Consider the following from a 1995 USPTO press release:

The U.S. Patent and Trademark Office is developing new guidelines that will govern the examination of patent applications on computer software inventions, the agency announced.

The guidelines are being developed in response to recent judicial decisions that suggest a trend toward increasing the eligibility of computer software-based innovations for protection under U.S. patent laws, while decreasing the availability of protection for certain aspects of computer programs under the copyright process, the PTO said. At the same time, the Office announced that it is reconsidering its position in a number of pending appeals concerning software-related cases, including In re Beauregard, which involves a computer program stored on a computer readable medium such as a floppy disk.

“The PTO must keep its practices consistent with judicial interpretations of the law. A failure to do so could jeopardize effective intellectual property protection for one of our nation’s most important industries,” said Nancy Linck, PTO’s solicitor.

Fast forward to last year and the Federal Circuit’s decision in In re Bilski…and you can appreciate the problem. In 1995, the Office had to prepare for caselaw developments that were increasing the patentability of software-based inventions. Now, just fifteen years later, the Office is preparing the corps to examine applications in the face of a sternly downward trend.

Like it or not, modern patent law is characterized by constant change. While we all struggle to stay current in this fast-paced area of law, we have to acknowledge that the Office has an additional challenge in its efforts to keep up with constant change: volume.

While we’re struggling to train ourselves and our teams, the Office is dealing with thousands of Examiners and hundreds of thousands of applications. It’s a grand scale faced by no other entity.

Why bring this up now? Simple….patent reform and patent quality.

The reform debate will be heating up again in coming months. With any luck, the patent community will pay attention to the patent quality issue and the need for reforms that support it. If we begin to acknowledge the predicament faced by the Office, maybe we can start helping it meet the challenge.

The saga took a turn in July of this year when the post-Dudas Office attempted to clarify the status of the rule for 2009, indicating that no due date had been announced and that “[n]o decision has been made to collect the fee in FY2009.”

So the rule is officially in limbo, and practitioners don’t know if or when the fee will become due. More importantly, the position of the new Kappos administration on the annual fee and other aspects of the rule remains less than clear.

Now it looks like the Office still considers the rule alive and kicking. On Friday, the Office published a Federal Register Notice [.pdf] that references the “Annual Practitioner Registration Fee” and various other fees related to the rule (voluntary inactive status, USPTO CLE fees, etc.). The Notice is labelled a “continuing information collection” that relates to various aspects of practitioner registration. There is no mention of a due date, and the fee is mentioned alongside several other fees and forms relating to practitioner registration.

The Notice is certainly not a direct indication that the Kappos administration supports the requirement for an annual registration fee. The inclusion of the fee in this “continuing information collection” does, though, seem to indicate that the Office intends to require payment of the fee at some point in the future, perhaps in fiscal year 2010.

The Office is soliciting comments on its “continuing information collection” and will presumably accept comments that address the substance of the proposed annual fee. You can send your input by email to Susan.Fawcett@uspto.gov. Comments must be submitted on or before February 9, 2010.

I have previously offered my support for imposition of the annual fee, with a few important concerns.

But something that happened the day before the editorial hit the press is very surprising, perhaps even to Google.

On Tuesday, the Patent and Trademark Office granted US Patent No. 7,525,207 to the company for a Water-Based Data Center.

Big deal, right?

That’s what I thought, until a Twitter friend (@elosf) had me looking at claim 1 of the ‘207 patent:

1. A system, comprising:

a computer data center proximate to a body of water comprising a plurality of computing units;

a sea-based electrical generator in electrical connection with the plurality of computing units; and

one or more sea-water cooling units for providing cooling to the plurality of computing units.

Whoa.

Now I’m interested. As a geek in every sense of the word, the subject matter intrigued me. But, as a patent attorney, the breadth of the claim left an impression.

My curiosity led me to Public PAIR, where I learned the following about the ‘207 patent:

• the patent issued in 26 months (certainly not break-neck speed, but quick nonetheless)
• the Office allowed the application in the first substantive action (along with a restriction requirement, which was addressed solely by Examiner’s Amendment in the same paper)
• the applicant made no substantive prosecution comments;
• the Notice of Allowance includes the following reasons for allowance: “There are inventions in the field that provide similar functionality and/or have similar features, as prior art of record shows. Applicant(s) invention differs from the prior art of record by the combination of its functional features, which include water motion generator, cooling arrangement and computer data center, which in combination are performing as disclosed and claimed, and which the examiner search failed to find.” (emphasis added)

(you can download a .pdf of the patent here, and a .pdf of the entire prosecution history here).

I’m not familiar with either the data center art or the “sea-based electrical generator” art, so I don’t know if that claim is patentable or not. But, in the post-KSR world, it’s incomprehensible that the Office would allow such a claim in a first action on the merits. Basing the allowance on grounds that the claim differs from the prior art by “a combination of…functional features” that, individually, are known in the art only confounds the problem.

Besides the obvious indefiniteness problem (the specification doesn’t mention the claim term “proximate,” making me wonder if land-based data centers with pipes reaching to the sea are covered), a simple Google book search reveals a 1997 publication stating that “the Unisys UYK-43 is the standard US Navy shipboard mainframe” that weighs 1795 lbs “when water-cooled.”

Surely the Office, in applying KSR and the broadest reasonable interpretation of the claim language, should have addressed these issues during examination. But, it didn’t and now Google is the proud owner of this incredibly broad patent.

For Google, the timing of this embarrassment of riches couldn’t be worse. The issuance of the ‘207 patent presents a troubling irony – the company was granted a very dubious patent claim the day before it stepped into the pulpit and lectured about “dubious infringement claims” and the need for reform.

It also highlights a fundamental problem with the narrow focus of the company’s (and industry’s) call for patent reform:

By focusing on the “expenses” and “problems” associated with so-called “bad patents,” reformers are abandoning the broader issue of patent quality – which, just a few short years ago, was the driving force behind the current patent reform movement.

Intentional or not, this is a sad development. While the Googles of the world call for patent reforms that devalue all patents in an effort to address the dubious ones in the herd, the Patent Office has been reduced to what Professor Mark Lemley recently termed “an assembly line type of operation.” That the outputs of such an operation are sometimes troubling – as exemplified by the ‘207 patent – should come as no surprise.

Patent reform efforts that continue to focus narrowly on the outputs, such as those called for by Google, will only make the overall system weaker. Patent quality is the basal problem that simply must be addressed.

It’s time we built a Patent Office and a patent examination system that makes everyone – Examiners, attorneys and agents, companies, and even the Office itself – proud. A fully funded Office capable of efficiently and thoroughly examining patent applications would go a long way, I think, to addressing the so-called “bad patents” problem that has Google and others concerned. I suspect the same Office would do a better job of promoting innovation and creating the “jobs” of which Google speaks.

Speculation as to the identity of the next Under Secretary is, not surprisingly, running wild. Three individuals – Q. Todd Dickinson, David Kappos, and James Pooley – have been the subject of attention for months now, and a new name – Mike Kirk – was thrust into the ring just last week.

Picking a candidate in this time of turmoil seems an impossible task. There is no shortage of candidates with academic and professional qualifications that are beyond question – each of the favorite candidates above fit into this category.

But, at this critical time, the Office and the patent community desperately need a Director that brings more than merely the right resume. The unprecedented state of disarray in which the Office is operating requires a candidate that brings intangible character traits that aren’t necessarily born from having attended the right school, having worked at the right firm, or having led the Office in the past.

We need a fresh face that, simply by being nominated, sends a signal to all Office stakeholders that a period of healing is set to begin. We need someone that, from day one, instills confidence in all stakeholders that the Office is committed to restoring the sense of partnership that has been destroyed in recent years. We need someone that is willing to try new approaches to old problems while respecting the Office’s role in protecting inventor’s rights. We need someone that values administrative efficiency, but that is not willing to compromise those rights in pursuing it. We need someone that embraces a goal of complete transparency and marries it with the Office’s statutory duty to “disseminat[e] to the public information with respect to patents and trademarks.”

The position is, without doubt, more challenging than it has ever been before and the new Under Secretary stands to inherit an incredible mess. No matter the selection, I firmly believe that the community stands ready to assist the new Director in unravelling everything and setting the Office and the system back on the right track.

As I’ve re-read the case several times, Judge Bryson’s concurring opinion continues to draw my attention. His open wondering about the ability of the Office to limit serially-filed continuations is very interesting…especially when considered in light of the Office’s recent efforts to explore the possibility of implementing a deferred examination system.

Could a deferred examination system that allows an applicant to file, in parallel, several continuations while the original application remains pending provide a compromise to the competing concerns over late-filed continuations and an applicant’s ability to claim that which he disclosed?

I provided several updates on Twitter as I read the opinion, and reproduce them below for the wider audience:

1. CAFC: Tafas v. Dudas – CON limit contrary to patent act; all other rules, including RCE and ESD, are not –> BASED ONLY ON ARGS PRESENTED.

2. CAFC: Tafas v. Dudas – Bryson concurrence – opinion does not decide whether limit on SERIALLY-FILED CONS would be consistent with patent act

3. CAFC: Tafas v. Dudas – Judge Rader dissents, would strike down all proposed rules as substantive limitations carrying “startling change”

4. CAFC: Tafas v. Dudas – Next – request for panel reh’g and for reh’g en banc. At this point, two judges decided a major patent policy issue.

5. CAFC: Tafas v. Dudas – Meanwhile, USPTO sits without a Director…without a policy leader. What comes of the new rules and this decision?

6. CAFC Tafas v. Dudas (Doll) opinion: http://is.gd/ocWP

I’ll provide a more detailed analysis when I post my full review of the case.

According to this article, Acting Director John Doll blames the decrease in filings on the global recession. He noted that he had “…talked to a large corporation…and they’re going through their patent portfolio to see what’s core.”

While the recession certainly deserves some of the blame, the article fails to mention other possible causes for the reduction in filings: KSR v. Teleflex and its application by the Office, examination quality issues, and the growing uncertainty surrounding patent protection in the courts. The company “going throough [its] portfolio” may simply be focusing on the applications that are likely to pass patentebility muster in light of KSR, as opposed to being the victim of budget cuts.  It seems likely that all of these things are contributing to any decrease in the overall use rate of the patent system.

All eyes are on Congress this week as many believe both chambers will see introductions of new vintages of the now perennial patent reform bill. Bicameral introduction, with bipartisan original sponsors in each chamber, is expected and would be a new twist. Such an approach might be a sign that, somehow, this round is different. But don’t forget that, despite significant hearing activity and coverage in the media, patent reform legislation has seen very little movement in previous sessions. Only time will tell if the 111th is any different.

The coming excitement doesn’t end there, though. Remember that the Court of Appeals for the Federal Circuit is sitting on the Tafas v. Dudas case, and a decision could come anytime over the next several weeks. Depending on the outcome, the opinion could represent a posthumous victory for the Dudas administration or a final reminder of its failed attempts at aggressive administrative reform.

And don’t forget that we’re still waiting for President Obama to appoint a new Under Secretary of Commerce/Director of the Patent and Trademark Office. The confirmation hearings for the person tapped for this exciting and challenging post will, no doubt, receive a great deal of attention as many stakeholders wait to see if the Office will continue the policy initiatives of the Dudas era or if new leadership will bring new approaches to familiar problems.

Clear your schedules – there’s plenty of patent law excitement on the way.

The Patent Office has properly started citing the Bilski decision to support rejections of process claims for failure to define patentable subject matter. This LA Times article notes example Bilski-based rejections of claims for processes ranging from seismic data analyses to methods for converting an internet domain names to read both left to right, for languages like English, and in the opposite direction, for languages like Arabic and Hebrew.

Such rejections are expected, of course – the Patent Office is simply applying the current law, as it should. But a recent patent granted to Chase Card Services, the credit card division of JP Morgan Chase, has to make you wonder how strenuously the Office is applying the new test.

United States Patent No. 7,480,631 is directed to fraud detection processes and was granted on January 20, 2009. Claim 1 is reproduced below:

1. A method for detecting and processing fraud and credit abuse, the method comprising: receiving a telephone call from a caller concerning a credit account; identifying one or more potential fraud-related problems by searching the credit account data for conditions that match one or more predetermined qualifiers and quantifiers; presenting the caller with a series of questions and soliciting, from the caller, responses to the series of questions, wherein each question in the series is generated based on the one or more potential fraud-related problems and further based on the caller’s responses to earlier questions in the series; and determining a fraud status associated with the credit account based on a computerized analysis of the solicited responses.

Where’s the Bilski-required machine, apparatus, or transformation in that claim? Is it the ‘computerized analysis’? If so, is the term “computerized” sufficient to tie this claim to a particular computing machine? Beyond that, I can only wonder, tongue only partially in cheek, whether the ‘telephone’ provides the machine or apparatus.

It’s interesting to compare the Patent Office application of Bilski, which produced the claim above, to the approach taken by the Federal Circuit. Comparing this claim to the claim summarily rejected by the Federal Circuit in its post-Bilski decision in Classen Immunotherapies v. Biogen IDEC, which included a step of “immunizing mammals,” suggests that the new ‘machine, apparatus, or transformation’ test is not being applied consistently between the Office and the court. On one hand, the Office appears willing to find a required connection to a particular machine or apparatus either in a vague term like ‘computerized’ or through the use of a known apparatus like ‘telephone.’ On the other hand, the court appears completely unwilling to recognize a step that recites a physical act that is well-known to trigger a physiological change as a required transformation.

The claim of the ‘631 patent is, of course, anecdotal in nature. It represents only a single post-Bilski patent issued by the Office and surely there are numerous examples of applications in which examiners took a strict approach to applying Bilski. But the existence of even one issued claim like the one above is troublesome because it reveals the difficulty associated with applying the vague test against which all process claims now must be evaluated.

UPDATE: A quick glance at the prosecution history for the ‘631 patent shows that the examiner mailed the Notice of Allowance on October 17, 2008 – 13 days before the court announced the Bilski decision. The timing, of course, doesn’t change the impact of the decision on the claim or render it subject to a different test for patentable subject matter. It may, though, explain the absence of a clear tie to a machine, apparatus or transformation – while the patent didn’t issue until January, the administrative gears of the issue process had already been set into motion and, apparently, could not be stopped.

In my mind, this actually raises more questions than it answers. Should the Office be required to evaluate all allowed claims that have yet to issue as patents when an intervening major change in patentability law is announced? What about a minor change? These are, of course, administrative headaches and would be time-consuming and expensive to implement. Should the patent attorney be responsible? Should prosecuting attorneys be required to amend claims or present additional arguments when such an intervening change is implicated? How about when such an intervening change might be implicated?

I wonder if this explains why Chase waited nearly 5 weeks to announce the granting of this patent.