The Reexamination Center Executive Interview: Chief Judge Paul R. Michel (part 3 of 3)
September 1st, 2011
With patent reform legislation looming on the not too distant horizon, The PTO Litigation Center interviews former Chief Judge of the United States Court of Appeals for the Federal Circuit Paul R. Michel on this topic and other timely issues related to patent reexamination. Chief Judge Michel was appointed to the Court in 1988 and assumed the duties of Chief Judge in 2004. Judge Michel judged several thousand appeals and wrote over 800 opinions in the diverse legal areas covered by his circuit (patent, government contracts, international trade, veterans’ benefits, government takings of private property, tax, childhood vaccine injuries, military and civilian promotions, trademark, civilian government personnel, and whistleblower cases). On May 31, 2010, he stepped down from the bench. Chief Judge Michel continues to share his knowledge gained during 22 years on the court by speaking out on issues related to the courts and the patent system, as well as by providing mediation, arbitration, and case evaluation services to private clients.
THE REEXAMINATION CENTER: Now in the current inter partes reexamination process, neither the patent owner nor the third party requestor is allowed to have any type of interview or hearing before the Central Reexamination Unit during the entire process. The only hearing that’s available is on appeal at the Board. And, of course, the PTO’s position is that they don’t want hearings because they are concerned about being able to control the actions and decorum of the various parties in the reexamination process. And yet the failure to have any type of hearing or interview deprives the Patent Office from asking questions and getting needed information and clarification. Do you think that the Patent Office is correct in its steadfast refusal to allow interviews or hearings in inter partes reexams?
JUDGE MICHEL: Well, it seems to me that a reexam is not an exam. This isn’t the initial review of the application. The patent has already been granted. It’s presumed to be valid in the eyes of the law and there certainly ought to be a clear burden on the attacker to prove that the patent was wrongly granted and that the claims are not valid and the invention not patentable. And it seems to me that it’s a hallmark of justice in our system and many others to have a hearing – a live hearing – and particularly when dealing with a presumptively valid patent, that would seem all the more important. As I understand it, the Director is encouraging interviews even at an early date in initial examinations because of the value of face-to-face communication – the ability, as you say, to ask questions and get answers and so on. Why that isn’t even more important in reexams escapes me. And in terms of controlling attorney behavior or witness behavior, that’s a problem in any system, every system, every Federal trial. Every Federal hearing presents that challenge. And I’m not saying that it’s trivial, but obviously Federal Judges at all levels, Magistrate Judges, District Judges, Court of Appeals Judges, Supreme Court Justices on the whole can handle it perfectly well. So I don’t see any reason why reexam officials couldn’t also do so. As I understand it, they’re the cream of the crop – the most experienced, most adept, hardest working, most intelligent, etc., etc. – of all of the six and a half thousand Examiners. So it’s hard to believe they wouldn’t be up to the task of conducting a hearing and having it be appropriate and lawyer-like and under control. It might take some learning and some experience – just the way it does for new judges – but I don’t think it’s out of reach and I think the results would be faster – reached faster and found to be more reliable if there were face-to-face encounters between the adjudicator and the contending parties.
THE REEXAMINATION CENTER: Now the Patent Office, through the OPLA, has set forth limits on the amount of pages that can be submitted of attorney argument as they denominate it in inter partes reexam as compared to factual evidence or record evidence. And yet it’s a very arbitrary determination made by the Examiners that often times is effectively unappealable. So the question is do you think in the interest of justice and getting the right result, that the Patent Office should be setting these limits or should they take a more expansive view to allow the full story of the invention and the prior art to be made by the parties involved?
JUDGE MICHEL: I don’t really know enough about the limits on attorney argument – what the practices are, what the limits are. If there are arbitrary limits, then of course that’s no good. If there are reasonable limits, that’s probably appropriate. I’m just not in a position to assess how often the Examiners are imposing limits that are really counterproductive and arbitrary. But if there are, that’s a bad idea. It doesn’t help the adjudicator and it’s not fair to the patent owner.
THE REEXAMINATION CENTER: Often the ability of the patent owner to settle law suits is taken away during the reexamination process because the licensees or the accused infringers take the position that there are rejected claims or there is uncertainty as to the patent rights created by the reexam process in itself. Do you think that the creators of the reexamination process contemplated the inability of patent owners to settle disputes during the reexamination process?
JUDGE MICHEL: I have no idea what was in the mind of Congress in 1980 or 1990 when the reexamination procedures were brought into being through legislation. So I really don’t know whether they contemplated impact on settlements or not. But what I have to think that they did contemplate was that these reexamination procedures – both ex parte and inter partes and now we may have new ones under a new statute – would be expeditious. And if they were both expeditious and careful, a lot of harms could be avoided. But the reality has turned out to be that they’re not expeditious. I think it’s almost farcical that Congress ordered that reexaminations be handled with “special dispatch.” It’s right in the Statute, as I recall, and it hasn’t happened – average delays of somewhere like four years, often longer, plus appeals that go on for additional years. Huge costs in money for attorney’s fees as well as long delays imposed on the patent owners. So it seems to me the biggest problem is that the resources available to the reexamination authorities in the Patent Office haven’t kept pace – even close to kept pace – with the growth in the inventory of reexams, delays encountered, and backlogs, all mounting, year after year after year. And Congress has spent the last seven years tinkering with the substantive patent law, both in the Courts before and now mostly in the Patent Office – meanwhile paying no attention at all to the resource problem, which has grown worse. The gap between needed resources and existing resources at the PTO – not just in reexam, but in every part of the operation – has grown worse just about every year for the last decade. When Congress should have been raising the user fees and providing more resources, instead they were siphoning off something like $900 million in private money user fees to spend on other government agencies more favored, presumably by certain powerful members of Congress. Instead of giving the PTO adequate resources, they took away some of the existing resources and failed to raise the fee levels as well. There’s a gigantic and growing resource problem that translates into delays, which have all sorts of consequences. It seems to me that’s the worst problem of all. Now in terms of settlement, the vast majority of patent cases are not and cannot be adjudicated by judges and juries on the merits. About 3,000 infringement suits are filed every year and the vast majority – about 2,600 – are resolved by settlement or pretrial motions. And only a couple hundred get anywhere near trial and usually only about 100 emerge as final trial judgments per year out of the 3,000 or so filed. Obviously settlements handle the bulk of those cases and the ability of the Federal Courts to handle more of them is nonexistent. The Federal Courts are having increasing trouble handling patent cases with any kind of expedition at all and the ability of the Federal Courts with growing caseloads to move patent cases faster is going down, not up. And it’s aggravated by the fact that the Congress has failed to provide adequate resources to the Courts just as they have to the Patent Office, so there are permanently, in recent years, 100 judicial vacancies – unfilled for many, many months and often many years. And in addition to that, Congress failed to pass a comprehensive judgeship bill for two decades. The last one was in 1990. And although they’ve added a few judges from time to time, here and there, it’s always been too little, too late. So the Federal Courts are swamped, don’t have enough judges, aren’t getting enough judges, keep getting broader jurisdiction over all manner of disputes that historically have been left to the state courts. The Federal Courts are in a mess for lack of resources, just the way the Patent Office is in a mess for lack of resources. So when you have such acute and growing gap between needed resources and available resources, settlement becomes more important – not less. Anything that impedes settlement doesn’t look like a good idea to me.
THE REEXAMINATION CENTER: In the patent reform legislation, the types of prior art and the types of inquiries that will be permitted under the proposed legislation will be expanded beyond patents and printed publications. Do you think that the PTO has the ability to be able to deal with that additional type of evidence?
JUDGE MICHEL: Well, it certainly doesn’t today as far as I can see. Then the question would be: do they have the salary scale, do they have the budget to go out and hire 100 or 200 new Board members who would have the ability to function like a Federal Trial Judge at a bench trial? It looks to me like the kind of people you would need to hire to fulfill that role would have to be experienced litigators with very high salaries in private practice. With the PTO pay scale for Board members, I don’t see how you’re going to get enough people of that proven experience and ability. You might get a few people who are independently wealthy or very self-sacrificing, but you won’t get very many, I don’t think. I’m worried about the ability of the Board to expand to be large enough. It would probably have to triple or quadruple in size to handle all these new proceedings and new issues which as you say that will be part of post-grant review – like public use and on sale and so forth. The Patent Office has no experience at that – has no experience at trial-like proceedings, no experience operating discovery systems, no experience operating sanction systems for abuses of discovery, no experience with trial-like motions practice. It’s going to be lot of learning, a lot of new challenging things for these Patent Board Judges to master and as far as I can tell the Patent Office isn’t getting the resources to pay much higher salaries. It isn’t getting the resources to triple or quadruple the size of the Board to handle all these new things. So my worry is that in the absence of a huge boost in resources, these new procedures are going to be a disaster because the personnel just aren’t going to be there to handle them. And, of course, the IT systems at the Patent Office are notoriously bad. The Director testified that they’re “ moribund”, his word, not mine. And we all know they’re terrible. You talk to Examiners and they talk about how often the whole system crashes and goes down and 6,000 plus Examiners are stopped in their tracks. In addition to hiring lots of new Examiners, Re-Examiners, Board Members, the Patent Office needs a huge amount of money to upgrade their IT systems – all of them. And as far as I can understand from the current deficit agreement, the Patent Office is likely to have less money next year than this year – not more. It needs a whole lot more and it looks to me that it’s actually likely to get less. I don’t expect the appropriation approved at the Committee level in the House to become law. I think that it’s almost certain that the fallout of the deficit fight will be that there will be a continuing resolution, not an appropriation for the coming fiscal year. For most of it. Probably all of it. Maybe in several bites – several successive continuing resolutions. And if that’s so, the poor Director of the PTO is going to have all these new duties under the new Bill that is expected to pass in September, and not have the resources to handle the existing work or the new work. We’re on a collision course – it seems to me, with Congress reducing the resources available to the PTO at a time when it’s long overdue to hugely increase those resources and yet they’re giving all these new duties – like post-grant review trials for public use and on sale – to the Patent Office. We’re going to get the worst of both possible outcomes. If we get new difficult duties on top of the existing backlogs, and with resources going down, new Examiners not being hired, IT systems not being upgraded, salaries not being improved, experienced Examiners not being retained, experienced Board Members not being retained, our whole patent system is going to be on the verge of collapse instead of reform and improvement.
THE REEXAMINATION CENTER: In conclusion, if one assumes that patents are paramount for job creation because they protect innovators – particularly small innovators and upstart innovators – who historically have produced a disproportionate number of jobs in this country, do you have any final comments on what you think Congress and the Patent Office ought to do to encourage job creation through the U.S. patent system?
JUDGE MICHEL: Well, I think that the Congress in all the hearings since 2005 should have been hearing from start-up CEOs and those who invest in cutting edge technological advances – like venture capitalists and equity fund managers and angel investors and so forth. And instead of that, Congress heard almost exclusively from witnesses representing giant multi-national corporations and therefore the Congress didn’t get much understanding of what additional incentives would it take to get increased private investment – there’s no public investment to go around anymore — to get increased private investment in innovation from these sort of investors. I’m not an expert in venture capital behaviors, but from what I’ve been told and read, venture capital and similar innovation capital is already drying up and has slowed terribly in recent years. Therefore, the question is what additional incentives would it take to bring the venture capitalists and the rest back into action to support innovative startups. It would take stronger, more-enforceable, faster patents, first and foremost.