On June 4, 2013, the White House issued five executive actions designed to increase the transparency of the patent system, ensure the highest-quality patents, reduce abusive patent litigation and level the playing field for innovators. The first of these executive actions is titled, “Making ‘Real Party in Interest’ the New Default.” The US Patent and Trademark Office (USPTO) took on this rulemaking mission but proposed a new term, “Attributable Owner“[PDF] rather than, “real party-in-interest” to avoid confusion with other provisions in Title 35 [PDF], i.e. §§ 118, 315, 317, 325, 327. However, the proposed rules did not become part of the final rules. Instead, the USPTO decided to continue implementing the volunteer assignment recording system with improved database searching functions. Most recently, on February 5, 2015, Representative Goodlatte reintroduced to Congress his patent reform bill, the Innovation Act. The Innovation Act in its section four addresses the “Transparency of Patent Ownership” with the focus on patent litigation. The proposed law would require patent owners to disclose “ultimate parent entity” as part of notice before a suit can be instituted. The Innovation Act is also facing significant oppositions in House that represented voices from different industries. To be able to actively and effectively regulate patent ownership disclosure, USPTO needs a similar deference the one like the Security Exchange Committee has from the Congress.
The AIA Provides No Guidance on Determination of Real Party In Interest’s Role
Patent ownership disclosure will have a significant impact on patent law practice. First, the AIA [PDF] gives a special estoppel effect to the identification of real party-in-interest (RPI). Under AIA, the identification of a RPI helps to determine the scope of prior arts under the common ownership exception [PDF]. Second, for both inter parties reviews (IPR) and post-grand reviews (PGR), the petitioner must identify all RPI. The final written decision by the Patent Trial and Appeal Board (PTAB), which resulted from IPR and PGR proceedings, estops the petitioner (or all RPI) from asserting in a district court proceeding, an International Trade Commission (ITC) proceeding or any other USPTO proceeding, that the claim is invalid or unpatentable on any ground that the petitioner “raised or reasonably could have raised” during the IPR or PGR proceedings. The AIA requires that a party filing IPR identify all real parties of interest to the board to consider instituting a petition. It further provides one year statutory bar for any IPR to be institute based on a petition “filed more than 1 year after the date on which the petitioner, real-party-in-interest, or privy of the petition is served with a complaint alleging infringement of the patent.
However, there is no bright line rule from PTAB for a clear definition on RPI. The USPTO had admitted that the determination of a real party-in-interest is a “highly fact-dependent question” [PDF] that cannot be compressed into a bright line rule. Chief Judge James Donald Smith of the BPAI admitted that the Proposed Rules from February of 2012 deliberately declined to promulgate particular factors as the future PTAB intends to consider each case on its specific facts. When AIA was enacted, Congress did not provide the USPTO with a mechanism to police the real parties-in-interest and had no intention of doing so.
The New Ownership Disclosure Rules Development in USPTO Draw Criticizes
In responding to the White House’s executive actions and the market pressure, the USPTO proposed “Attributable Ownership[PDF].” The proposed definition of “attributable owner” [PDF] reaches far beyond title holder (assignee). It includes parties with standing to enforce the patent (including exclusive licensees), ultimate parent entities as defined in 16 CFR § 801.1(a)(3) and hidden beneficial owners. What’s more, failure to comply with the disclosure requirement leads to harsh penalties such as being forced to abandon the patent.
The “Attributable Ownership” rules was widely criticized for overreaching and its harsh penalties. The Intellectual Property Owners Association (IPO) in its comments supports the USPTO’s proposal to require identification of titleholders only upon the initial filing and allowance of a non-provisional application. The IPO does not support additional rules requiring disclosure of enforcement entities, ultimate parent entities, or hidden beneficial owners, because the compliance would be extremely burdensome and fraught with potential pitfalls. The American Intellectual Property law Association (AIPLA)’s comments [PDF] echoed some of the IPO’s concerns that the proposed rule is likely to be unduly burdensome and may not provide the intended information. The AIPLA also raised the concerns that the proposed rules have limited effect on NPEs. The overly harsh consequences (abandonment) and potentially high burdens on all users of the patent system, the complex legal determination of what is an “attributable owner” may be beyond the titleholder’s interest, and the potential that the information will remain irreducibly vague. The AIPLA noted that the proposed rules seem to exceed the agency’s rulemaking authority.
Facing all the criticizes, the USPTO eventually decided to stay with the volunteering disclosure system and focus on the improvement of current assignment recording system, while the PTAB continues using RPI in post grant proceedings. However, abusive patent litigations and transparency of ownership remain the focus of the discussion.
The Stalled Congressional Actions on Patent Ownership Disclosure Issues
Congress continues the discussion by reintroducing HR 3309: the Innovation Act, with bipartisan support in February 5, 2015 by Goodlatte. HR 3309 contained provisions that in scope and impact rivaled those of the American Invents Act. It focused on patent litigation rules and addressed the transparency of patent ownership specifically by requiring a patent owner to disclose “the ultimate parent entity” of any assignee of the patent. Further, the patentee will be under an ongoing duty to update the USPTO of any change in ownership, including ultimate parent entity within 90-days of any change. The bill seems to limit penalty of non-compliance from abandonment of patent to no enhanced damages or attorney fees for the patentee in litigation and an award of attorney fees to the defendant who spent money researching the actual ownership information.
HR 3309 drew both support and opposition that were broad and strong. Major technology companies whose products and customers are prime targets of patent trolls abusive enforcement tactics, have been behind a push for broad reform. Lobbyists for the biotechnology and pharmaceutical industry have expressed opposition to the bill. The American Bar Association focused much of its statement of opposition on what it saw as the institutional assault on the ability of the federal judiciary to manage and conduct its Article III responsibilities, with particular concern expressed regarding the degree to which HR 3309 would override rule-making authority of the courts and replace it with highly detailed congressional prescriptions for the conduct of all patent infringement litigation. The leading Senate Patent Troll bill: S.1720 did not contain a number of the controversial provisions of HR 3309. But due to the lack of agreement between stakeholders on the problem of patent trolls, Congress ended its 113th session without an integrated legislation before January 2015. The oppositions for HR 3309 reduced to HR 3924 proposed in June 9 [PDF], 2015 bring the attention to HR 3309’s potential on making it more difficult for the inventors to protect against theft of huge corporations and fear that the provisions in HR 3309 unreasonably included all American Universities and dramatically changes the value of the patent of all, not only the patent trolls’. The stalled legislative acts present the controversial and sensitivity of the real party of interests in the patent system.
The USPTO Needs High Deference, Not Rigid Definition From Congress
Ownership disclosure regulation is not a unique challenge in intellectual property market. It has been an important subject for regulation in the security interest market. Like patent ownership disclosure, the security interest disclosure regulations also faced and may still face the delicate balancing issue on adequate disclosure and proper burden for owners of all kinds. Different from USPTO, which still does not have a clear delegation for its authority on the issue, SEC was authorized to interpret and apply the Securities Exchange Act [PDF]. SEC was able to do so on the basis that the “undisputed philosophy of securities law was to mandate full disclosure of corporate information in order to promote a healthy market that is “fair” to all investors despite the absence of a specific legal definition of the practice. The high deference to the agency allows SEC to have high flexibility and to adapt to market changes. It also gives SEC flexibility to have exceptional treatment for confidential business information that otherwise ends up in public as the compliance with the SEC regulations. It also allows SEC to set up exemptions for small business’s burden of compliance. Similar issues could arise in patent ownership disclosure cases. The benefit of avoiding the rigid definition from Congress will give the USPTO a flexible position to adopt to the fast developing market and technologies just like the SEC has been enjoying so far.
Xiaoying Zhang is third-year law student at the University of Pittsburgh, School of Law with a Ph.D. in Biochemical Engineering. Dr. Zhang serves University of Pittsburgh Office of Technology Management as an IP Intern. Dr. Zhang is interested in area of IP portfolio management, patent prosecution, technology commercialization and intellectual property law and policy in general.
Suggested citation: Xiaoying Zhang, Patent Ownership Disclosure and Real Party-In-Interest Regulation, JURIST – Student Commentary, Nov. 25, 2015, http://jurist.org/student/2015/11/Xiaoying-Zhang-patent-ownserhips-disclosure.php.
This article was prepared for publication by Marisa Rodrigues, an Assistant Editor for JURIST Commentary. Please direct any questions or comments to her at