USPTO Rulemaking Practices Being Called into Question (Again)

    By Kevin E. Noonan and Donald Zuhn --

The U.S. Patent and Trademark Office has attempted (with varying levels of success) to implement a number of new rules packages in the past two years, including new continuation and claims rules, alternative claiming rules, and IDS rules, but none of these rules packages has been implemented as yet.  One new rules package that has been published as a Final Rule in the Federal Register concerns changes in how rejected patent claims are appealed to the Board of Patent Appeals and Interferences (see "New Appeals Rules Published").  This is the agency Board charged with performing the administrative review required to trigger (if unsuccessful) an applicant's right to appeal, either to the District Court (under 35 U.S.C. § 145) or the Federal Circuit (under 35 U.S.C. § 141).  The Notice of Final Rule was published on June 10, 2008.

Despite publishing as a Final Rule, however, the Patent Office has yet to implement the new appeals rules, which is perhaps due to the Office's failure to follow proper procedures within the Executive Branch for this type of administrative agency rulemaking.  In particular, the Office failed to timely comply with the requirements of the Paperwork Reduction Act (PRA), which mandates that the Office analyze paperwork burdens imposed on applicants by any Office rulemaking.  The PRA directs the Office to submit its assessment of any added paperwork burdens to the White House Office of Management and Budget (OMB), and mandates that an agency proposing a new rule assess any additional burdens imposed by the rule "fairly, objectively, and accurately."

The Patent Office, it seems, did not perform the PRA assessment at the time the Notice of Proposed Rulemaking for the appeals rules package was published on June 30, 2007.  Indeed, because the new appeals rules were deemed by the Office "to be not significant for the purpose of Executive Order 12866," the Office appears to have simply sidestepped its obligation to provide a PRA assessment.  (Executive Order 12,866, which was first promulgated in 1993 under the Clinton Administration and amended twice -- in 2002 and 2007 -- by the current Bush Administration, requires that the Office account for the economic effects of a new rules package, unless that package is deemed to have effects that are "not significant.")  As a result, the Office did not request that the OMB grant its approval under the PRA until the day before the Notice of Final Rulemaking was published.  Now, it appears, the OMB has requested that the Office comply with the PRA.

Accordingly, on June 9, 2008 (the day before appeals Final Rule Notice was published), the Office published a Federal Register Notice (73 Fed. Reg. 32559), requesting that interested members of the public comment on the Office's estimates for any additional burdens imposed on applicants by the new appeals rules.  The Notice made public the Office's analyses, including its estimates on the number of appeals expected per annum as well as ancillary added costs (such as postage).  Curiously, the Office did not list the June 9, 2008 Notice on its website (see the "Federal Register Notices" column on the "News and Notices" page of the USPTO website) or any other forum for notifying the public.  While the June 9th Notice is sufficient under the Administrative Procedures Act, which was made law well before the advent of websites, it marks a departure from the Office's recent practice of posting such notices on its website.  In fact, the Office published a similar Notice regarding the alternative claiming rules a little more than four months ago (see "Patent Office Publishes Notice Regarding Impact of Proposed Markush Claims Rules on Small Entities" and "You Can't Fight the USPTO -- or Can You?").

Comments regarding the June 9th Notice must be submitted no later than August 8, 2008, and must be sent to Susan K. Fawcett, Records Officer, USPTO, Office of the Chief Information Officer, Customer Information Services Group, Public Information Services Division.  Comments received by the USPTO are supposed to be forwarded to the OMB without characterization or editing by the Office.

Whether the Office's actions in this instance evince an intention to reduce the amount of public participation in the OMB's PRA review, or are just another reflection of a "gang that couldn't shoot straight" performance level that has all too frequently characterized their actions over the past few years, two things are clear about the circumstances.  First, the OMB will not permit the Office to implement the new appeals rules until it has done its own PRA review, and second, the Notice gives concerned members of the patent public the opportunity to make their views known.  There is no evidence that the OMB is doing anything other than exercising its authority and fulfilling its responsibilities, or that anyone at the OMB has any reason to prevent the Office from implementing the new appeals rules in the absence of public comment challenging or refuting the Office's position that there is essentially no additional burden imposed by the new rules.  Thus, it is imperative that any member of the concerned patent public make those concerns known to the OMB within the comment period.

For those more inclined to see intent rather than ineptitude behind this latest example of the Office appearing less than above-board when dealing with the public (see "Docs at BIO: "Gotcha" Games Continue at USPTO"), prudence suggests that any comments be sent not only to Ms. Fawcett at the Office but to the OMB directly.  In doing so, it may be worthwhile to attach a cover letter to the following effect:

[email protected]
The Honorable Susan E. Dudley
Administrator
Office of Information and Regulatory Affairs
Office of Management and Budget
Washington, DC  20503

Re: Comments on Information Collection Request 0651-00xx (formerly 0651-0030), 72 Fed. Reg. 32559 (Jun. 9, 2008) for RIN 0651-AC12, Rules of Practice Before the Board of Patent Appeals and Interferences in Ex Parte Appeals, 73 Fed. Reg. 32938 (Jun. 10, 2008)

Dear Ms. Dudley:

Enclosed is a copy of a comment letter we filed on the U.S. Patent and Trademark Office's Information Collection Request for the Patent Office's recently-finalized Appeal Rule.

We are sending it to you separately to ensure that these comments are before the Office when making its determinations in this matter.  We believe that having these comments directly, without any input, recasting or characterization by the Patent Office will permit the OMB to fairly and accurately assess the objective and reproducible information presented therein.  In our view, the Patent Office has recently shown the tendency to recast or characterize public comment in ways that may not accurately reflect such information.  For example, in the Notice of Final Rulemaking for this very rule, the PTO repeatedly reformulated the public comments in a manner that appeared to make it easier to discount the commenter's concerns or assessments contrary to the Office's position.  In addition, for several comments the Office had no discernable response but simply failed to address the comment meaningfully.  Indeed, a recent Notice of Final Rulemaking states that the Patent Office refuses to implement the oversight principles in the OMB's Good Guidance Practices Bulletin, and refuses to provide supervisory enforcement to require employee compliance with the procedural requirements of the Patent Office's guidance document (72 Fed. Reg. at 46752, col. 2-3).

Thus, to ensure that our comments are accurately addressed, and that the Patent Office follows OMB's regulatory oversight, we have provided a separate copy to you.  You should confirm that whatever summary or response that the Patent Office provides to you accurately paraphrases the issues raised in our letter, and addresses them in a way that complies with various OMB guidelines.

We also write to bring to your attention our disagreement with the Patent Office's characterization of three major rules as all being "not significant" for purposes of Executive Order 12,866:  (a) this Appeal Rule (RIN 0651-AC12), (b) RIN 0651-AC00, Examination of Patent Applications that Include Claims Containing Alternative Language, 72 Fed. Reg. 44992 (August 10, 2007) ("Markush Rule"), and (c) RIN 0651-AB95 Changes to Information Disclosure Statement Requirements and Other Related Matters, 71 Fed. Reg. 38808 (July 10, 2006) ("IDS Rule").  We understand that the Patent Office was not permitted to make this designation for anything except rules that have essentially zero effect on the public.  But each of the three rules has effects - in paperwork and other compliance costs, loss of patent asset value, and loss of investment in innovation - that are easily several times the $100 million threshold for "economically significant" rules.  The IDS Rule alone imposes several billion dollars of paperwork burden, and the Appeal and Markush Rules would each impose hundreds of millions, or billions, of dollars of effect in lost asset value and investment.  We are troubled by assertions from the Patent Office to the OMB that these rules fall outside the scope of your review, based on this mischaracterization of the staggering economic effects of each of its rules.  In our view, the best course would be for the OMB to order the Patent Office to withdraw all three of these rules, and re-promulgate them (if the Office wishes to) only accompanied by a full Regulatory Impact Analysis on each.

We thank David Boundy of Cantor Fitzgerald for bringing this issue to our attention.