

8. Enact legislation to create intervening or prior user rights to protect parties from infringement allegations that rely on certain patent claims first introduced in a continuing or other similar application.

9. Enact legislation to require, as a predicate for liability for willful infringement, either actual, written notice of infringement from the patentee, or deliberate copying of the patentee’s invention, knowing it to be patented.

10. Expand consideration of economic learning and competition policy concerns in patent law decision making.

According to FTC Chairman Timothy J. Muris, “Consumers and innovators win when patents and competition policy are aligned in the proper balance. Although questionable patents can harm competition and innovation, valid patents work well with competition to promote innovation."  However, the FTC's patent initiative received  a cool response at the American Intellectual Property Law Association's annual meeting in Washington DC, with many patent attorneys expressing their alarm over the agency’s plans to intervene more in patent matters.  In their eyes, discriminating competition policies and an end to USPTO fee diversion would go a long way toward promoting the progress of the useful arts.  In fact, after being urged by Congressman Lamar Smith, Chairman of the Subcommittee on Courts, the Internet and Intellectual Property of the House  Judiciary Committee, to make a final push to end fee diversion, the AIPLA provided its participating members with a phone bank, contact details for all national politicians, and a printed handout of talking points to help make the case for ending diversion.  

"To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, A Report by the Federal Trade Commission, October 2003" is available at http://www.ftc.gov/opa/2003/10/cpreport.htm and is the first of two reports about how to maintain that balance. A future report by the FTC and the Antitrust Division of the Department of Justice (DOJ) will make similar recommendations for antitrust law.

For more information on U.S. competition policy as it relates to patent law, or USPTO fee diversion, please contact the author of this issue of "APLF Patent Law Updates," Bill Heinze (bill.heinze@tkhr.com), at Thomas, Kayden, Horstemeyer & Risley LLP in Atlanta, Georgia USA.

The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

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