PublishedNovember 2, 2022

Biden’s Regulatory Office Must Closely Review USPTO Rulemaking that Impacts our Economy 

In September, President Biden formally nominated Richard Revesz, former Dean of the New York University School of Law, to be Administrator of the Office of Information and Regulatory Affairs (OIRA). This small but deeply powerful division within the White House Office of Management and Budget (OMB) – which is charged with the authority to review proposed regulations from federal agencies – has typically shied away from rulemaking proposed in the U.S. Patent and Trademark Office (USPTO).

As I’ve previously written, the USPTO has often evaded OIRA scrutiny by presenting actual federal rulemaking instead as guidance, policy documents, or administrative rulings. But given the economic impact of the pressing intellectual property issues our country faces – and considering the sweeping America Invents Act passed by Congress during the last decade – it’s clear that USPTO rulemaking should be subject to the same OIRA review as any other agency.

This issue is critical as USPTO Director Kathi Vidal recently indicated that the office is preparing to engage in rulemaking on its approach to discretionary denials, resulting from the NHK-Fintiv rule that was made precedential during the previous administration. This type of rulemaking should be subject to close OIRA review for a variety of reasons, but perhaps most importantly because the USPTO must comply with Executive Order 12,866.

The executive order, signed by President Clinton, gives OIRA the authority to review agencies’ proposed rules to ensure they advance the public interest and do not harm the economy. For those that are deemed economically significant – meaning an annual effect on the economy of $100 million or more, or adversely affect the economy, jobs, and competition, among other factors – the agencies are required to do an in-depth review of both the costs and benefits of the action.

By OIRA’s own definitions, it’s clear that rules governing Patent Trial and Appeal Board (PTAB) review, including NHK–Fintiv, are “economically significant” issues. Following USPTO’s adoption of NHK–Fintiv, America’s largest semiconductor manufacturer, Intel, was ordered to pay more than $2 billion dollars to a non-practicing entity (NPE) in an infringement lawsuit after being denied PTAB review on patents which the USPTO has since admitted have “reasonable likelihood” of being invalid. This one decision, in and of itself, surpasses the $100 million threshold ­– not to mention the countless other examples of similar abusive litigation across the country.

But this isn’t just about one company. Numerous studies have shown that rules governing PTAB proceedings clear, by far, the threshold needed to trigger OIRA review. This includes analysis that has shown that NPEs generate almost $30 billion in direct out-of-pocket costs from targeted companies every year and that they have hundreds of millions of dollars worth of impact on targeted firms’ R&D spending. And even the impact on the agency’s workload and the amount of money and time they have diverted to dealing with these issues almost certainly exceeds $100 million of taxpayer dollars that could be better spent improving patent quality and merits-based review. All of which, statutory access to PTAB review unfettered from political machinations could help prevent.

It’s abundantly clear that any action by USPTO that would limit access to PTAB proceedings – as NHK-Fintiv did by increasing discretionary denials – is economically significant. OIRA must begin seriously engaging with USPTO rulemaking, starting with regulatory economic analysis any time office engages on rulemaking related tosuperstatutory “discretionary” denials. With so much at stake the American people deserve this information – and the law demands it. 

circle 09

Jonathan Stroud

General Counsel, Unified Patents

Mr. Stroud manages Unified Patents’ legal and corporate work, with a focus on Patent Trial and Appeal Board (PTAB), district court, and appellate litigation, contracting, general corporate matters, and settlement negotiations. He regularly teaches, speaks, and writes about patent and administrative law.

Previously, Mr. Stroud was a patent attorney at Finnegan, Henderson, Farabow, Garrett and Dunner LLP, where he was involved in some of the earliest post-grant review work. Before that, he examined patents on implantable medical devices at the U.S. Patent and Trademark Office (USPTO).

More Posts

Another startup bites the dust, courtesy of patent trolls

A handful of interest groups like to claim that patent trolls are a myth—that they're a straw man used to shape IP policy in ways that are harmful to patent holders. Mycroft AI is one of many startu...

How Challenging Low Quality Patents is Lowering Drug Prices

The FTC made headlines in May when it announced it was challenging over 300 “junk” patents in the FDA’s “Orange Book,” including patents on popular drugs like Ozempic and Victoza. With this ...

Incremental Progress on Valve

In March, U.S. Patent and Trademark Office Director Kathi Vidal vacated earlier Patent Trial and Appeal Board (PTAB) decisions that denied patent validity challenges brought by Honda Motor Co., Genera...

Subscribe to Patent Progress

No spam. Unsubscribe anytime.