Bottleneck at Patent Office is Leading Indicator of U.S. Economy

1.2 million patents waiting; it takes 34 months for patents to be issued; American innovation and competitiveness at risk and American jobs not being created

A few months ago I was taking a free class on living off grid where I met an examiner with the U.S. Patent Office for about 25 years. I mentioned to him that I heard there was a backlog in applications, which he confirmed. When I asked him why this was so, he told me that about 15 years ago the examiners where instructed by management to intentionally slow down the processing of applications because the U.S. government was using patent revenue for other purposes. He also mentioned that examiner attrition is high because law firms recruit former examiners so that they can have inside contacts to help expedite patent applications of their clients.

The number of applications for U.S. patents has increased every year for 20 years. The number of patent examiners has not kept pace, and now over one million patents are waiting to be examined. [Patent Backlog Grows to Record Levels, Impact Lab, August 31, 2006]

If there is a problem with the patent system, it is not that patents are issued too hastily, but rather that many are issued too slowly. Witness the current backlog and pendency. In some sections at the Patent Office it takes three years or more just to get a first office action. With this kind of pendency, by the time an inventor gets their patent, their technology is of no value. If small entities can't get timely patents, we can't get funded. If we can't get funded, promising new discoveries will die on the vine. That is the problem everyone should be focused on — not this imaginary issue of patent quality trumpeted by large multinationals as a way to stifle innovation and further cement their market control. There is then no systematic abuse of the patent system by patentees which would require an overhaul of the system. To the contrary, there is a reason why the patent system works the way it does. We didn't get here by accident. That's because of past abuse of the system by large companies who used their wealth and power to give small entities the run around and make a sham of the system. [Professional Inventors Alliance]

Bloomberg Interview of David Kappos, Former IBM Executive and New Director of the U.S. Patent and Trademark Office:

Patent Office Reforms Derailed

Milwaukee Wisconsin Journal Sentinel
April 25, 2011

Reacting to Congress' decision to raid another $100 million from the U.S. Patent and Trademark Office, the agency's director has thrown the brakes on nearly every one of its planned internal reforms, triggering new warnings that the congressional action will cause a "catastrophic" setback for American innovation, competitiveness and job creation.

"It's a tax imposed on innovators," said Paul Michel, recently retired chief justice of the federal court in Washington, D.C., that handles patent cases.

Because the patent office is structured to be self-supporting by charging fees without costing taxpayers a penny, Congress effectively has helped itself to funds that belong to garage entrepreneurs, start-ups and inventors, Michel said Monday.

"Instead of helping innovators by speeding the patent system, Congress is impeding innovators by taxing their innovations," he said.

As reported in a series of stories in the Journal Sentinel since 2009, the patent office has struggled for years to keep up with the burgeoning number and complexity of patent applications it receives. Crippled by the ongoing series of raids on its fees dating to the early 1990s, it has fallen desperately behind and now has a backlog of more than 1.2 million applications awaiting a final decision - nearly tripled from about 10 years ago.

Patent office director David Kappos, a former IBM executive who was appointed less than two years ago to turn around the agency, late last week sent a memo to his examiners that "reluctantly" details how the latest congressional budget actions will cripple his efforts:

• He indefinitely postponed a pilot program that guarantees fast-track examination of applications within a year to those who pay an additional fee. The program would have gone into effect next week.


• For the second time since he took over, Kappos imposed a hiring freeze at the chronically understaffed agency. Since 2005, the patent office has aimed to hire 1,300 new examiners each year just to chip away at the backlog. But with deficits of nearly $1 million per working day, it hires only sporadically at best.


• The agency suspended all overtime - halting one of the few approaches at its disposal to eat into its backlog - and slashed the training budget for new examiners, who typically need three years to gain competence.


• Plans to open the agency's first satellite office, in Detroit, meant to ease overcrowding at its campus outside Washington, have been "postponed until further notice."


• Upgrades to the agency's antiquated and dysfunctional computer system will be cut to "mission critical" upgrades only.

"We have not come by these decisions easily," Kappos wrote. "I recognize that these measures will place additional burdens on your offices, your staff, and your ability to carry out the agency's mission."

Legislators siphoned the funds as part of the emergency spending bill to avert a shutdown of the federal government this month.

"I see a negative impact on pendency (the length of time required to get a patent) and backlog," said Barry Grossman, a senior patent attorney in Milwaukee at the Foley & Lardner law firm. "The program reductions will not promote technological progress and innovation, nor will they reduce pendency, reduce the backlog or improve quality."

According to a Journal Sentinel analysis, patents awarded by the agency last year took nearly four years from application to issuance, on average - more than twice the agency's benchmark of 18 months.

Because more than a half-million new applications arrive every year - the number rises each year - the office has been unable to catch up. Under a best-case scenario made before the latest congressional raid, Kappos predicted that the agency could reduce its backlog to manageable levels by 2015.

While Beijing invests heavily in China's patent system - now the world's third-biggest, behind the United States and Japan - American innovation activists decry Washington's divestment in the U.S. patent system. The patent system has always been linked to the American dream: The issuance of single patents launched IBM, General Electric and Johnson Controls, not to mention much of Silicon Valley as well as Madison's biotech economy.

"There is no great surprise why we are having a jobless recovery," said Eugene Quinn, a Washington, D.C.-area patent attorney and author of the IPWatchdog.com blog.

Washington's policy-makers appear oblivious to the importance of intellectual property and the historical role that the patent system plays in the nation's economy, Quinn wrote in reaction to the latest diversion. "The PTO has to throw up its hands and cease trying to make progress, treading water at best, but more likely drowning," Quinn wrote. "Pathetic."

The latest diversion comes as key Senate and House leaders as well as the White House have started to extol the importance of the agency. President Barack Obama and his advisers have vowed to strengthen the nation's innovation economy, and Commerce Secretary Gary Locke used an appearance in Milwaukee this month to tout the fast-track examination system.

Pending legislation called the America Invents Act of 2011 deals largely with patent litigation but also includes a provision to allow the patent office to keep its fees. Yet even if Congress passes the legislation - it has rejected three previous attempts over the past four years - the agency wouldn't gain control over its finances until the new fiscal year starts Oct. 1.

Michel, the former patent court judge, called the latest diversion "catastrophic and devastating."

Michel noted that small companies and start-ups create the bulk of new jobs in the U.S. economy, and those are the entities hardest hit by a dysfunctional patent office.

"The delays in the patent office are already the biggest problem in the American patent system," Michel said, "and they are holding back new companies, new technologies and new jobs."

Patent Backlog Clogs Recovery

Agency’s inability to keep pace undermines American innovation, competitiveness

Amid the worst downturn since the Great Depression, the U.S. Patent and Trademark Office could be seen as a way to jump-start the economy. Instead, it sits on applications for years, placing inventors at risk of losing their ideas to savvy competitors at home and abroad. Under a practice that Congress authorized a decade ago, the Patent Office publishes applications on its Web site 18 months after the inventor files them, outlining each innovation in detail regardless of whether an examiner has begun considering the application. The system invites competitors anywhere in the world to steal ideas.

Milwaukee Wisconsin Journal Sentinel
August 15, 2009

First of two parts

On a campus of boxy office buildings nine miles outside Washington, D.C., some 6,300 patent examiners hold the nation's economic future in their hands.

The next Google. The next iPhone. The next Viagra.

All could be fueled by inventions awaiting the 20 years of protection afforded by a U.S. patent - if only the patent examiners could catch up.

But they can't. The federal system of granting patents to businesses and entrepreneurs has become overwhelmed by the growing volume and complexity of the applications it receives, creating a massive backlog that by its own reckoning could take at least six years to get under control, the Journal Sentinel has found.

Amid the worst downturn since the Great Depression, the U.S. Patent and Trademark Office could be seen as a way to jump-start the economy. Instead, it sits on applications for years, placing inventors at risk of losing their ideas to savvy competitors at home and abroad.

The agency took 3.5 years, on average, for each patent it issued in 2008, a Journal Sentinel analysis of patent data shows. That's more than twice the agency's benchmark of 18 months to deal with a patent request.

The total number of applications waiting for approval, more than 1.2 million, nearly tripled from 10 years earlier.

The Journal Sentinel also found:

• Under a practice that Congress authorized a decade ago, the Patent Office publishes applications on its Web site 18 months after the inventor files them, outlining each innovation in detail regardless of whether an examiner has begun considering the application. The system invites competitors anywhere in the world to steal ideas.

• For more than a dozen years starting in 1992, Congress siphoned off a total of $752 million in fees from the Patent Office to pay for unrelated federal projects, decimating the agency's ability to hire and train new examiners.

• As its backlog grew, the Patent Office began rejecting applications at an unprecedented pace. Where seven of 10 applications led to patents less than a decade ago, fewer than half are approved today - a shift that a federal appeals judge termed "suspicious." The same judge calls the agency "practically dysfunctional."

• Staff turnover has become epidemic. Experts say it takes at least three years for a patent examiner to gain competence, and yet one examiner has been quitting on average for every two the agency hires.

• Patent activity, a widely accepted barometer of innovation, is showing exponential growth in increasingly competitive economies such as China, South Korea and India. As developing economies strive to commercialize and protect their technologies throughout the world, they add tremendously to the U.S. Patent Office's workload.

• In many cases, applications languish so long that the technology they seek to protect becomes obsolete, or a product loses the interest of investors who could give it a chance at commercial success. "Patents are becoming commercially irrelevant to product life cycles," said John White, a patent attorney and former examiner.

For an American start-up company, a patent application is often the only asset, which creates a Catch-22: Start-ups often need a patent in order to get funding; yet without that funding, entrepreneurs can't afford the mounting fees and legal costs to keep the patent application alive or to fend off infringers.

Backlog hits home

Just such a delay doomed MatriLab Inc., a Milwaukee biotech company formed to commercialize a wound-healing gel based on technology licensed from the University of Wisconsin-Madison.

Backed initially by the Wisconsin Alumni Research Foundation, which works to commercialize UW technologies, MatriLab won the governor's business plan contest in 2006. It went belly up in 2007, five years after a patent application was filed for the gel, because no new investors would come aboard as the application languished.

"The absence of patent protection says to investors, 'Maybe these people really don't have anything,'" said Grady Frenchick, a veteran patent attorney in Madison with Whyte Hirschboeck Dudek, who represented MatriLab.

Kathleen Kelleher, chief executive of the short-lived start-up, went on a 20-stop investor roadshow. But without a patent in hand, she couldn't raise a penny.

"Potential investors want to know if there will be some level of exclusivity or protection," said Kelleher, whose résumé includes 25 years in the biotech industry.

A patent was finally awarded for the compound this year; it went to WARF, which reclaimed its license when MatriLab ran out of cash.

MatriLab ended with nothing.

"That story is retold across the country thousands of times," said White, who also teaches patent law. "People give up on their dreams."

Patent delays buried Merc-Exchange LLC, a Virginia company that survived several costly court battles with eBay but couldn't outlast the Patent Office.

In 2003, a federal court found that eBay was infringing on MercExchange's patented online-auction technology - so eBay asked the Patent Office to re-examine the two most crucial patents in an effort to invalidate them.

The agency reopened the examination in March 2004. Four years later, with the validity of his patents still in limbo, MercExchange founder Thomas Woolston capitulated and sold them to eBay.

"It destroyed us," Woolston said.

MercExchange went from more than 40 programmers and engineers at its peak to zero.

Of 1,349 patents issued to Wisconsin inventors last year, 123 took at least five years to issue, with some taking as long as nine years, the newspaper's analysis found.

The delays grew beyond frustrating for Roger Hoffman, a Green Bay businessman and inventor whose advances in environmental technology for the paper industry earned him an award from the White House in 1991.

In 2001, he created an Internet-based technology that would allow companies to streamline the process of gathering bids from suppliers. By the time he got his patent more than five years later, the idea had been published online, copied and developed many times over - all technically legal as long as there was no patent. It was rendered worthless to Hoffman, even though the patent he eventually won validated that he was first with the idea.

"You just cannot get anything through the patent office," Hoffman said. "You cannot find investors that will wait eight years for patents to issue. Start-ups are risky enough without that."

Set up in Constitution

Article 1 of the U.S. Constitution created the Patent Office.

"The issuing of patents for new discoveries has given a spring of invention beyond my conception," wrote Thomas Jefferson, the nation's first patent examiner.

The patent system encouraged a mechanical engineer named Herman Hollerith to patent a punch-card tabulation machine in 1889 (U.S. patent No. 395,781), prompting him to found the Tabulating Machine Co., which later became IBM Corp. In 1883, Warren Johnson patented the electric thermostat (No. 299,552) and spawned Wisconsin's biggest company, Johnson Controls Inc., with $38 billion in 2008 sales.

Thomas Edison's incandescent light bulb (No. 223,898) launched the General Electric Co. In turn, GE used the vacuum tubes for Edison's filaments to patent vacuum tubes for X-ray equipment (No. 1,203,495). By 1947, GE's X-ray division in Milwaukee was on its way to becoming GE's $17 billion-a-year medical technologies business - which today ranks among Wisconsin's most active users of the patent office.

But over the years, the agency became a backwater, staffers say. The State Department passed it to the Department of the Interior, which handed it off in 1925 to the Commerce Department, where it resides today. It became the registration agency for trademarks, a smaller and separate part of its work.

"Since the '60s, there's an under-appreciation of the importance of the Patent Office to our whole economy, to employment, to prosperity," said Paul Michel, chief justice of the Court of Appeals for the Federal Circuit, which handles patent appeals. "It's been neglected by the Congress and most high-level policy-makers."

The last time the Patent Office met its 18-month average for passing judgment on applications was 1991 - shortly after the fall of the Berlin Wall inaugurated the era of raw global competition.

Funding siphoned off

Then in 1992, Congress began siphoning off the agency's revenue.

The Patent Office is structured to be self-sustaining, surviving on fees paid by patent applicants. Facing shortfalls in other areas, however, Congress voted to divert $8 million in fees in 1992 - less than 1% of the agency's budget that year - to pay for federal projects that had nothing to do with patents.

That diversion eventually snowballed into $752 million during the next 12 years, as Congress drained anywhere from $12 million to $200 million each year, regardless of which party controlled Congress or the White House. The diversion amounted to about 7% of the total funding available to the agency during the period of diversion, according to a 2005 report by the National Academy of Public Administration.

"If we had hired an additional 250 to 300 people each year through those years, over what we hired, we'd be at 18 months right now," said John Doll, the Patent Office's acting director until the Senate confirmed IBM executive David Kappos as the agency's new leader on Aug. 7.

As the diversions took their toll and technology competition went global, the Patent Office steadily fell behind. Its backlog of unexamined applications has increased every year since 1997 and now numbers more than 1.2 million, higher than that of any other patent agency in the world.

The diversions ended in 2004, although Congress never legislated a ban on them, and the agency began a game of catch-up, hiring nearly 1,000 new examiners in one year. From 2006 through 2008, it hired and trained at the unprecedented pace of 1,200 examiners a year. In 2006, it opened a Patent Academy with an eight-month curriculum.

It planned to hire another 1,200 each year through 2012 but this year slammed on the brakes with a hiring freeze.

"We don't have the money to hire 1,200 new examiners this year, so we won't be able to make the gains that we expected to make," Doll said.

The agency blames the slowing economy for the drop in its fee income, citing a dip in filings - as companies have reduced research-and-development budgets - and less willingness by inventors to pay the periodic maintenance fees that keep a patent alive for its full term.

In his July 29 Senate confirmation hearing, Kappos said his No. 1 priority is to shorten the amount of time it takes to get a patent without sacrificing quality.

"The challenge of fee diversion has been costly in terms of user-community confidence," Kappos told the senators.

Even so, few expect change to come quickly. Under one internal model, Doll said the agency won't catch up with its workload for a half dozen years. He cited a projection based on a fresh infusion of funding, which would allow the agency to increase the pace of hiring to 1,500 examiners per year. That would drop the average waiting time for a patent to 18.7 months by 2015, Doll said.

Previous efforts to expedite applications had little impact. Three years ago, Doll introduced a program called Accelerated Examination, which is meant to render a decision within 12 months. Only a fraction of applicants use it, patent attorneys say, because it saddles users with extra costs and can create a legal liability that can invalidate patents in court.

Limited impact

Most patents have little or no economic impact. An estimate published in 1997 in Research-Technology Management, a business journal, found that only 5% to 10% of U.S. patents have potential market relevance. But that includes those with the potency to build and help maintain the U.S. economy. These represent advances in science, technology and human creativity, from Robert Fulton's steamboat to Orville and Wilbur Wright's flying machine to Google's search engine.

A 2005 Federal Reserve Bank study found that the largest factor in a state's income growth is the volume of patents each state generates. Ranked by patents per capita, Wisconsin is 12% above the national average and 14th nationally.

The system amounts to a social compact: A patent shares advances in science and technology with the world in return for a temporary, exclusive right to make and sell something. A good patent delineates the exact limits of what an inventor wants to protect, which in turn fires the ingenuity of others to improve on it without encroaching. And the system influences every niche of the economy, from manufacturing to stem cells.

Patents "are essential instruments for an innovation-based economy," said Bruce Lehman, director of the Patent Office in the mid-1990s. Neither Silicon Valley nor the Madison biotechnology industry would exist without patent protection, said Lehman, who earned his undergraduate and law degrees from UW-Madison. "To advance science in a market economy, you have to have a system that permits you to capture property rights in inventions so investors will invest and the public gets the benefit," Lehman said.

Yet the U.S. patent system has bogged down just as other fast-developing economies, such as China and India, have ratcheted up their efforts to innovate - and to protect their inventions. And because a patent carries legal force only in the nation that issued it, foreign inventors have added increasingly to the burden at the U.S. Patent Office.

"We're going to see more patent applications from China and the rest of the world, and we cannot hire our way out of it," said Jon Dudas, who ran the U.S. Patent Office from 2004 until earlier this year.

In 2008, about 49% of U.S. patent filings came from foreign inventors, mainly Japan, South Korea and Europe. Last year, for the first time in the agency's history, the Patent Office issued more patents to foreign inventors (80,271) than to U.S. innovators (77,501).

China accounts for less than 1% of U.S. applications. But many expect that to change. The State Intellectual Property Office, China's patent agency, overtook Europe's 35-nation patent office in 2004 to become the world's third-biggest, behind the U.S. and Japan. Applications to the Chinese office tripled to 289,838 in 2008 from 2003, about half from foreign interests, mirroring U.S. trends.

"China has a national plan to be a leader in the world, from 'made in China' to 'invented in China,'" said Dudas, now an attorney in the Washington office of Milwaukee-based Foley & Lardner.

Long waits for patents are not unique to the United States. The European Patent Office takes longer than the United States, on average, to resolve patent applications. The wait in Japan is similar to that in the U.S.

But nowhere do the delays take a greater toll.

Garage entrepreneurialism, the type that created Hewlett-Packard and Harley-Davidson, is more influential in the United States than in most other countries, said Lehman, the former Patent Office director.

"Investments in technology in the United States are to a much greater extent than elsewhere financed by venture capitalists, who require the certainty of patent protection as a precondition," he wrote this year in a policy paper. "Companies like Google didn't exist 10 years ago."

Inventor scales back

Born in Two Rivers and educated in chemical engineering at UW-Madison, Roger Hoffman is a compulsive inventor.

During 25 years at Green Bay Packaging Inc. and later as the operator of an independent inventing shop, he created and patented dozens of technologies, many of them dealing with paper industry issues: paper production, recycling and water treatment. In 1991, the first President George Bush honored him with an environmental award in a Rose Garden ceremony.

But now, at age 65, Hoffman splits his time between homes in Wisconsin and Florida, having closed his Green Bay shop in 2003 and gone into semi-retirement because it had become so difficult to get its inventions patented.

"I'd still be in Green Bay if it weren't for the futility of trying to get these patents," he said.

Case in point: In 2001, before many Internet business applications existed, Hoffman created an automated online program that allows a company to collect bids from suppliers around the world, sort through them, determine which ones have the capacity to meet production and delivery specifications, and generate a list of optimal candidates.

This "Decision Analysis System" could work for manufacturers or retailers, whether they needed brake parts, paper pulp or running shoes.

The Patent Office agreed the idea was original and deserved patent protection - more than five years later. By then, the idea had been published on the Patent Office Web site and untold imitators had sprung up.

"Everyone has software products that do what Roger invented years ago," said Philip Weiss, Hoffman's patent attorney. "But if you go back to 2001, there was no such thing."

Hoffman got U.S. Patent No. 7,110,990 for his program in September 2006, proving he was first with the idea. He could have sued some of those who had been duplicating his work, but the technology had quickly become ubiquitous, and patent suits are expensive - pursuing a single infringer can cost $1 million to $5 million.

"Roger never got into this to be a litigator, that I can tell you," Weiss said. "He thought inventors were noble."

Hoffman finds it ironic that the building that used to house his eight-person inventing shop in Green Bay is now a courthouse.

"If we had the same system 140 years ago, which was the year Thomas Edison's first patent issued, we probably would not know who Thomas Edison was," Hoffman said.

Working for the USPTO (Excerpt)

On a survey of 1,420 patent examiners. Not surprisingly, the GAO report provides ample support for POPA's position that the USPTO's antiquated production goals are the reason for the Patent Office's high examiner attrition rate (the GAO reports that from 2002 to 2006, one patent examiner left the USPTO for nearly every two the Office hired). Among the specific findings of the GAO survey were:

• 67% of the examiners surveyed said that the Patent Office's production goals were among the primary reasons they would consider leaving the USPTO.
• 62% of the examiners surveyed are very dissatisfied or generally dissatisfied with the time the USPTO allots to achieve their production goals.
• 50% of the examiners surveyed are very dissatisfied or generally dissatisfied with how the agency calculates production goals.
• 59% of the examiners surveyed believed that the production system should be reevaluated.
• 70% of the examiners surveyed reported working unpaid overtime during the past year in order to meet their production goals (some putting in more than 15 hours of unpaid overtime per week).
• 59% of the examiners surveyed identified the amount of unpaid overtime that they have to put in to meet their production goals as a primary reason they would choose to leave the USPTO.
• 37% of the examiners surveyed identified the amount of time they must work during paid leave in order to meet their goals as a primary reason they would choose to leave the USPTO.

As Mr. Budens noted during his testimony, the production goals currently being applied by the USPTO were developed more than 30 years ago.

She also stated that even if the Office were to satisfy its hiring estimate of 1,200 examiners in each of the next five years, the backlog would grow from about 730,000 applications in 2006 to 1.3 million applications in 2011.

Working for the U.S. Patent and Trademark Office (USPTO)

United States Patent and Trademark Office
March 15, 2008

Did you know?

Your career as a Patent Examiner is just beginning – and there’s nowhere to go but up. Do you know about all the opportunity your future at the USPTO holds? Did you know that a primary examiner makes between $102,000 - $145,000 a year? And you can be a primary examiner within only 5-7 years of joining the USPTO? Your career path doesn’t stop there.

You could be a manager, running a group of examiners, after only 7-8 years. All patent managers – all the way up to the Commissioner – started their USPTO careers as patent examiners. Promotions are based on how well you perform relative to a fixed goal – not competition amongst employees. Employees are eligible for their first promotion after only 6 months of employment.

Did you know that as a new employee, you have an immediate impact on the U.S. economy through your own decisions? It’s important work with an important mission. Experienced USPTO employees describe themselves as independent thinkers, disciplined, decisive, self-starters.

How did you hear about careers with the USPTO?

Did you know that word-of-mouth is the main way we recruit new employees?Nearly 40% of patent examiners were hired in FY 2006 by employee referrals. Patent examiners are invaluable – over 450,000 patent applications are filled each year – that means an average examiner will examine 100 patent applications per year. After mastering patent examining, there are other career options for you within the patent office. From being an Administrative Patent Judge at the Board of Appeals, to working on national and international endeavors, and more, the possibilities are as wide as the ideas you’ll work with every day.

If everything is so crappy at the PTO, and everyone hates it there, then why are nearly 40% of patent examiners were hired in FY 2006 by employee referrals (the above article was published in July of 2007)?

From Intellectual Property Law Server:

I was one of the 14 to be hired as a biotech examiner in '97. How did I get the job? I don't have the slightest idea. Nonetheless, here are a few pointers you might want to consider:

Although there is no shortage of new applicants, the PTO has a problem retaining experienced Examiners. Once examiners get their training, they often leave for higher paying (or equally paying, but less stressful) jobs. In fact, many leave leave after just 1 year, and the majority leave within 2 or 3 years.

So without being too overt about it, present yourself as someone who will be around for longer than that. (But don't over do it by claiming that you plan to become a career examiner. The interviewer will think you are lying or aren't very ambitious.) And before you interview, you should also do considerable homework as to what an examiner actually does. You'll need to explain why you want to leave the lab to do this sort of work. You might even want to learn a little patent law so you can "talk the talk" during your interview.

If you haven't already done so, have a look at the MPEP. You might even want to read chapters 700 and 2100 (or parts thereof) just to get a feel for it. Have a look here...

Manual of Patent Examining Procedure" Edition 8 (E8), August 2001, Last Revision July 2010

Hope the above helps.

Compact Prosecution

By Patent Hawk, The Patent Office
December 14, 2007

Unable to staff its way out of its pendency hole, USPTO management seeks to address the problem by limiting continuations and RCEs. Seeking to gratify a grotesque bias, Ayal Sharon & Yifan Liu set out to statistically validate that conclusion. Instead, they proved what many prosecutors already knew: examiners' refusal to grant deserved patents. The root of the problem is a culture now steeped in political fear of being considered slack by granting junk patents, inspired by a short-sighted and incompetent management responding to pressure from well-funded propagandists.

Patent Applications Backed Up: So Are New Jobs

By Myra Per-Lee, InventorSpot.com

Manufacturing as percent of total employment: via Economist View

Switzerland slid past the U.S. to first place in the 2009 - 2010 Global Competitiveness Report, a biannual report published by the World Economic Forum. There are many elements that contribute to a country's competitiveness, but the Forum puts a lot of emphasis, as it should, on innovation capacity. If innovation capacity were the only factor, the U.S. probably would not make it to the top 20.

Why? Because other countries are putting far more emphasis on innovation and entrepreneurship than the U.S. right now. In fact, "North America" is the only continent that is less focused on innovation now than it was in the year 2000 - and it's not Canada that's pulling the continent down.

In the meantime, everyone is asking 'where are the jobs?' Manufacturing has left the area. The jobs are where the innovation is - 50 percent of new jobs come from new companies within their first five years of establishment. New companies are established to monetize innovation.

Where is innovation? Are we blighted with rusty spring disease in the U.S.? As it happens, no. You see there are millions of potential jobs being held captive by the U.S. Patent Office in the form of patent applications that have no one to read them and not enough people to evaluate them because some are too technologically sophisticated for the patent examiners.

And the new Director of the United States Patent and Trademark Office (USPTO), former IBM chief David Kappos, admits all this himself. He volunteers this information, because without more funds his office cannot function. Though the office was set up to be self-sustaining, surviving from its fees, billions of dollars were siphoned off and re-diverted by Congressional earmarking between 1992 and 2004, which really put the Patent Office behind in its application reviews. And things have gotten worse.

Just this past December, a budget provision that was to provide an extra $100 million to the USPTO was pulled at the last minute. Now, the office has a cap on spending which prevents it from hiring new examiners even if an examiner leaves his or her position.

All that leaves the Patent Office with 1.2 million new applications, three times more than there were 10 years ago, and 700,000 of them have not been picked up for a preliminary examination.

It's been the Patent Office that has helped create millions and millions of jobs for more than 200 years. Patents created jobs during the Industrial Revolution and patents need to continue to create jobs in the digital and biotechnology age.

Technology: A Gift That Keeps On Giving: via BruceClay.com

"Hundreds of thousands of groundbreaking innovations that are sitting on the shelf literally waiting to be examined - jobs not being created, lifesaving drugs not going to the marketplace, companies not being funded, businesses not being formed - there's really not any good news in any of this," Kappos said during a panel discussion at the annual trade show of the Biotechnology Industry Organization.

IPBiz’s Ebert: Kinsella Way Off on Patent Reform

By Stephan Kinsella
March 29, 2011

Since Patent Reform is in the air, here is an older exchange with patent attorney Lawrence Ebert at the IPBiz blog that I just came across while binging. I mean, googling:

***

Kinsella way off on patent reform

December 14, 2007

Stephan Kinsella has a particularly insipid piece on patent reform, titled Another Reason to Reform Patent Law: Touch Off A Recession!

Kinsella writes: There’s increasingly hyperbolic opposition to patent reform efforts. Dude, some of us have been pointing to the “same old, same old” bad aspects of patent reform for years but guys like yourself never respond.

LBE published “Patent Reform 2005: Can you hear me, Major Tom?” back in 2005 and talked about it on IPBiz.

Kinsella finds boogeymen in the patent bar, just as Jaffe and Lerner do:

Naturally, the organized patent bar and intellectual property (IP) advocates have an interest in labeling recent developments “radical” so that any really radical proposals will be dismissed out of hand. (Patent lawyers also seem loath to have to learn some new rules—those CLE courses are so bothersome.)

Lots of people in the “organized patent bar” favor post-grant opposition, a current part of the house and senate patent reform packages. It creates MORE opportunities for patent lawyers. Duh, where’s your brain Steve? Oh, yes, lots of new rules to learn in post-grant opposition.

The changes to the rules on continuing applications were supposed to impact the backlog, but they will affect only 5% (or fewer) of filed cases. Tough to see how all this added paperwork is going to reduce backlog. Where’s your logic Steve?

Steve writes:

Well, I disagree that the proposed and recent changes are radical. Patent terms have not been shortened. The scope of what is patentable has not shrunk.

Steve doesn’t mention that the ability to claim an invention will have shrunk if the new rules go into effect, and the ability to argue with examiners about stupid rejections will diminish. If a large fraction of continuing applications were devious attempts to claim the products of competitors, one might at least understand the motivation (if not the ultimate rationale), but the most abundant continuing application form is the RCE, wherein one can’t change the invention. One is arguing with the examiner about the claim scope of already submitted claims.

See also, PatentHawk Compact Prosecution and the 271 blog (Study Shows USPTO Backlog Is Tied More to Non-Final Actions, and Not Continuations)

No Hurry to End Patent Application Backlog

By Dick Miller, WeConnectDots.net
January 25, 2011

“No country grants more patents for inventions than the United States,” President Obama said in promoting confidence that our economy will recover.

The remark, included in his third annual State of the Union address, however sheds light on a government failure that has transcended administrations of both parties for at least two decades.

The backlog of applications sitting in a Northern Virginia warehouse belonging to the U.S. Patent and Trademark Office (USPTO) is 1.2 million and growing. What once took 18 months to grant now takes almost four years. In today’s dynamics that can be “forever.”

In 1991, the financial burden of granting patents was shifted from taxpayers to the applicants through user fees. As the number of patent applications grew, the office was actually being run at a profit. (Sounds like a “Tea Bagger” success story, so far.)

Then Congress began to raid the patent office piggy bank to the tune of $650 million by 2004. As the number of applications expanded, USPTO did not have the funds to keep pace with patent examiners.

The American dream is to invent the 100 miles per gallon carburetor, the next smart phone, even a diet that really works. The patent helps prevent anyone else from stealing your design and keeping you from making the maximum return on your efforts.

Some economists maintain more jobs will be created by smoothing the path to innovation than by reducing government impediments. Lengthen time to review a patent application will increase chances to steal the idea. Raising money also becomes more difficult. Venture capitalists are not likely to contribute money to an invention that may never get out of the starting gate or has been stolen.

The job of patent examiner grows not only by the number of applications, but also patents already granted. In the 145 years from its founding in 1790, USPTO issued its first two million patents. Beginning in 1935 USPTO granted its second two million in the next 41 years. All the many more issued patents an examiner has to check against the application he is working on.

USPTO says 2,900 new examiners are needed over the next five years, adding to the current workforce of 3,500. A plan approved by the House and awaiting Senate action promises to no longer raid the USPTO piggy bank and would boost fees by 20 per cent to hire 1,500 new examiners over five years.

There is little doubt that as long as the patent process is slowed, less new jobs will be created by the lack of protected innovation.

If you are an unemployed engineer you can still find a job in China. According to the Milwaukee Journal Sentinel, since the entire backlog of applications is on the Internet, engineers sift through them to determine what intellectual property is worth stealing.

All of this could lead to the following conclusion:

We are only just beginning to learn how both parties have manipulated foreign policy at the expense of American jobs. What if the patent processing backlog was part of the same program?

Ambassador Jones tells the Sultan of Siam:

“I’ll tell our people that we asked and you agreed to crack down on intellectual property theft, but then we’ll keep the backlog of patents going so you can steal more of our inventions.”

Wink. Wink.

Patents Pending: IP Attorneys Advise Clients on Longer Process

Wisconsin Law Journal
October 26, 2009

The next Thomas Edison or Bill Gates may take a little longer to get discovered, if at all.

Intellectual property attorneys are enduring an increasingly arduous patent process on behalf of their clients, coupled with a backlog of approximately 1 million applications at the United States Patent and Trademark Office.

As a result, some inventors are reconsidering or even abandoning applications because they can’t afford a series of appeals or have simply grown impatient with the system.

“For the first time ever, clients are saying, ‘I just can’t put any more time and money into this invention. It’s just not worth it,’” said IP attorney Keith M. Baxter of Boyle Fredrickson SC in Milwaukee.

He said most clients accept the fact that the process will be relatively rigorous, and “nobody gets patents on fads.” But even before the recession hit, the timeline between filing an application and receiving a first office action or response from the Patent Office had begun to widen.

And the situation has gotten worse.

Baxter, who deals primarily with clients in the technology field, said that patents which previously had seen first office action in six months are taking three or four times as long. He suggested this could be a product of examiners granting a high volume of applications in recent years — and now the Patent Office is looking at them with more scrutiny.

“It could be too many patents getting through,” he said. “[For me] it may mean people with simple mechanical cases just get rejected.”

Michael Best & Friedrich attorney Thomas J. Otterlee said smaller inventors, especially, are concerned about the length of the process.

“When I tell them it can take, two, three or four years, they are a little surprised,” said Otterlee, who deals with mechanical devices. “Every time we respond to an office action, they ask ‘When is this going to end?’”

Timeline hard to predict

Otterlee said it is increasingly common for inventors to have to file several responses with the examiners at the Patent Office, and because it’s also taking longer to initially hear back, attorneys are having a hard time giving clients an accurate timetable.

Quarles & Brady patent attorney Jean C. Baker, who has 20 years experience, said that it’s particularly difficult for someone just starting out to have an accurate expectation of how long the process will take.

“We have attorneys here that filed applications years before they started seeing office actions,” she noted.

Baker also attributed the lengthier process to more complex applications, especially in the technology industry, and increased back and forth among patent examiners.

“They [examiners] are getting different things to look at than 10 years ago,” she said.

That may be why examiners appear to be less confident in granting applications and there always seems to be a lot of “double-checking.”

“There are more situations where people agree to something on the phone, then change their minds because they go up the chain and someone else disagrees with them,” Baker said.

In those cases, inventors often have to file a continuance or appeal the decision, which means an additional cost.

“That’s another filing fee, another office action and more lawyers’ fees,” Baker said. “You can easily add $3,000 to the process just because an examiner wanted to clarify something you had an interview about.”

But despite the hassles, attorneys say they haven’t noticed a significant dip in the number of clients seeking patent protection. In fact, while some clients are abandoning the process, Baxter said that given what can be riding on approval, other clients may be more willing to fight than in the past.

“In my first 15 years I probably had two cases in appeal, and now I have five or six … because people are just not getting what they believe should be allowed through,” he said.

Congress Takes Up Major Overhaul of Patent Law

The Associated Press
March 3, 2011

The patent system hasn't changed much since 1952 when Sony was coming out with its first pocket-size transistor radio, and bar codes and Mr. Potato Head were among the inventions patented. Now, after years of trying, Congress may be about to do something about that.

The Senate is taking up the Patent Reform Act, which would significantly overhaul a 1952 law and, supporters say, bring the patent system in line with 21st century technology of biogenetics and artificial intelligence. Sen. Orrin Hatch, R-Utah, hails it as "an important step toward maintaining our global competitive edge."

Senate backs USPTO receiving all fees

A first step to strengthen the U.S. Patent and Trademark Office was taken this week when the USPTO would gain power over the revenue it collects under an amendment the Senate approved. It’s a step seen as critical to reducing the lengthy backlog in processing patent applications.

The Senate measure would end the practice of diverting fees paid to the patent office to other government programs. It came as an amendment to legislation that would carry out the first major overhaul of the patentsystem in almost 60 years.

Sen. Tom Coburn, R-Okla., who promoted the amendment, said that last year some $53 million in application and other fees paid to the patent office was spent elsewhere.

The provision, which also allows the office to set its own fees, aims to rectify a backlog: 700,000 applications are awaiting initial action, and it takes three years to get a patent request granted.

The overall bill, which is expected to pass this week, would also carry out fundamental changes in howpatents are processed. Instead of the current system where patents are given to the first to invent, the United States would adapt the system used by all other industrialized nations, where they go to the first to file.

The White House, which supports the bill, said the first-to-file system would simplify the process of acquiringpatent rights, reduce legal costs, improve fairness and support U.S. innovators.

The switch has been opposed by independent inventors and smaller companies concerned that they wouldn't have the resources to compete with corporate competitors, but Patent and Trade Office Director David Kappos told reporters Tuesday that the transition comes with increased legal certainty to assure that smaller businesses would not be disadvantaged.

"First-inventor-to-file is a win for all American innovators, of all sizes and all industries," Kappos said.

Kappos also welcomed provisions giving his office more control over fees, saying it would allow the office to hire more qualified examiners and upgrade its technology, resulting in the issuing of higher-quality patents in a faster period of time.

Prospects for bill passage seem good

Congress has been trying for well over a decade to rewrite patent law, only to be thwarted by the many interested parties - multinational corporations and small-scale inventors, pharmaceuticals and Silicon Valley companies - pulling in different directions. Prospects for passing a bill now, however, are promising.

The Senate bill is sponsored by Judiciary Committee Chairman Patrick Leahy, D-Vt., Hatch and another top Republican on the panel, Sen. Chuck Grassley of Iowa. The committee voted 15-0 in early February to send the legislation to the full Senate.

The overhaul is long overdue. It now takes the U.S. Patent and Trademark Office about three years to process a patent application. There are about 1.2 million applications pending - 700,000 waiting consideration and another 500,000 somewhere in the process. The patent office says it received about 483,000 applications in 2009 and granted about 192,000 patents.

"Hundreds of thousands of patent applications are stalled" at the patent office, Leahy said. "Among those is the application for the next great invention."

The most sweeping, and controversial, change is the transition from a first-to-invent application system to a first-to-file system that is used by every other industrialized nation, but has been opposed by independent inventors. It comes with an enhanced grace period to protect inventors who publicly disclose their inventions before seeking patents.

Companies or individuals seeking patents in multiple countries are confronted by a different set of rules in this country, said Bill Mashek of Coalition for 21st Century Patent Reform, a group that represents big companies like General Electric, Pfizer and 3M.

"It puts us at a disadvantage globally."

The bill would create a nine-month "first window" post-grant procedure to allow challenges to patents that should not have been issued and to cut down on litigation and harassment of patent owners by improving the review system for challenges. It provides more certainty to damage calculations.

It also gives the patent office authority to set its own fees at a level that will give it enough funds to reduce its backlog of applications. It requires that smaller businesses continue to get a 50 percent reduction in fees and creates a new "micro-entity" class - with a 75 percent reduction - for independent inventors who have not been named on five or more previously filed applications and have gross incomes not exceeding 2.5 times the average. The standard fee for filing a patent is now $1,090, with additional maintenance fees over the life of the patent.

In a change from current law, tax strategies could not be patented.

A variety of backers

Leahy's office lists a diverse group of supporters, including major drug companies, IBM, the AFL-CIO, the Association of American Universities, Caterpillar and USPIRG.

One reason supporters are optimistic about the bill's prospects this year is that courts have dealt with some of the more contentious issues involving lawsuits and damage awards.

"When we started these efforts many years ago, we faced a grim landscape where patent lawsuits threatened to stifle the pace of innovation and shut down our factories," David Simon, associate general counsel for Intel Corp., told the House Judiciary Committee. "Today, the scenario has changed drastically."

Testifying in February on behalf of the Coalition for Patent Fairness, a group of high-tech companies, Simon credited the change to Supreme Court and other federal court rulings dealing with such practices as venue shopping where litigants sued in courts known for handing out large damage awards.

Simon's coalition, however, has not endorsed the Senate bill. In a statement, it said the bill still needs to do more "to lessen the growing burden of abusive and unjustified patent infringement claims."

A group of nine organizations representing small businesses, start-ups and independent inventors was more forthright in its opposition, saying in a letter to senators that the first-to-file system would have "unique adverse effects" on its constituents.

"The bill favors multinational and foreign firms over start-up firms seeking an initial foothold in U.S. domestic markets, and favors market incumbents over new entrants with disruptive new technologies," said the letter signed by groups such as American Innovators for Patent Reform and the U.S. Business and Industry Council.

USPTO Seeks to Rehire Limited Number of Former Examiners

PatentLYO.com
December 26, 2009

The USPTO has had a fairly large attrition rate over the past 15 years. Part of the cause of the attrition has been within USPTO. However, I believe that the real driving forces have been (1) the private great demand during that time for patent law professionals; and (2) the fact that many of the USPTO new hires were young college graduates who expected to leave their first job within a couple of years.

Training of replacement examiners is slow and expensive and also frustrates patent applicants who expect a professional examination for their $1000+ fee.

Now that the private law market has shifted, the USPTO now sees its opportunity to hire experienced individuals — folks who will “hit the ground running” and who will likely be more stable in their life goals. As a first step, the USPTO is “reaching out to former patent examiners, inviting them to return to the agency.”

In a media quote, USPTO Director David Kappos said:

“These examiners can have an immediate impact on the patent examination backlog and reducing the backlog is our top priority.”

The immediate limited program is focused on former examiners who passed their probationary requirements and who resigned less than three years ago or have more than three years experience examining patents. See www.USAJobs.gov (GS 9–14).

U.S. Patent Office Needs Money to Reduce Backlog: Obama

The China Post
July 15, 2010

The U.S. Patent and Trademark Office should get as much as US$279 million to help the agency deal with a backlog of patent applications, U.S. President Barack Obama said in a request for supplemental funding from Congress.

The patent office, which experienced a drop in fees last year because of the recession, is seeing a rebound in applications and wants to keep more of the money it collects. Otherwise, any money above its US$1.89 billion fiscal 2010 budget would enter the general treasury to be spent by Congress on other programs.

Improving the patent office has been a key goal of the Obama administration, which has said that better protection for intellectual property will be a driver of economic growth. The patent office has said technology innovation is linked to three-quarters of U.S. growth since the end of World War II.

The additional funds would go toward salaries and expenses directed at improving efficiency at the agency. The patent office is struggling to reduce a backlog of more than 700,000 applications in the last fiscal year. On average, it takes 34.6 months to complete a patent application and the office is seeking to reduce that to 20 months by fiscal 2014.

The proposal would “support efforts to reduce backlogs in processing patent applications — by spurring innovation and reforming U.S. Patent and Trademark Office operations to make them more effective,” Obama said in a letter yesterday to House Speaker Nancy Pelosi, a California Democrat.

The agency is funded exclusively by user fees collected from initial applications and to maintain the status of issued patents, with a smaller part of the agency's budget coming from trademark-related fees. In a May 10 Congressional hearing, patent office Director David Kappos said the agency projects it will collect US$146 million to US$232 million more than is appropriated in the current fiscal year.

Under Obama's proposal, which must be approved by Congress, the agency would get US$129 million that had been budgeted for the Census Bureau and be allowed to keep as much as US$150 million above that if it collects more in fees, for a total budget of US$2.17 billion in fiscal 2010.

Obama has proposed a US$2.32 billion budget for the year beginning in October. The agency plans to hire 1,000 patent examiners in each of the next two fiscal years to reach its goal of reducing the application pendency rate.

Kappos, a former International Business Machines Corp. assistant general counsel who became head of the patent office a year ago, has been trying new programs to speed the process of reviewing patent applications.

Innovation Crisis: Job Creation Stalled by Patent Backlog, Says Pat Choate

By Stacy Curtin, Finance.Yahoo.com
September 8, 2010

Today President Obama is widely expected to reveal more of his plan to help revive the economy. In addition to the $50 billion infrastructure program announced Monday, the President will likely call for the following:

• $200 billion in tax breaks for business investment in new plants and equipment

• $100 billion to extend the research and development tax cut

But, many economists feel the President’s proposals are too little, too late.

Growth equals jobs and growth in this country is stagnant: GDP has slowed to less than 2% for the last few quarters and nearly 15 million people are unemployed -- according to the "official" tally. Millions of Americans have either lost their homes or are saddled with under water mortgages.

There is another - less talked about - factor stifling job growth says Pat Choate, author of “Dangerous Business” and “Saving Capitalism.”

The U.S. Patent Office is broken

There is a backlog of 1.2 million patents waiting for approval, Choate notes. "Patents are the basis for most innovation. People will not invest in new technology unless they can have a long period of exclusive use so that they can get their money back."

If innovation is at risk, it also prevents business from spending and creating new jobs.

"The value of patents, copyrights and trademarks, which is called intellectual property, now makes up almost 80% of the total value of U.S. corporations,” says Choate. "I say the greatest store-house of unused, cutting-edge technology in the world are the patent office warehouses in Northern Virginia."

Many technologies "go obsolete" while waiting for approval, he tells Aaron in this clip. Meanwhile, many big companies use what's know as "efficient infringement," which is a fancy way of saying they calculate the benefits of stealing someone else's patents vs. the possibility of getting caught, tried in court and being forced to pay damages and penalties, Choate says. (This "strategy" may explain the rash of patent infringement suits in the tech sector such as between Apple-HTC, Intel-AMD and NTP vs. everybody.)

"The Patent Office granted Alexander Graham Bell's patent for the telephone three weeks after he submitted his application," Choate says. "Today, the Patent Office has such a backlog that it takes three years from the time an application is submitted until it is approved or rejected."

If President Obama’s tax credit for research and development actually spurs economic activity, will our new innovations stall in the three-year backlog at the U.S. Patent Office?

"As a country, this is very foolish," Choate says. "Spend another $1 billion, hire [more] patent examiners, make a patent cheap, do it quickly, and let’s get on with the innovation that we need for job creation in this country."

Innovation Crisis: Job Creation Stalled by Patent Backlog, Says Pat Choate

Comment by Jose, Finance.Yahoo.com
September 8, 2010

When was the last time Steve Jobs was a "small inventor"? Steve himself has never denied having copied others ("steal"), most notably Xerox. Of course, this guy talking did not in fact say that with a straight face if you watch closely.

Bill Gates, another "small inventor", is famously quoted as talking about how stifling software patents would have been if exploited last century; however, Microsoft, afterward, having reached monopoly status, started using patents as an anti-competitive weapon. Today, Bill Gates loves investing in patents. [Once a monopolist, always a monopolist.] Patents are used to protect the existing giants much more than they are used to help any small firm.

Patents are a tax on consumers and on the majority of inventors and producers. Patents lead to industries that shrivel. Software does not need patents. Genes do not need patents (other people own my body!) And most industries would gain from reworking the entire patent monopoly system, preferably by dropping the stifling "monopoly" part.

Today, life moves much faster than it did in 1790. Today we "need" 20 years of monopoly? I don't think so.

The principle problem is the monopolies. The long MONOPOLIES on broad relatively easy ideas are the PROBLEM.

Listen, where would physics, math, music, literature, etc, be if we had had patents in those areas? It's virtually impossible to make a great product without leveraging the geniuses and smart people of the past 20 years.

Software inventions are virtual. They are mathematics combined with fiction in most cases. Mother nature does not pose limits or hide information from software inventions as is the case for every form of tangible invention. Manufacturing and distributing each new unit copy of a software product is $0 in time and money -- just check out all the software being produced this way. This means we have many many participating inventors (low bar to participate and recoup costs) who are hand-cuffed with every single software monopoly out there.

Monopolists love software patents because they fear small firms and the great work being done and given away for free by many very smart individuals working together. You give a little away, but you gain a ship load being contributed by others. It's efficient advancement, highly exciting to those participating, very cheap for everyone, promotes small businesses (great for VCs and for most workers), and promotes those that don't require monopoly profits. If this nation was run by a small number of monopolists, very little would get done and most money would be in the hands of a very few at the top. Consumer products would stink.

U.S. Patent Office Grants Massively More Patents Than Ever Before

By TechDirt.com
January 18, 2011

Commerce Secretary Gary Locke has made it clear that he wanted to US Patent and Trademark Office (USPTO) to clear out some of the backlog on patents, and it quickly became clear early last year that the way the USPTO was doing this was by simply approving more patents while giving less scrutiny to the patents in question -- meaning that we're now getting a ton of bad patents approved. It seemed like an obviously bad sign when we passed the total number of patents approved in 2009 by October of 2010.

Now the final numbers are in: nearly 220,000 patents granted (219,614 if you want to be exact), a massive 31% increase over 2009 and still significantly more than ever before in history. The highest previous year was 2006, when a mere 173,772 patents were granted. So this is still 27% more patents granted in a single year than ever before. I find it hard to believe -- as USPTO supporters claim -- that the Patent Office suddenly figured out how to approve 30% more patents without decreasing the quality. Patently-O put together this lovely chart to demonstrate the pattern:

Prepare for the barrage of innovation delaying lawsuits... followed by a lot more patent applications. What's funny is that USPTO director David Kappos actually thinks that ramping up patent approvals will help with the backlog. It won't. Because all that will happen is that more people will try to get more ridiculous patents through, recognizing that the USPTO has massively lowered its standards, and they have a better chance of getting that magic monopoly with which they can sue other companies.

If you look at the numbers over the past thirty years, you see that massive jump in 1998 and heading on up until 2003, when the Supreme Court finally realized that the patent system was massively out of control and was doing a lot more to harm innovation than to help it. However, over the last few years, in response to pressure from those who abuse the patent system to squeeze money out of others, it appears we haven't just reverted to the way things were before, we've leapfrogged the trend line. I can think of no better way to massively slow down American innovation than this. What a shame. Kappos' legacy is going to be a pretty sad one when all is said and done. It's really too bad. When he was first put into the job, it appeared he actually understood how bad patents could be harmful.

And, it should be clear that it's not just the small "trolls" that are the issue here. A ton of big companies stocked up on tons of new patents. Not surprisingly, the top patent getters are companies that are heavily involved in massive value-destroying patent thicket lawsuits: IBM, Samsung and Microsoft. Apple -- which has gone all in on some patent battles -- received nearly twice as many patents in 2010 as in 2009. Ditto with Qualcomm.

Oh yeah, and guess which area of technology had the highest number of new patents? "Multiplex Communications." In other words, the mobile phone patent thicket of lawsuits we've discussed in the past is only going to get messier:

Patent Backlog Is Clogging Job Growth

By Nathaniel Cahners Hindman, The Huffington Post
September 10, 2010

The greatest stockpile of unused, cutting-edge technology in the world is sitting in a warehouse in Northern Virginia gathering dust, author Pat Choate told Yahoo Finance Wednesday morning. The warehouse, Choate said, belongs to the U.S. Patent and Trademark Office (USPTO), and the stockpile is a backlog of 1.2 million unexamined patent applications.

A number of analysts claim that unclogging this patent build-up at the USPTO -- by ending a diversion of funds that has left the agency underfinanced -- could jump-start job creation in America.

Henry R. Notthaft calls the patent office the "biggest job creator you never heard of" in a recent Harvard Business Review article.

"It is [the USPTO], after all, that issues the patents that technology startups and other small businesses need to attract venture capital to pay salaries," says Nothhaft in a separate New York Times op-ed.

Increased funding at the patent office will reduce delays and result in the issuance of more patents. Nothhaft insists that this will lead to more innovation and more jobs.

But since 1992, Congress has diverted more than $750 million in patent fees from the USPTO to other purposes. Without the money, the agency hasn't had the resources to deal with the threefold increase in patent applications over the past 20 years. Today it takes an average of over three years for inventors to get a decision on a patent, which is at least twice as long the average wait time 15 years ago.

"Hundreds of thousands of groundbreaking innovations are sitting on the shelf literally waiting to be examined," David Kappos, Director of the USPTO, told an audience at a biotechnology conference earlier this year. "[This results in] jobs not being created, life-saving drugs not going to the marketplace, companies not being funded, businesses not being formed," Kappos added.

And while many say patents spur entrepreneurship because they give inventors a stronger incentive to invent, and offer venture capitalists more reason to open their wallets -- others disagree entirely.

Patents, they argue, do not increase incentives to invent, and are not vital to startups getting financing. In fact, they can harm innovation because they breed intellectual property battles that stall billion-dollar innovations over patents worth far less. Often these legal battles are between large technology firms and so-called "patent trolls" -- firms that buy up patents with the sole intention of shaking down large companies that allegedly infringe on them. As the Economist notes, a group recently found that these types of cases have risen from 109 in 2001 to 470 in 2009.

As the flood of patent-marking lawsuits continues to flow, and the debate spills into Congress, legislation to fix America's broken patent system remains tied up in the Senate.

Director's Forum: David Kappos' Public Blog

www.uspto.gov
January 3, 2011

Improving Key Patent Processes and Sub-processes

As the Patents organization moves toward its goal of reducing the average total pendency of patent applications to 20 months by 2015, it is important to streamline all components of the examination process. Everyone plays a role – including of course our examiners and our quality assurance professionals and our searchers and our management team, as well as all of our support functions and our Board of Patent Appeals and Interferences and Central Reexamination Unit. The technical support staff plays a crucial role in this effort. And they are making substantial progress. I’d like to highlight areas where our technical support team is achieving real results.

In FY 2010 the Technology Center Technical Support Staff of 274 legal instrument examiners and legal document review clerks:

• Entered more than 2.9 million documents;
• Verified more than 264,000 allowed patent applications;
• Reviewed and counted over 2,300,000 office actions; and
• Processed more than 257,000 new patent applications.

These stats represented all-time records for the USPTO, reflecting all-time record workflow through the Agency including interviews conducted, office actions processed, notices of allowance, and final rejections.

An example of the incredible effort put forth by our technical support staff is the reduction of amendment entry times over the 2009 fiscal year. At the end of FY 2009, the backlog of documents to be entered was over 170,000 and the average amendment entry time was 34.5 days. Not good at all. In response, the head supervisory legal instrument examiners reengineered the work distribution process to better balance workflow, and to ensure that all documents were entered in date order.

As a result of their determined reengineering efforts, as of October 2010 the backlog of documents was reduced to about 15,000, with amendments being entered in 5.2 days on average. Additionally, the backlog of new applications to be processed was reduced from over 100,000 in FY 2009 to just 13,000 as of October 2010.

These are, quite simply, jaw-dropping improvements. And to top off the performance, the team engineered this dramatic reduction in the backlog of documents to be entered while at the same time maintaining the timeliness of other critical areas of their work processes. Really excellent.

A second example: Our post-examination technical support team has recently begun to focus on its cycle times. It faces the unique challenge of handling the increased rate of patent issuances coming through as we work off our backlog of unexamined patent applications.

So just to keep pace, this team had to handle an increase of some 40,000 utility patents issuing in FY 2010 over FY2009. Building on successful process improvement efforts in the printer rush area from early in FY10 (printer rushes occur when an application has been allowed by the examiner, but a technical issue like claim renumbering causes the application to drop out of the issuance queue, requiring attention by technical support staff), the post-examination program analysts and quality control specialists established electronic upload and automated tracking of printer rush queries.

As a means of reducing paper-based and e-mail inefficiencies, the team also improved its automation capability so that the post-examination applicant service representatives were able to immediately enter applicant's application data to facilitate issuance.

Here are the results so far from this effort:

• For FY 2009, the average time from applicant's issue fee payment to issuance was 50 calendar days for 165,212 applications.
• For FY 2010, the average time from applicant's issue fee payment to issuance was 51 calendar days for 207,915.
• For FY 2011 to-date, the average time from applicant's issue fee payment to issuance is running at 43 calendar days for 39,064 applications.

This is an impressive eight-day (better than 15 percent) improvement in cycle time in less than one quarter. While there is more to do, the technical support team is again showing that it can achieve excellent results in cutting its processing times at USPTO.

So whether you are a USPTO employee, or a patent applicant, or a member of the patent bar prosecuting applications in front of the Agency, if you’ve been noticing processing times speeding up, now you know who is making that happen behind the scenes: our outstanding technical support staff.

I would like to thank and recognize the technical support staff – of course for the Patents organization but also throughout the USPTO -- for your hard work and dedication, and most importantly for your clear, measurable accomplishments. Reducing pendency is a challenging goal, requiring team effort among all employees playing a role in patent application processing. The technical support staff’s contributions are vital to our Agency putting Americans to work, putting new products and services into the marketplace, and creating opportunity for our country and for the world.

Patent Chief Kappos 'On the Hunt' to Reduce U.S. Backlog, Spur Innovation

By Susan Decker
September 9, 2010

David Kappos, the head of the U.S. patent office, said his agency is “on the hunt” to cut its applications backlog to the lowest since 2007 to further President Barack Obama’s goal of job growth through innovation.

U.S. Patent and Trademark Office application reviews, which often take more than two years, have been sped up and hiring practices improved, Kappos, 49, said in an interview yesterday at Bloomberg’s Washington office. Kappos says the changes are part of efforts to help the U.S. maintain its economic power.

“I’m quite convinced there’s really only one way that will happen and it will be based on innovation,” said Kappos, who spent more than two decades as an engineer and intellectual property lawyer for International Business Machines Corp. “Innovation-driven companies, small and large, especially small, are huge creators of jobs and creators of wealth.”

Obama, who yesterday said he recognizes that the U.S. economic recovery has been “painfully slow,” has called for incentives to promote American ingenuity as part of his measures to create jobs and expand productivity. Patent applications are up about 4 percent for the year that ends this month, following a 2.3 percent drop in fiscal 2009, led by medical, computer, biotechnology and nanotechnology inventions, Kappos said.

“The U.S. business sector seems to be reviving,” Kappos said. “The recovery isn’t as fast as we’d like it to be, but one leading indicator is the filing of patent applications.”

‘Locked Down’

Kappos said he has been working to improve the efficiency of the patent office and eliminate a backlog of applications that had reached 750,000.

“You can think of each one of these as a business, as some new product or service that’s sequestered in a government agency, that’s locked down, that’s inhibited from reaching the marketplace,” Kappos said. “To have 750,000 of these things sitting in a government agency is not good for innovation.”

In the 13 months he’s headed the agency, Kappos has worked to meet an interim goal of cutting the backlog to less than 700,000 by the end of this fiscal year. He said it would be the first time in three years that “the first significant digit of the USPTO’s backlog was anything other than a 7.” He said he wants to have an “inventory” of pending applications of 325,000 by 2015.

“We’re fans of his,” said Herb Wamsley, executive director of the Intellectual Property Owners Association, which represents companies including Intel Corp., Monsanto Co., Johnson & Johnson, and 3M Co. “He has been very energetic in creating a great many proposals and he’s very creative.”

Kappos had been vice president of the Washington-based group and was in line to be president before he was tapped by Commerce Secretary Gary Locke to head the patent office.

Candy and Overtime

Obama has proposed a $2.32 billion budget for the agency in the year starting Oct. 1, with a 15 percent increase in fees to help pay for changes Kappos is making. The agency is funded by the fees it collects.

To reach his goals, Kappos said he is drawing from his time at IBM, the world’s largest computer-services provider, to introduce more “business-related processes” at the agency. He has changed how examiners process applications, with more personal interviews with inventors early in the process. The agency is holding pep rallies and approving overtime, and Kappos is handing out candy to improve morale and productivity.

“I’m just running business plays at the USPTO and so far no one’s told me you can’t do this,” Kappos said. “So I keep running the plays I learned from 26 years in the business sector.”

Fast-Track Programs

There were 485,500 patent applications filed in fiscal 2009, and 190,121 patents issued, the most in the agency’s history. There were more patents issued in fiscal 2009 than applications filed in fiscal 1993, according to agency data.

Kappos created a special program that lets applicants with inventions that increase energy efficiency petition for a speedier review. The so-called green energy program has been so popular, a similar approach is being considered for other products including medical devices, Kappos said.

The agency also is developing a three-track system that would let applicants, for a fee, get their inventions reviewed in about a year. Kappos said he expects smaller businesses will take advantage of the program, which may begin in about a year.

Inventors of some medical devices may want fast processing, while drugmakers aren’t in a hurry because they’re also waiting on regulatory approval, Kappos said, likening the program to tiered pricing options by companies such as FedEx Corp.

“Not every package needs to go by ground delivery,” he said. “Some packages need to go by overnight, some packages ground delivery is fine, and some you say look I’ll just send it third-class, it’s bulk mail, it can take two weeks.”

Kappos also has changed the agency’s hiring practice -- selecting people who have more experience rather than those just coming out of college. The patent office plans to hire 1,000 examiners annually in fiscal years 2011 and 2012. It has about 6,200 examiners, up from 3,500 in fiscal 2002.

GAO Testimony Supports POPA's Position on Examiner Attrition

By Donald Zuhn
March 13, 2008

Earlier this month, we reported on the appearance of Robert Budens, the President of the Patent Office Professional Association (POPA) at an oversight hearing on the USPTO held by the House Subcommittee on Courts, the Internet, and Intellectual Property in late February.

We also reported on appearances by Jon Dudas, the Undersecretary of Commerce for Intellectual Property and Director of U.S. Patent and Trademark Office, and Alan Kasper, the First Vice President of the American Intellectual Property Law Association (AIPLA) (our report on Mr. Dudas' testimony can be found here and our report on Mr. Kasper's testimony can be found here).

The second witness appearing before the Subcommittee was Robin Nazzaro, the Director of National Resources and Environment for the U.S. General Accountability Office (GAO). Today, we conclude our coverage of the PTO oversight hearing by discussing Ms. Nazzaro's statement.

Ms. Nazzaro's testimony focused on the findings of the GAO's 2007 report entitled "U.S. Patent and Trademark Office: Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog," which was based in part on a survey of 1,420 patent examiners. Not surprisingly, the GAO report provides ample support for POPA's position that the USPTO's antiquated production goals are the reason for the Patent Office's high examiner attrition rate (the GAO reports that from 2002 to 2006, one patent examiner left the USPTO for nearly every two the Office hired). Among the specific findings of the GAO survey were:

• 67% of the examiners surveyed said that the Patent Office's production goals were among the primary reasons they would consider leaving the USPTO.
• 62% of the examiners surveyed are very dissatisfied or generally dissatisfied with the time the USPTO allots to achieve their production goals.
• 50% of the examiners surveyed are very dissatisfied or generally dissatisfied with how the agency calculates production goals.
• 59% of the examiners surveyed believed that the production system should be reevaluated.
• 70% of the examiners surveyed reported working unpaid overtime during the past year in order to meet their production goals (some putting in more than 15 hours of unpaid overtime per week).
• 59% of the examiners surveyed identified the amount of unpaid overtime that they have to put in to meet their production goals as a primary reason they would choose to leave the USPTO.
• 37% of the examiners surveyed identified the amount of time they must work during paid leave in order to meet their goals as a primary reason they would choose to leave the USPTO.

With respect to the USPTO production system, Ms. Nazzaro explained that examiners receive a "count" for each first Office action and each disposal (e.g., allowance), and that production goals are assigned on the basis of the number of production units (a production unit being equal to two counts) that an examiner is expected to achieve in a two-week period. Ms. Nazzaro also noted that production goals vary depending upon an examiner’s experience and the technology center in which the examiner works. As Mr. Budens noted during his testimony, the production goals currently being applied by the USPTO were developed more than 30 years ago.

Touching on the USPTO application backlog, Ms. Nazarro explained that at the end of each fiscal year, patent applications that have not been reviewed for at least a first action are counted towards the backlog. She also stated that even if the Office were to satisfy its hiring estimate of 1,200 examiners in each of the next five years, the backlog would grow from about 730,000 applications in 2006 to 1.3 million applications in 2011. In fact, Ms. Nazarro noted that even if the Office hired 2,000 examiners in each of the next five years, the backlog would still rise to over 950,000 applications by 2011. According to Ms. Nazarro,

"The agency has acknowledged that it cannot hire its way out of the backlog and is now focused on slowing the growth of the backlog instead of reducing it." (This, of course, explains a number of the new rules packages that the Office has introduced in the past nine months.)

One of Ms. Nazarro's most interesting observations was the statement the GAO received from the Deputy Commissioner for Patent Operations (Margaret Focarino) when she was asked about the need for examiners to use unpaid overtime in order to meet their production goals. The Deputy Commissioner told the GAO:

"As with many professionals who occasionally remain at work longer to make up for time during the day spent chatting or because they were less productive than intended, examiners may stay at the office (or remote location) longer than their scheduled tour of duty to work."

The GAO, however, does not agree with the Deputy Commissioner's view on this issue, recommending instead that "the agency comprehensively evaluate the assumptions it uses to establish patent examiner production goals and revise those assumptions as appropriate."

USPTO Plans Potentially Disastrous for Small Companies

By Thom Holwerda
May 8, 2010

Whatever products we use, I think we can all agree that the United States patent system and the US Patent and Trademark Office need a serious overhaul. Not only has the USPTO a history of granting ridiculous patents (massive prior art, obviousness, incredibly vague, the USPTO grants them all), it also has a backlog of about 750000 patent applications. The USPTO now has a plan to combat these issues - sadly, they once again display their utter incompetence.

The main issue the USPTO wants to address is the frankly laughable backlog of patent applications - 750000 of them, to be exact. It currently takes 35 months from application to grant; the USPTO wants to reduce this to just 12 months. Very ambitious, but also very welcome. What isn't welcome, however, is their proposed solution.

To combat this problem, you can do one of two (or both) things. First, you can lower standards, and grant more patents. It turns out that the USPTO is indeed doing this: the amount of patents granted per week has jumped 35% since last year. This is a bad thing because the quality of patent applications surely hasn't jumped 35% since last year, meaning more vague and troublesome patents have been granted.

Now, the second method to address the problem is to cut down on the number of patent applications, and indeed, this is where the USPTO is planning some potentially disastrous changes. They are planning to drastically increase the patent application and maintenance fees so less applications will be filed. The USPTO's goal is to reduce the amount of patent applications by 40%.

Sadly, increasing the fees will seriously hurt smaller-to-medium businesses - while not posing much of a problem for large companies like Google, Microsoft, and Apple. This could prevent small companies from innovating, because they wouldn't be able to pay for a patent anyway.

"Large companies become the beneficiaries because they have free access to the work of smaller companies, though the reverse would not be true," writes Erik Sherman for BNet, "Large companies will be able to freeze smaller ones out, making the changes an innovative and competitive train wreck."

Some of you might be wondering why I pay so much attention to things like this. Well, it's pretty obvious; not only has a lot of competition moved away from the market and into the court room, it's also the case that the technology industry benefits from a healthy environment in which innovation flourishes.

It seems like large companies are trying to do just about anything to create an environment hostile to innovation. In the meantime, the USPTO, most likely one of the most incompetent US government organisations, is trying just as hard to accommodate these large companies (intentionally or no).

If you value innovation and a fast-evolving technology world where the little guy can revolutionise the market, then you'll most likely share my concerns.

U.S. Senate Begins Debate on Patent Reform

Several tech groups oppose the bill, which would make large patent awards less likely

By Grant Gross, IDG News Service
March 2, 2011

The U.S. Senate is debating an overhaul of the nation's patent system this week, but several technology groups have opposed the bill, saying it would hurt innovation and overload the U.S. Patent and Trademark Office.

Supporters of the Patent Reform Act, due for a Senate vote this week, say it would improve the quality of patents issued by the USPTO and would reduce huge infringement awards in patent lawsuits.

"This bill, if we do it right, will create millions of new jobs," Senate Majority Leader Harry Reid, a Nevada Democrat, said Tuesday on the Senate floor.

Others disagreed. Even though the tech industry has long called for patent reform, the bill would be worse than the "status quo," said Ed Black, president and CEO of the Computer and Communications Industry Association. "On the whole, it will inhibit the technology sector and impede future reform," Black said in a statement.

The bill is similar in many ways to controversial patent reform legislation that has stalled in Congress in recent years. It would direct the USPTO to award patents to the first inventor to file for a patent, instead of determining the first person to create a new invention, putting the U.S. in step with most of the rest of the world.

"The first-to-file provision will be a gold mine for attorneys and the largest portfolio holders, but the result will burden rather than promote innovation," Black added.

Several large technology vendors, including Intel, Microsoft and Apple, have been pushing for patent reform for years, spurred by several multimillion-dollar patent infringement awards from U.S. courts in recent years.

The bill, sponsored by Senator Patrick Leahy, a Vermont Democrat, would allow outside parties to file information related to patent applications, potentially allowing outsiders to challenge patent applications, and it would create new ways to challenge patents after the USPTO has awarded them. It would narrow the ability of patent holders to collect multimillion-dollar damage awards, and it would allow the USPTO to set its own fees for patents.

The bill enjoys bipartisan support in the Senate and from President Barack Obama's administration.

The bill "represents a fair, balanced, and necessary effort" to improve patent quality, improve the USPTO and "offer productive alternatives to costly and complex litigation," the White House Office of Management and Budget said in a statement released Monday.

The bill will improve U.S. competitiveness and add jobs, the OMB said in its statement.

The USPTO needs more resources, Leahy argued Tuesday. The agency has a backlog of 700,000 patent applications, with another 500,000 being currently examined, he said on the Senate floor.

"Among [the backlogs] could be the next medical miracle, the next energy breakthrough," he said.

But in late February, nine organizations representing small businesses, inventors and engineers sent a letter to senators urging them to reject the bill. The first-to-file patent rule would hurt small businesses and inventors, who don't have the resources to file quickly, said the letter, signed by the Institute of Electrical and Electronic Engineers-USA (IEEE-USA), the National Congress of Inventor Organizations, and the National Small Business Association.

The first-to-file provision "disrupts the unique American start-up ecosystem that has led to America's standing as the global innovation leader -- the ecosystem that is vital to our businesses, but with which large firms have less expertise," the letter said.

"The bill disadvantages companies that must seek outside financing and strategic partners, in favor of firms that can arrange all of their investment, testing, manufacturing, and marketing internally."

The groups called for a "streamlined" bill focused on increased funding for the USPTO.

"If (and only if) increased examination quality does not result from increased funding and operational oversight, should Congress revisit broader patent reform," the letter said.

Patent Fast Track Proposed

By Amy Schatz, Wall Street Journal
June 3, 2010

Inventors frustrated with waiting for a decision on their applications from the U.S. Patent and Trademark Office may soon be able to pay for expedited review under a proposal to be announced Thursday.

U.S. Patent and Trademark Office chief David Kappos is proposing a new three-track system for patent applications that would allow applicants to pay an undisclosed amount on top of the standard $1,090 filing fee to jump to the front of the line for expedited reviews.

"Not every application needs to go at the same speed. Some need to go fast and some need to go more slowly," Mr. Kappos said in an interview.

The system will allow applicants to essentially select which innovations are the most important for patent examiners to tackle first, Mr. Kappos said.

The proposal, which following a public comment period could go into effect next year, would be a major change for the Patent and Trademark Office, which has mostly reviewed applications on a first-come, first-served basis. Other government agencies offer similar expedited services, including the State Department, which offers expedited passport processing for a $60 fee.

Multi-track reviews are part of a broader effort by Mr. Kappos and the Obama administration to improve the office, which has struggled with funding shortfalls and complaints from businesses about the rising backlog of unresolved applications.

Last year, it took 34.6 months on average for patent applications to be reviewed compared to 26.7 months in 2003.

The proposal is a tacit acknowledgment the patent office may not be able to spend its way out of the backlog.

Corporations have long pressed for a stronger, more efficient Patent Office, citing delays in patent reviews that hold up product development and stall expansion plans. Patent Office approval of less-than-novel patents has in some cases led to years of costly litigation.

Examination fees are low compared to the cost of patent attorney fees and it might be worth the money to get a faster decision, said Louis Foreman, an inventor and founder of Enventys, a Charlotte, N.C., product design and engineering firm, and member of a patent office advisory board.

"It makes it difficult for an entrepreneur to build a business and hire people if it could be three years before their patent even issues," said Mr. Foreman.

Over the past year, the patent office has experimented with limited expedited processing. It has offered expedited processing to inventors who agree to drop one application and for applicants seeking patents for "green tech" ideas.

"A major problem with the current system is that the backlog delays everyone and there is no easy mechanism to speed-up the process," said Dennis Crouch, an Associate Law Professor at the University of Missouri School of Law and author of the Patently-O Law Blog. "I have some hope that the "Three-Track" program will be helpful."

Companies could pay extra to fast-track their applications and have examiners complete patent reviews in about a year.

Officials haven't decided how much expedited processing would cost. The middle track would be similar to the system used now, which includes a $755 fee when a patent is issued and periodic fees to keep the patent in effect.

The slowest track would allow companies and inventors to pay a smaller fee and essentially park their applications for up to 30 months before the patent review begins. That might help inventors who haven't perfected their applications yet or who aren't sure if there's a market for their innovations, the office said.

Q. Todd Dickinson, executive director of the American Intellectual Property Law Association said the slowest route potentially creates problems, such as the way it would allow companies to hide applications from competitors. Requiring publication of all patent applications within 18 months of filing would help alleviate that problem, he said.

Inventors with less financial resources might also feel left behind. Some independent inventors have complained that Mr. Kappos understands the needs of large companies better than start-ups. He was previously IBM Corp.'s top intellectual-property lawyer.

Patent-office officials say the proposed fast-track plan won't leave small inventors behind because they already receive a 50% discount on fees. Inventors in the second lane should also see faster processing times as some applications move into the slowest lane, officials said.

"There's a component of this proposal that a rising tide lifts all boats," said Mr. Kappos. "It's like having someone in the butcher shop get out of line in front of you."

Corrections & Amplifications

U.S. Patent and Trademark Office chief David Kappos is proposing a new three-track system for patent applications that would allow applicants to pay an undisclosed amount on top of the standard $1,090 filing fee to jump to the front of the line for expedited reviews. An earlier version of this article said it was a standard $545 filing fee.

U.S. Patent Office Swamped by Backlog

Without more funding, wait time could top 5 years

MSNBC.com
April 27, 2004

For most inventors, developing and perfecting an idea takes far more time, energy and money than it does to get a patent. But with the U.S. Patent and Trademark Office drowning in paper, the patent process has become a frustrating waiting game.

Unless long-overdue reforms are put in place and the agency’s budget is expanded, the current backlog will balloon further, and the average time it takes to win a patent — now more than two years — will double in five years, according to the acting head of the agency, Jon W. Dudas.

And that, he says, could have a chilling effect on innovation.

“At what point will venture capitalists feel like it’s no longer useful to invest in certain technologies because they don’t know that they’re going to get a patent and actually get a return on their investment?” said Dudas.

The impact of allowing the patent logjam to worsen would be felt by more than just the companies and individuals currently awaiting word on nearly 500,000 patent applications that arecollecting dust until an examiner can be assigned to review them.

Short shrift for applications

Intellectual property — everything from new life forms to movies — represents the “single largest sector of the U.S. economy,” Dudas told Congress last month, and makes up more U.S. export value than “the automobile, automobile parts, agricultural and aircraft industries combined.”

“Patent quality has suffered,” in part because examiners are too busy to spend more time on applications, according to John R. Allison, a professor of Intellectual Property Law at the University of Texas at Austin. “Depending on the technology area, [review time] ranges from an average of about eight up to maybe 30or so hours for biotech applications.”

The result is that some patents aren't as thoroughly reviewed as they should be. In the case of a seemingly minor patent — like the "Beerbrella" (U.S. Patent # 6,637,447) or a method for using a tree swing (U.S. Patent #6,368,227) — there is probably no harm done. But if a duplicate patent is awarded for a far more lucrative and possibly unique idea, a court dispute could cost millions.

“Patent infringement litigation is just frightfully expensive,” said Allison. “Intellectual property lawyers are highly paid, and they’re among the most skilled litigants you’re going to find.”

Private parties in multimillion-dollar patent infringement cases often have a much greater incentive — and can bring much greater resources to bear – than the examiner who originally issued the patent, said Allison. Someone sued for patent infringement, for example, may be able to conduct a more thorough search that finds prior examples of the technology or invention — successfully challenging a patent that its owner had counted on for big profits.

Raiding the patent piggy bank

Money, it turns out, is one of the major reasons for the current patent logjam. In 1991, the financial burden of granting patents was shifted from taxpayers to patent applicants through the establishment of so-called user fees. But over time, those fees became a politically attractive source of funds to help balance the federal budget without raising taxes. So Congress began raiding the patent office piggy bank; as of last year, more than $650 million had been siphoned off to pay bills for other government functions.

Meanwhile, the volume of patent applications mushroomed. At the patent office, they call it “technology creep” — the explosion of new technologies, many of which didn’t exist 20 years ago, when most patent applications were evenly divided among electrical, chemical and mechanical inventions. Today, far more complex fields like semiconductors, biotechnology and, increasingly, entirely new areas like nanotechnology make up a much a bigger share of the agency’s workload. And the number of new applications continues to set records every year.

“The fact of the matter is that innovation is increasing,” said Harry Roman, an inventor who for many years ran the New Jersey Inventors Hall of Fame.

In the 145 years from its founding in 1790 until 1935, the U.S. Patent Office issued its first 2 million patents. It took just 41 years to grant the next 2 million patents. The next 2 million patents took only 23 years.

“Look at that growth,” said Roman. “Since 1935, almost 70 percent of the patents ever issued have been issued. That’s an astounding figure.”

2,900 new examiners sought

Today, patent examiners have to slog through 50 percent more existing patents than they did 25 years ago; every new patent issued just adds to the pile that the next examiner has to search. And with more applications being filed, the pressure on examiners from applicants has increased, according to Ronald Stern, head of the Patent Office Professional Association, the patent examiners union.

“The interest in getting a patent has increased,” said Stern. “And, as a result, the aggressiveness of applicants has increased, which takes more time to deal with.”

To break the logjam, the patent office has lobbied Congress for the money to pay for its five-year plan to reform the agency. A central element of the plan is the hiring of more patent examiners — lots of them.

The U.S. Patent and Trademark Office Fee Modernization Act, now awaiting a Senate vote after overwhelming approval by the House, would raise fees by 20 percent to boost the agency’s budget by $300 million, bringing it to $1.5 billion for the fiscal year beginning in October.That would pay for adding 2,900 new examiners over five years to the current workforce of 3,500. That's an 80 percent increase, after factoring in attrition of about 300 examiners a year. The bill would also end the congressional raid on patent fees, because the law says that all unspent fees would be returned to applicants.

Amid calls for greater productivity in government these days, most members of Congress are loathe to expand government agencies. But no one has yet come up with a way to dramatically speed up the patent examination process without more people.

“We’re more like a law firm than the post office,” said Dudas. “At a law firm, if you doubled the amount of litigation you have, no one would question that you need more lawyers.”

The five-year plan also includes a more controversial move to outsource some of the agency’s workload to the private sector. The current plan calls for contracting limited parts of the process to outsiders who would help, but not replace, existing examiners. Many applicants already perform patent searches on their own before investing heavily in new technologies. Dudas says the patent office is looking for ways to leverage work that’s already been done.

But not everyone thinks outsourcing will help clear the backlog.

“Outsourcing will slow down the entire process; it will not speed it up,” said Stern, "and it will make processing any one application more expensive. The best way to speed it up would be to hire more examiners.”

Catching up with technology

Exacerbating the patent office's struggle to keep up with an ever increasing number of applications is its own primitive technology. Despite the flood of patents issued each year for advances in collecting, analyzing and storing information, the office is still transitioning from a paper-based system that hasn’t changed much in 200 years. Although more than half of applications are now made electronically, the new system — which stores electronic images of paper-based applications — fails to take full advantage of electronic document handling, says Stern.

“They’re merely recording a piece of paper electronically to avoid physically moving that piece of paper around the office,” he said.

Dudas says the five-year plan includes a move to a system that uses fully searchable, Web-like documents. Document imaging, he says, is a critical first step and helps the patent office coordinate applications with its counterparts in other countries.

Still, even as the office struggles to upgrade its information processing systems, applicants are already a step or two ahead.

“We receive patent applications now on 12 CD-ROMs that are the equivalent of 6 million pages of data,” said Dudas.

In the meantime, the office isn't waiting for Congress to cough up more money. More than 1,000 employees now telecommute, saving office space. Operations housed in 18 buildings spread over a mile and half are being consolidated into some 2 million square feet in five linked buildings.

Even if more funding is approved, Dudas says it will be years before the huge patent backlog is brought under control.

"Things will get worse at first," he said. "It takes a while to turn a ship around."

U.S. Patent and Trademark Office Battles to Keep Up

By John Schmid, Milwaukee Journal Sentinel
January 25, 2011

Patent applications on the Internet. And they can use the technology anywhere in the world, including in America, for free.

"American economic security is threatened in a way Congress has failed to recognize," Michel said.

The Patent Office is meant to act as steward of the nation's newest and most competitive technologies, granting protection to innovative new products so their developers can commercialize them.

But beginning in the 1990s, Congress got into a nearly two-decade habit of draining funds from the agency, which is structured to be self-supporting by charging fees. So just as patent applications have become more and more complex because of the advance of technology, and as global competition exploded, the Patent Office found itself underfunded and understaffed.

Applications now languish so long that technologies can become obsolete before a patent is ruled upon. And the absence of patent protection in some cases allows infringers to steal new technologies, while legitimate inventions are unable to get licensed and start-ups are unable to get funding. Consider:

• The agency took 3.82 years on average for each patent it issued last year, up from 3.66 years in 2009 and 3.47 in 2008, according to an analysis of Patent Office data. That's well over twice the agency's traditional benchmark of 18 months to deal with a patent request. And many took years longer.


• The total number of applications awaiting a final decision, representing new technologies ranging from pharmaceuticals to engine designs, remains stuck at 1.22 million, nearly unchanged from levels of the past three years.


• The chronically understaffed agency imposed a hiring freeze in 2009 and lost examiners into most of last year, unable to replace them because of budget constraints. Since 2005, it has aimed to hire 1,000 to 1,300 new examiners each year just to chip away at the backlog, but only began to hire again starting in August.


• In 2010, the first full year under a new reform-minded administration, the Patent Office collected $53 million in fees that it was not allowed to keep, according to limits imposed by Congress. Neither has Congress approved the agency's 2011 budget, nor has it approved an agency fee increase, meaning it continues to operate at 2010 budget levels with a deficit of more than $1 million on each business day, agency officials said.

A Milwaukee Journal Sentinel investigation in 2009 illustrated how the agency's dysfunction impedes U.S. competitiveness and stifles innovation. A study released last year by Britain's patent authorities found that the U.S. wastes at least $6.4 billion each year in "forgone innovation" -- legitimate technologies that cannot get licensed and start-ups that cannot get funding because of U.S. Patent Office problems.

Delays by the Patent Office often inflict the deepest damage on garage inventors and start-up companies that may have no other assets than their unprotected ideas.

"We're talking about America, right? We're the innovators. This is our future," said John Abendroth, an architect and inventor in Mequon, Wis., who waited more than nine years for his patent on a logistics network for routing trucks and cargo. "It's almost a paradox. It's counterproductive in every way."

Abendroth's patent (No. 7,698,204) was issued last April.

"Just before it issued, they said I was lucky that I was finally coming to that point and that others would take longer," Abendroth said. "In the past, you'd go through the process in a year. Now we're up to 91âÑ2 years."

He and his son continue to wait on a related patent application, filed separately in 2003 and still pending.

It took longer than 11 years for a patent to be issued to George Davida, an expert in computer security and encryption from the University of Wisconsin-Milwaukee. Davida's application, for secure ways to store personal biometric information on a smart card, was ahead of his time, said his patent attorney, Stephen Lesavich. He filed his patent application in 1999. But Davida may have missed his best opportunities. Sometime after 2003, while the application was still pending, the Patent Office lost his application file, Lesavich said, citing his 4-inch-thick records.

"In 2008, I finally found a sympathetic clerk, who on her own went and found the file, which was lying on the floor of someone's office," Lesavich said. Dragging out the examination even longer, the application was sent to a different examiner, who effectively needed to start over, but instead handed it off to yet another examiner.

Davida's patent (No. 7,711,152) finally was issued in May -- in the midst of a slow economy, and long after the 2001 terrorist attacks had made biometric data storage a hot technology.

"What he did miss, flat out, was that after 9-11, Homeland Security spent a lot of money on encryption security identification technologies," Lesavich said. "He missed that whole opportunity because it was sitting on the floor of the Patent Office."

"The U.S. loses," said Davida, since retired. "It's not exactly protecting its R&D."

Is It Time to Privatize the Patent Office?

By Gene Quinn, President & Founder of IPWatchdog, Inc.

I am in New York City for the next few days for the PLI Patent Bar Review Course. John White and I traveled up from Virginia together yesterday and we did what we so often do — talk patents. A fun life we lead no doubt, but someone has to do it! In any event, increasingly as we were talking about things we have heard from attorneys, retired patent examiners we know and frustrated clients, something that has been occurring to me with more frequency came to mind once again.

Is it time for us to seriously consider privatizing the United States Patent Office, or at least turning it into a quasi-governmental body that has autonomy to run as it sees fit? I think the answer is a resounding yes. This is a discussion long over due and I tend to think that objectively reasonable minds at the end of the discussion will come to the conclusion that a Patent Office controlled by Congress has little or no chance of ever fulfilling its Constitutional responsibility again.

Saying that Congress controls the Patent Office is something of a misstatement really. It would be far more accurate to say that Congress starves the Patent Office and is constantly demanding more and more with less and less.

At a time when $1 trillion is spent like Monopoly money to put Trump like towers on Boardwalk and Park Place it is not only irresponsible, but down right embarrassing that our political leaders in Washington are starving our innovation agency while they hit the campaign trail with all the required high-tech, innovation and job growth platitudes that the evening news demands in 15 second intervals.

There is plenty of blame to go around with respect to how we got into this state, but does anyone think we can realistically get out of this mess without thoughtful Congressional assistance? Then the real nightmare question becomes: Does anyone really think we will ever get thoughtful Congressional assistance?

The fact that any Congressional assistance seems unlikely, let along thoughtful Congressional assistance, is what leads me to ask whether the only answer is to either privatize the Patent Office or create a quasi-governmental body that does not report directly to either the Executive Branch or the Legislative Branch, but perhaps to a Board of Overseers made up of patent attorneys, inventors and corporate users of the Patent Office— you know, the stakeholders who seem to be the only ones any more that really care whether the Patent Office works, save of course those on the inside on the 10th floor who have the thankless task of making a broken system work the best it can without adequate funding, without enough patent examiners and with state of the art computer systems circa 1990. How many of you are reading this on a machine that is 5 years old? 10 years old? 15 years old? The problems facing the Patent Office truly boggle the mind.

I have said it in the past and I will say it again now, hopefully with enough force so that people will read it and understand it to be true, because I believe it to be 100% accurate. One of the biggest problems facing the Patent Office is a lack of mentorship of the young examiners over the last 5 to 7 years.

On December 1, 2003, the United States Patent Office began its move to Alexandria, where the agency is headquartered presently. The move was completed in 2005, at about the same time that the Patent Office announced a tele-work program because they didn’t have enough space for all of the employees at the new Alexandria location. What happened? The minute the new facility in Alexandria was open and the move complete the offices were inadequate in number to accommodate all of the USPTO employees. Practically comical if it weren’t true and if the consequences haven’t been so terrible.

If you are running your business who would you allow to work from home? Those who you trust enough to actually work from home and who don’t need supervision or motivation to work. That was the same group of people the USPTO thought most appropriate to work form home. It just so happens that those people were the ones with the institutional memory. They were the ones with the experience over the years and could remember a kinder, gentler Patent Office that didn’t blame patent attorneys and applicants for all the problems facing the system. These were the individuals who in years past would have been available to younger examiners to answer questions and provide the mentoring that is absolutely essential. There has been a brain drain at the Patent Office and many of the day-to-day problems we are experiencing now are almost irreconcilably inter-twined with the inescapable truth that those with 5 to 6 years of experience, the very people doing the heavy lifting, were not properly mentored.

Those who know me know I talk patents to anyone and everyone willing to talk, and thankfully for most of us it is a calling and passion and not just a job. What that means is I talk to a lot of people, and so does John White. Some of those that we talk to regularly are retired patent examiners, some of whom man the inventor help line to answer questions. John and I have both been told by several of those retired patent examiners that they get calls with some frequency from patent examiners wanting to know how to handle a particular situation. The reply by the retiree taking the call:

“Did you ask your SPE? What did they tell you?” The reply from the young patent examiner looking for help: “My SPE told me to call you.”

It is increasingly true that those who are becoming Supervisory Patent Examiners have grown up in a Patent Office that had those with the institutional memory and experience out of the building and working at home. That is not a recipe for passing down knowledge and customs from one generation to the next. It is a recipe for failure if you ask me.

The attrition rate at the Patent Office has also been a great concern. This is what the Government Accountability Office (GAO) had to say in September of 2007:

From 2002 through 2006, patent examiner attrition has continued to significantly offset USPTO’s hiring progress. Although USPTO is hiring as many new patent examiners as it has the annual capacity to supervise and train, for nearly every two patent examiners it has hired over the last 5 years at least one has left the agency.

In early 2009 because patent filings were off dramatically compared to expectations the Patent Office instituted a hiring freeze, which has lead to a consistent monthly decline in the number of patent examiners. So the attrition problem faced by the USPTO is, if anything, worse than identified by the GAO back in September of 2007.

No entity can continue to thrive when there is a brain drain and those who are new hires are largely left to their own devices to figure out the job for themselves without sufficient mentoring. This is a trend that demands to be reversed, but how? Congress did appropriate another $129 million to the Patent Office, allowing them to keep those funds collected rather than turn them over to the general Treasury, but what about the other $200 million or more in fees that the USPTO will collect in fiscal 2010 (which ends tomorrow) that they have to turn over to the general Treasury?

Simply stated, taking money from the Patent Office is called fee diversion in the industry but is nothing other than an innovation tax. Innovators are paying excess fees to the Patent Office and the Patent Office can’t even use them to hire more employees, improve their IT infrastructure or find suitable office space so the work-at-home program can be eliminated.

The problems facing the Patent Office are monumental and I have no faith that they can adequately be addressed without Congressional assistance, an end to fee diversion and a lump sum appropriation so the Patent Office can reinvest in the institution. I just cannot see that happening, which leads me to conclude that the Patent Office needs to break free of the chains of bureaucracy, operate like a business and be accountable not to Congress but to the stakeholders who pay for the services rendered.

Patent Backlog Frustrates Inventors

New Products Could Jumpstart an Economic Recovery but U.S. Patent Office Hampered by Inability to Adjust Fees

By Phil Hirschkorn and Rebecca Jarvis, CBS
August 8, 2010

Entrepreneur Aldo DiBelardino started developing lightweight "Spekx" eyewear four years ago in an office above his garage in Virginia Beach, Va. He gave CBS News an exclusive sneak peek at his invention before they went on sale.

"They provide you goggle-like protection, but they provide you the style and convenience of sunglasses," DeBelardino says.

DiBelardino is preparing to start selling them this summer. But the trouble is, he does not have a patent to protect his invention. He applied for one in April.

"Until I get a patent, I have a very limited ability to defend myself in the marketplace against copy activity," he explained.

DiBelardino knows that from personal experience. His first commercial venture -- the X-It Ladder -- a compact fire escape ladder for the home was copied by Kidde, the biggest fire extinguisher maker in the United States. After DeBelardino refused to sell the company his idea, it produced a knockoff that ate into his market share. In 2002, DiBelardino sued Kidde for patent infringement and won a $17 million settlement, the bulk of which went to attorneys fees, and had to give up the exclusive rights to his invention.

Since the federal patent agency was created in 1790, the U.S Patent and Trademark Office has issued 7,752,677 patents. And following many of those patents are jobs, especially when the venture capital kicks in.

"Every innovation comes through this agency on the way to creating a business, whether it's the light bulb, whether it's the laser, whether it's the iPod," USPTO Director David Kappos tells CBS News.

In the technology field alone, consider the employment ripple effect of Larry Page's 1998 patent for Google's search engine, Steve Wozniak's 1979 patent for a microcomputer and Jack Kilby's 1959 patent on the semiconductor integrated circuit.

However, the current wait for a patent is, on average, three years, or 36 months. The "in box" at the U.S. Patent and Trademark Office is stuffed with 700,000 applications awaiting review. Ultimately, only 4 out of ten applications, or 42 percent, are approved.

"The backlog is indeed our biggest problem," Kappos concedes. "It represents innovations trapped in this agency that otherwise could be creating jobs."

Kappos, who was appointed to his post a year ago after working 26 years at IBM, aims to cut the wait time to 20 months and the backlog in half over the next five years. But to achieve those goals, Kappos says, he needs more money to hire 1,200 additional patent examiners and upgrade the agency's computer systems.

"We currently have systems that are not as capable as they need to be -- they're certainly not state of the art. As a result, our examiners are handicapped," Kappos says.

Like a handful of government agencies, such as the Food and Drug Administration, the Federal Housing Administration, the Securities and Exchange Commission, USPTO is self-financed. It charges $1,000 to file for a patent, but little guys like DeBelardino get a 50 percent discount, paying only $500. Patents, of course, and the licensing fees they generate, can be worth millions or even billions of dollars.

"We vastly undercharge for most of the services we perform," Kappos says.

Many established companies, which consider patent fees a bargain, and are frustrated by the backlog, are willing to pay more.

"Several thousand dollars actually, as far as patent cost to us, is relatively immaterial," Hank Nothhaft, CEO of Tessera Technologies, tells CBS News.

Tesserra, a 20-year-old Silicon Valley company that miniaturizes components for smart phones and cameras, has 850 U.S. patents and another 350 pending.

Nothfatt estimates the value of each patent to his firm more than $1 million a year. It derives $220 million in annual revenue from licensing about 150 patents to semiconductor industry.

"Medium-sized and profitable companies like ourselves -- we'd be willing to pay a significantly higher fee in order to fund the patent office correctly," Nothfatt says.

Congress sets the fees charged by the patent office. The legislative branch also does not permit the patent office keep all $2 billion in its annual revenue, by diverting $200 million dollars a year for other federal budget items.

"We very much want that money," Kappos says. "It would be enough to begin the turnaround of the agency immediately."

Legislation that would end fee diversion and empower USPTO to adjust its own fees, as well as other reforms, is working its way through Congress. A bill sponsored by Senator Patrick Leahy of Vermont has passed his Judiciary Committee but has not come to the Senate floor for debate.

The agency has secured an additional $129 million appropriation from Census money that wasn't used this year. Both the Census and USPTO are in the Commerce Department. Unless Congress acts to end fee diversion, USPTO will face a revenue shortfall next year.

To lessen the backlog, the patent office is experimenting with a “fast track” review process for inventions with an environmental streak. One of the first beneficiaries was Skyline Solar, a solar panel builder in Silicon Valley, which saw a stalled patent application approved in May.

"We are the gate. We are right now the block," Kappos says. "We need to be the accelerant to Americans dreaming their dreams, getting protection for them, putting them in the marketplace, and succeeding or failing based on their merits."

But DiBelardino believes the cost of waiting for patent approval for his new "Spekx" eyewear is too high. So he will take a chance by launching a website to sell his new product by direct mail.

"I'm taking a big risk, but the reality is I have no other choice," DeBelardino says. "The way the marketplace works, I can't be sitting on the sidelines as well, because by the time the patent would possibly issue, my opportunity window could close."

USPTO Backlog: Patent Pendency Out of Control

By Gene Quinn, President & Founder of IPWatchdog, Inc.
April 22, 2009

The average pendency of U.S. patent applications is out of control. Everyone involved in the industry knows this to be true, but it might be easy to forget just how bad it is at times. Like so many patent attorneys and agents, I did not practice during the Reagan years.

While I have over 10 years of experience as a patent attorney, that means I did not start practicing until President Clinton was already in his second term, and the Patent Office was already in decline. During my professional life I have not known a Patent Office that could issue a patent on average in 18 months.

When Ronald Reagan became President he wanted to revitalize the Patent Office, and he successfully accomplished that goal by bringing the average pendency of patent applications down to 18 months. As you can see from the chart below, this lasted (for the most part) through the Administration of President George H. W. Bush, and almost through the Clinton first term, and then something went horribly bad for the Patent Office, which means that whoever is the next Director of the Patent Office will need to fix a problem that has been brewing for at least 14 year.



The above chart has as its baseline 18 months, which I believe most would believe is about as good as you can reasonably do in terms of an average pendency. If we can do better, great, but that should be considered the goal; and unfortunately it is a long term goal given the failures of the last 14 years. What is perhaps even more alarming is that average time it takes to even get an examiner to issue a First Office Action on the Merits (FOAM). For the last several years in addition to publishing the average total pendency the USPTO has also published the average time it takes to receive an action on the merits, which is represented by the table below:

What this table shows is that the average time it takes to get a first action on the merits is greater than the average time it took to get a patent issued just 10 years ago, and the average time it takes to get a first action is approaching 8 months longer than the optimal time to complete the entire patent process if you believe 18 months to issuance on average should be the goal. This is absolutely ridiculous!

This is a problem that will only continue to get worse for the foreseeable future, given the budget crisis facing the USPTO has force a hiring freeze, and given the almost unbelievable growth in the number of patent applications awaiting first action and the number of applications still pending (see charts below).

This is particularly disturbing for entrepreneurs and start-up companies who attempt to get funding from investors. For better or for worse, investors are not always able to make their own independent judgments with respect to the quality of an underlying technology that is the basis for a start-up company. What this means is that investors typically look for other ways to gauge whether the underlying technology is sound, including looking to the United States Patent Office for some kind of independent verification from a neutral party regarding the merits of the technology.

While the Patent Office cannot and does not vouch for commercial feasibility, when you obtain a patent it should be at least some evidence that the technology or innovation included in the application is unique to some level, at least based on the references that could reasonably be obtained with a competent patent search.

The minute you file a patent application, even a provisional patent application, you have created an asset. Like other forms of assets, not all patent assets are created equally. The further you go down the path toward obtaining a patent the more valuable the asset is, and an issued patent, no matter how weak, will be preferable to a pending patent application. Once a patent issues the underlying technology has received a government stamp of approval as unique, at least to some degree. Likewise, once a patent has issued the likelihood that additional patents can be obtained as a result of various related patent applications goes up. But until you get that critical first patent finding funding can be difficult, if not altogether impossible.

Thus, if we really want to help small businesses and start-up companies succeed we are going to have to find a way to get the first patent in a patent family issued relatively quickly. We can take longer, if necessary, on the remaining related patents, but the first patent must issue quickly. Obviously it would be most ideal to have all patents issue as quickly as possible, but that first patent needs to issue with all due speed.

Stay tuned for strategies! I am always thinking and have a few gems (or at least I think they are gems) in store for later this week or early next week.

About the Author

Gene Quinn is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene’s particular specialty as a patent attorney is in the area of strategic patent consulting, patent application drafting and patent prosecution. As an electrical engineer by training his practice primarily focuses on software, computers and Internet innovations, as well as electrical and mechanical devices. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, CNN Money and various other newspapers and magazines worldwide.

What Happened to Your Patent Application?

It's probably just sitting at the U.S. Patent Office, admits the office's director. Meanwhile, there are bills for patent reform on Capitol Hill -- and plans to raise fees.

By Courtney Rubin
May 7, 2010

The U.S. Patent and Trademark Office is sitting on hundreds of potential small businesses – and, according to its director, “millions" of jobs – because it can’t keep pace with patent applications.

"Hundreds of thousands of groundbreaking innovations that are sitting on the shelf literally waiting to be examined - jobs not being created, lifesaving drugs not going to the marketplace, companies not being funded, businesses not being formed - there's really not any good news in any of this," said David Kappos, the patent office’s director.

Kappos was speaking on a panel at the annual trade show of the Biotechnology Industry Organization in Chicago.

And the news gets worse. The 1.2 million application backlog – at an agency Kappos refers to as “our country’s innovation agency” -- stifles economic advancement at exactly the time China is investing heavily in research and development. According to the World Intellectual Property Forum, China has the world’s third-busiest patent agency behind the U.S. and Japan, but may soon overtake Japan.

More than 700,000 of those 1.2 million applications in the pile haven’t had so much as a preliminary examination, Kappos said – “which by the way is too many by at least a factor of two and a little bit more than that.”

What’s the big deal about a paper jam? Technologies go unprotected or become obsolete, while inventors and investors are forced to pace the halls, unable to start their businesses. Attempts by the patent office to catch up on its paperwork have also been disastrous for entrepreneurs: An extensive Milwaukee Journal-Sentinel investigation last year revealed that in an effort to catch up with its paperwork, the agency rejected applications at an unprecedented 60 percent rate, including many that were later proved worthy of a patent.

"Highly innovative firms rely on timely patents to attract venture capital," Kappos said, adding that 76 percent of start-ups say their venture backers needed the validation of a patent to invest.

The potential companies are also unable to hire. Half of new jobs come from new companies in their first five years, according to figures cited by Gary Locke, the U.S. Secretary of Commerce.

“New companies are established to monetize innovation,” the Commerce Secretary wrote.

Locke, whose department includes the patent office, voiced support of patent office reform, currently the subject of bills in both the House of Representatives and the Senate.

“America may still be a world leader in key metrics of economic success – like levels of entrepreneurship, R&D investment and IT infrastructure – but a report last year from the Information Technology and Innovation Foundation concluded that no advanced economy has done less than the United States to improve its competitive position over the past decade,” Locke wrote.

Kappos was on Capitol Hill this week for a hearing related to the proposed patent reform, which would hand the agency more control to manage its finances, which currently are controlled by Congress. Attempts at patent reform have failed twice in the past three years. (Read Kappos's testimony here.)

One thing you can expect either way: An increase in patent fees. Kappos said the agency needs the cash to meet the goals in its proposed $2.322 billion budget for next year. Among the goals: Reducing the average time for preliminary examination of an application to 10 months by 2014, and reducing total average wait time for patent applications to 20 months by 2015. (Plans are also afoot to publish monthly statistics on wait times.) To meet those goals, Kappos said the office will need to hire 1,000 new patent examiners a year for the next two years.

Want to have your say about patents? The agency is taking written comments on patent quality and ways to improve it until June 18. In addition, it will hold (and Webcast) two public roundtables, May 10 in Los Angeles and May 18 in Alexandria, Virginia. For information on the Webcasts, click here.

Bipartisanship Lives Where Rancor Rules

Lawmakers who will tussle over court nominee collaborate on other issues

By Ken Strickland, NBC News

May 10, 2010

In the coming weeks, the president’s Supreme Court nominee will — with much fanfare and snapping of flashbulbs — testify before the Senate Judiciary Committee, Congress’s coliseum for ideological, philosophical, and political battles.

The panel, which has jurisdiction over all things covered under the Constitution, has hosted history-making clashes over abortion rights, immigration, and — perhaps most famously — judicial nominations. But for the past few years, those same legislative gladiators have also been quiet comrades-in-arms, writing a significant and complex law that could dramatically improve the way America invents life-changing products.

Its bipartisan work on the sweeping patent reform bill has grabbed few headlines, but it indicates that collegiality is no stranger to the lawmakers who may wrestle over the confirmation of the country’s next Supreme Court justice.

"You may see a lot of partisanship, and that's what occupies 90 percent of the media,” said Sen. Jon Kyl, R-Ariz. “But 90 percent of the work we do is not partisan.”

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Leading their party’s message

Many members of the Judiciary Committee are long-serving stalwarts who champion their party’s core beliefs, in and out of the hearing room. Besides Chairman Patrick Leahy, the Democrats include Sens. Dianne Feinstein of California, Chuck Schumer of New York, and Dick Durbin of Illinois. The Republicans include Kyl, Utah’s Orrin Hatch, Alabama’s Jeff Sessions, and South Carolina’s Lindsey Graham.

They were among the first senators called by President Barack Obama when he was seeking suggestions on his court pick, and they will be among the first visited by the woman he selected — Solicitor General Elena Kagan.

In addition to their committee duties, these senators are often enlisted to wage war in the form of press conferences, op-eds, and Sunday morning talk show appearances.

Occasionally they take aim directly at each other.

In a recent news conference on financial regulatory reform, Democrat Schumer took aim at one of Kyl’s arguments against the bill, using language seldom used in the Senate.

"The minute these things come out of the mouths of some of our Republican colleagues, we rebut them," Schumer said, "and fortunately, these lies are not talking hold."

But at the same time public rhetoric soared, Schumer and Kyl (and several of their committee colleagues) were united behind closed doors, putting the final touches on a bill to overhaul the nation's patent system.

“The greatest asset America has”

In simple terms, patents are granted to inventors — both individuals and companies — to protect their products from being used by others for a period of 20 years. The concept is as old as the Constitution.

However, the consensus is that the patent system is broken and hasn't been updated in more than 55 years. The process for getting patents and defending them in court has become problematic, costly, and burdensome. Dennis Crouch, an associate professor at the University of Missouri School of Law, says the U.S. Patent Office has a backlog of 750,000 applications.

Supporters of an overhaul effort say that the flawed system stifles innovations and can delay the discovery of life-saving drugs and energy technologies. And those discoveries would lead to more jobs, boosting a sagging economy.

"Intellectual property is probably the greatest asset America has in terms of future economy and if we don't protect it, everyone will lose," said Schumer. "It creates jobs."

"The only way we can compete in a worldwide market is to have the best technology, the most innovative," said Leahy.

Not an ideological issue

Crouch believes the Judiciary Committee’s bipartisanship on the bill exists primarily because patents skirt the issues most likely to draw fire: party ideology, taxpayer dollars, and size of government.

"It's about issues of property rights, rather than growing or shrinking the size of the government," he said. (The patent office is supported by application fees rather than by tax dollars.)

Sessions, the committee's ranking Republican, seemed to agree. Patent reform is "a complex thing, but it's not a ideological thing or a philosophical thing. Those are the things that divide us," he said.

Bipartisanship is more common than most Americans would realize. Just within the past week, senators have collaborated to introduce several bills, including ones addressing Wall Street reform, airline passenger rights, gun ownership, and tweaks to Senate procedure.

Many of these bipartisan proposals do not survive the daunting legislative process. Others pass, without national fanfare, tucked inside the more popular or controversial provisions of other bills.

"[On] the major issues, unfortunately, the top level issues ... there's not much bipartisanship," added Schumer. "But you go one layer deeper and there's lots of it. The patent bill is a great example."

While the patent reform bill has a majority of the panel's support, its future is unclear. The bipartisan bill must fight for time on the Senate floor with other more partisan bills, like the financial reform overhaul currently dominating legislative headlines. And while the House has passed a patent bill in the past, it has not acted this year.

"[Majority Leader Harry] Reid would do well to make sure that there is time, because I think we could have a nice debate, a good discussion like the Senate is suppose to operate," said Sessions. "We would look like grown-ups on that issue."

But with a confirmation vote on Kagan's nomination expected before July 4, the committee will more than likely return to the coliseum.

"On judges, you have a conservative approach and a liberal approach and that's kind of different" from the patent bill, Sessions said last week. "And if the judge is going to act in a way that you think weakens the constitution then you've got a burden to object."

In Senate parlance, those are fighting words.

U.S. Patent Office Earned Revenue

Long Description for the Patent Revenue by Fee Type Chart

The following table presents the values given in the patent revenue by fee type chart for fiscal year 2010.

FY 2010 Patent Revenue by Fee Type

Fee Type	Percentage of Revenue
Maintenance	35.8%
Filing, Search and Examination	28.7%
Issue	19.4%
Extensions	6.6%
PCT	2.9%
Services	1.7%
Other	4.9%

The USPTO’s earned revenue is derived from the fees collected for patent and trademark products and services. Fee collections are recognized as earned revenue when the activities to complete the work associated with the fee are completed. The following table presents the earned revenue for the past five years.

Earned Revenue (Dollars in Millions)

	FY 2006	FY 2007	FY 2008	FY 2009	FY 2010
Patent	$1,384.2	$1,507.0	$1,625.0	$1,697.4	$1,887.6
Percentage Change in Patent Earned Revenue	15.6%	8.9%	7.8%	4.5%	11.2%
Trademark	210.2	228.7	237.2	229.7	214.1
Percentage Change in Trademark Earned Revenue	20.1%	8.8%	3.7%	(3.2)%	(6.8)%
Total Earned Revenue	$1,594.4	$1,735.7	$1,862.2	$1,927.1	$2,101.7
Percentage Change in Earned Revenue	16.1%	8.9%	7.3%	3.5%	9.1%

Earned revenue totaled $2,101.7 million for FY 2010, an increase of $174.6 million, or 9.1 percent, over FY 2009 earned revenue of $1,927.1 million. Of revenue earned during FY 2010, $424.6 million related to fee collections that were deferred for revenue recognition in prior fiscal years, $673.1 million related to maintenance fees collected during FY 2010, which were considered earned immediately, $997.3 million related to work performed for fees collected during FY 2010, and $6.7 million were not fee-related.

For fees collected and earned during FY 2010, there was an increase of $76.6 million over these same fees earned during FY 2009. This increase can primarily be attributed to $10.7 million in earned patent filing fees, $72.7 million in earned patent issue fees, $8.8 million in PCT international fees, $0.3 million in trademark post-registration fees, offset by a decrease of $7.5 million in fees considered earned immediately, $3.2 million in patent appeal fees, $2.2 million in trademark application, and $3.4 million in trademark statement of use.

Traditionally, the major components of earned revenue derived from patent operations are maintenance fees, initial application fees for filing, search, and examination, and issue fees. These fees account for approximately 84 percent of total patent income. The following chart depicts the relationship among the most significant patent fee types.

Patent maintenance fees are the largest source of earned revenue by fee type. During FY 2010, maintenance fees collected increased $126.4 million, or 23.1 percent, from FY 2009. As they are recognized immediately as earned revenue, any fluctuations in the rates of renewal have a significant impact on the total earned revenue of the USPTO. To some extent, renewals recoup costs incurred during the initial patent process. As shown below, the renewal rates for all three stages of maintenance fees increased this year.

Patent Renewal Rates

Patent Renewal Rates	FY 2006	FY 2007	FY 2008	FY 2009	FY 2010
First Stage	93.1%	90.1%	83.1%	80.3%	99.4%
Second Stage	69.2%	71.4%	73.7%	63.5%	71.2%
Third Stage	44.4%	48.5%	49.2%	45.4%	50.0%
Note 1: the First Stage refers to the end of the 3rd year after the initial patent is issued; the Second Stage refers to the end of the 7th year after the initial patent is issued; and the Third Stage refers to the end of the 11th year after the initial patent is issued. For example, in FY 2010, 99.4 percent of the patents issued three years ago were renewed, 71.2 percent of the patents issued seven years ago were renewed, and 50.0 percent of the patents issued 11 years ago were renewed.

Application fee revenue earned upon filing decreased slightly from $95.2 million in FY 2009 to $95.0 million in FY 2010 (decrease of 0.2 percent), with the number of applications increasing from 486,499 to 509,367 over the same period (increase of 4.7 percent). The FY 2011 President’s Budget projects a gradual increase in patent applications filed beginning in FY 2012 and extending through FY 2014, which will contribute to a renewed growth in budgetary resources, as well as earned fee revenue.

Earned issue fee revenue increased from $292.7 million in FY 2009 to $364.5 million in FY 2010, with the number of patents issued increasing from 190,121 to 223,127 over the same period, an increase of 24.5 percent and 22.6 percent, respectively. The FY 2011 President’s Budget projects that patents issued will increase an average of 2.2 percent each fiscal year through FY 2015.

Trademark fees are comprised of application filing, renewals, services, and Trademark Trial and Appeal Board fees. Additional fees are charged for intent-to-use filed applications, as additional requirements must be met for registration. The following chart depicts the relationship among the most significant trademark fee types.

Earned revenue for trademark applications decreased from $126.0 million in FY 2009 to $112.5 million in FY 2010, with the number of trademarks registered decreasing from 241,637 to 221,090 over the same period, a decrease of 10.7 percent and 8.5 percent, respectively. The FY 2011 President’s Budget projects that trademark applications filed will start to increase, which will contribute to the continued growth in budgetary resources, as well as earned fee revenue.

Trademark registration can be a recurring source of revenue. To some extent, renewal fees recoup costs incurred during the initial examination process. As shown below, the renewal rates for trademarks have remained fairly stable over the last five years, indicating continued earned revenue from this source. Further, in the FY 2011 President’s Budget, earned revenue from trademark renewals is expected to continue in the future.

Trademark Renewal Rates

Trademark Renewal Rates	FY 2006	FY 2007	FY 2008	FY 2009	FY 20102
Renewals	28.8%	28.6%	28.9%	29.3%	28.2%
Note 1: the renewals occur every 10th year for trademarks registered after November 15, 1989. For trademarks issued or renewed before November 15, 1989, renewal will occur after the 20th year and the renewal will be for a ten-year period. For example, in FY 2010, 28.2 percent of the trademarks granted ten and 20 years ago were renewed. Note 2: Preliminary data. (back to text)

U.S. Patent and Trademark Office Earned Revenue

The USPTO's earned revenue is derived from the fees collected for patent and trademark products and services. Fee collections are recognized as earned revenue when the activities to complete the work associated with the fee are completed. The table on the next page presents the earned revenue for the past four years.

Earned Revenue (Dollars in Millions)

	FY 2001	FY 2002	FY 2003	FY 2004
Patent	$ 859.0	$ 910.1	$1,004.5	$1,070.1
Trademark	181.2	151.3	157.8	168.9
Total Earned Revenue	$1,040.2	$1,061.4	$1,162.3	$1,239.0
Percentage Change in Earned Revenue	8.8%	2.0%	9.5%	6.6%

Earned revenue totaled $1,239.0 million for fiscal year 2004, an increase of $76.7 million, or 6.6 percent, over fiscal year 2003 earned revenue of $1,162.3 million. Of revenue earned during fiscal year 2004, $312.2 million related to fee collections deferred for fee recognition in prior fiscal years, $384.8 million related to maintenance fees collected during fiscal year 2004, which were considered earned immediately, and $542.0 million related to work performed for fees collected during fiscal year 2004.

Traditionally, the major components of earned revenue derived from patent operations are maintenance fees, filing fees, and issue fees. These fees account for over 80 percent of total patent income. The accompanying chart depicts the relationship among the most significant patent fee types.

Patent maintenance fees are the largest source of earned revenue, and as they are recognized immediately, any fluctuations in the rates of renewal have a significant impact on the total earned revenue of the USPTO. To some extent, renewals recoup costs incurred during the initial patent process. As shown below, the renewal rates for all three stages of maintenance fees have been increasing modestly over the last four years and there are indications that this growth pattern may continue.

Patent Renewal Rates

Patent Renewal Rates	FY 2001	FY 2002	FY 2003	FY 2004
First Stage	84.5%	85.1%	86.8%	91.9%
Second Stage	59.9%	59.5%	61.1%	65.7%
Third Stage	39.1%	38.4%	42.9%	43.8%
Note 1: the First Stage refers to the end of the 3rd year after the initial patent is issued; the Second Stage refers to the end of the 7th year after the initial patent is issued; and the Third Stage refers to the end of the 11th year after the initial patent is issued. For example, in FY 2004, 91.9 percent of the patents issued three years ago were renewed, 65.7 percent of the patents issued seven years ago were renewed, and 43.8 percent of the patents issued 11 years ago were renewed.

Patent Backlogs at USPTO and EPO: Systemic Failure vs. Deliberate Delays

References and further reading may be available for this article. To view references and further reading you must purchase this article.

By Malwina Mejera and Bruno van Pottelsberghe de la Potterieb
January 17, 2011

Abstract

This paper first describes the so-called patent backlogs and assesses the extent to which they might affect the examination process in major patent offices. Second it puts forward that the root causes of these backlogs in Europe and in the US are different.

The backlog at the United States Patent and Trademark Office (USPTO) is three times larger than one at the European Patent Office (EPO) and is essentially due to very low fees and a weak rigor of the examination process. The observed long pendency at the EPO is more due to applicants’ strategic filing behaviors that aim at delaying the grant date, as it marks the start of high expenses due to translation requirements and multiple validation or renewal fees. Since the root causes of backlogs diverge between EPO and USPTO, their cure should also be different.

Keywords: Patent backlogs; Patent systems; Patent cost

JEL classification codes: K41; P14; O34

Article Outline

1.

Introduction

2.

Measuring backlogs

3.

Backlogs at the USPTO: systemic failure

3.1. Patentable subject matter

3.2. Novelty

3.3. Inventive step

3.4. Cost of protection

4.

The EPO: voluntary delays

5.

Concluding remarks

References

Vitae

U.S. Patent Policy and Government Research

U.S. Patent Statistics

USPTO Performance and Accountability Report

When Patents Attack!

This American Life
July 22, 2011

Why would a company rent an office in a tiny town in East Texas, put a nameplate on the door, and leave it completely empty for a year? The answer involves a controversial billionaire physicist in Seattle, a 40 pound cookbook, and a war waging right now, all across the software and tech industries. (Transcript)

We take you inside this war, and tell the fascinating story of how an idea enshrined in the US constitution to promote progress and innovation, is now being used to do the opposite.

Prologue.

There's a derogatory term in Silicon Valley for companies that amass huge troves of patents and make money by threatening lawsuits: "patent trolls." When Jeff Kelling's Internet company Fototime was sued - along with more than 130 other companies - for violating someone's patent, he wondered if it was a troll (which the company denies), and then settled out of court. (8 minutes)

Act One.

NPR reporter Laura Sydell and This American Life producer/Planet Money co-host Alex Blumberg tell the story of Intellectual Ventures, which is accused of being the largest of the patent trolls. The investigation takes them to a small town in Texas, where they find a hallway full of empty companies with no employees. (29 minutes)

Act Two.

Laura and Alex continue their story about Intellectual Ventures and the practice of patent trolling. They learn why the buying and selling of patents is likely to continue being a huge, controversial business that affects the entire tech industry. (23 minutes)

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