You’re not alone in your suffering.  The recession has even hit the U.S. Patent and Trademark Office, which is funded by fees from patent applications and other services.  John Doll, acting director of the U.S. Patent and Trademark Office, said the patent office is projecting a 2 percent drop in applications, if trends continue.

What’s more, some are indicating that applications could end up being down 10 percent for the year:

“I talked to a large corporation today and they’re going through their patent portfolio to see what’s core,” said Doll, adding that the company could decide to abandon much of its portfolio.

jdoll-allowance-thumb.jpgSo, what does that mean for the patent office?  In the short run, the office has stopped recruiting examiners, which it had been doing in an effort to clear the backlog of patent applications.   After remaining fairly steady over decades, allowance rates have now plummeted from over 70% in 2000 to an allowance rate of 44.3 % in 2007 (Note, the allowance rate hadn’t dropped below 50% in the prior 30 years).

Earlier, the Patent Office claimed that it would hire additional examiners to deal with the backlog.  Doll now contends that that “If we closed our doors today, it would take us almost two years to clear out our backlog.”  It’s not clear how a hiring freeze will make things better other than frustrated applicants will give up and abandon their applications.  Or, stop filing applications in the first place!

So what do we do?  Gene Quinn of IP Watchdog has proposed that if we really want to get out of this economic downturn we need a Patent Stimulus Plan.  This would require President Obama to issue an Executive Order directing the Patent Office to start allowing patents.  According to Gene:

A backlog of 800,000 patent applications that are pending and have not even been considered on any level by a patent examiner is unacceptable.  Why would anyone want to get a patent when you apply today and if it is a real invention where there is a lot of innovative activity you have to wait 8 to 11 years to get a patent, which are the current estimates used by experts familiar with the likely time applications filed today will have to wait in high-tech areas.  So while you are at it President Obama, order the Patent Office to issue a patent UNLESS there is a reason to deny it.

Don’t look for the current budget problem to solve itself.  All the many patents that have not been allowed will not issue as patents.  The Office will not pass go and collect the issue fees on all these applications.  This is further perpetuated downstream as the Office will not collect the large maintenance fees that would have been due at are 3 ½ years, 7 ½ years and 11 ½ years after the date of issuance.  The low patent allowance rate will set in motion a budget shortfall that will play out over decades.

Update:  

The European Patent Office (EPO)  and Japanese Patent Office (JPO) announced that their allowance rate is also below 50% — with the EPO at 49.5% and the JPO at 48.9% (via the 271 Patent Blog).

See also Gene Quinn’s post “Perspective of an Anonymous Patent Examiner,” where a PTO examiner comments:

This “reject, reject, reject now” policy is encouraged by management’s policy of issuing a written warning on an examiner’s permanent file for allowance error percentage above 10%. While this may seem high, if you only allow 20 cases a year it is no problem for quality to find some kind of error in your cases, especially when they aren’t experts in your art. Additionally, there is a lack of motivation to get cases allowed, because there is no incentive for the examiner to do the extra work required to arrive at claim language which can be allowed.

Nice.

  Print This Post Print This Post  

10 Comments

  1. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    This (and particularly also Gene’s article) is a sad commentary on the PTO. “Allowance error rate” doesn’t include cases that should have been allowed but weren’t, it’s only cases that shouldn’t have been allowed but were (leaving aside the question of whether the review itself is correct). Until the PTO straightens up how it reviews and rewards examiners, this problem will only persist.

  2. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    Trademark filings in the USPTO are down by 25% when you compare Jan-Feb 2009 to Jan-Feb 2008. I strongly suspect patent filings will follow the same trend if not worse due to the econmomy, long delays in examination and the low allowance rates. Its like betting on horses at a track that rarely run and if they do run they never cross the finish line. Why bet? Why file a patent application?

  3. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    […] relates to the fees for filing a request for examination.  Apparently, the Japan Patent Office is not the only patent office to experience a large drop in the number of patent applications being filed.  The JPO’s annual report shows that the office received 396,291 applications in […]

  4. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    This is a short-sighted article:

    First, allowance rate is a ratio, not a total number. There are more applications being processed per year, then a lower allowance rate does not necessarily mean that there are less total allowances. So, will the net fee revenue from maintenance fees actually drop? We don’t know, and the article does not provide an answer – it only assumes that revenue will drop.

    Second, it’s idiotic to ask “Who will file for a patent?” Of course people will file. R&D can’t survive without patent protection. If anything, the backlog will force people to seriously consider what is worth filing rather than filing for everything under the sun. There are tons of issued patents that are tied together with terminal disclaimers because the patents were claiming obvious variants of the same thing. That’s a waste of the patent office’s time. The USPTO can do only so much. Some responsibility must lie with intelligent applications.

    Third, simply brushing aside the law for the sake of revenue devalues the patent. How can one expect a valid, enforceable patent if the law is simply thrown to the wind? This is getting ridiculous.

    Finally, one must consider the variables involved in the current practice. There are worthless applications; there are time constraints and there are quality constraints. There are variations in how the law is interpreted; there are variations in prosecution procedures; there are variations among employees and their training. All of these things contribute to an allowance rate that may vary significantly with time.

  5. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    Multiple articles are throwing around these allowance rate graphs, but nobody questions them. There’s stupid suggestions that the law should just be brushed aside and allow everything for the sake of revenue, and many more short-sighted complaints.

    Here’s a real question: what does the allowance rate represent? Does it consider that CPA and RCE practices didn’t exist before the drop in allowance rates? CPAs, and then RCEs, are continuations of the same invention – but internally everytime one is filed, it is considered an “abandonment” and then the internal counting system starts over and pretends that the RCE is a new application. But it isn’t. It’s the same invention – the same subject matter – the same application.

    Thus, are RCEs skewing the allowance rate data? In many cases, after one or two RCEs, the invention ends up being allowed. In reality, that’s 100% allowance rate (1 invention filed : 1 patent granted). However, in the USPTO’s statistics, it only represents a 50% or 33.3% allowance rate due to the internal “abandonment” and restart procedures of the application.

    I want to see a correllation before we start screaming that the Supreme Court is fundamentally flawed in their interpretation of patent law. That’s a serious allegation.

  6. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    Time,

    Thanks for your thoughts. You raise some good points. I agree that R&D can’t survive without patent protection. I also agree that the backlog will force applicants to seriously consider what is worth filing rather than filing for everything under the sun. I think everyone would like to see fewer frivolous patents. Unfortunately, I’m also seeing applicant’s abandon applications that they probably shouldn’t abandon purely out of frustration.

    I would disagree that issued patents tied together with terminal disclaimers are necessarily claiming obvious variants of the same thing, although that’s certainly the case with some patents.

    I would also disagree that the USPTO can do only so much. I think that if the USPTO needs to charge a higher fee in order to handle its workload, then that would seem more appropriate than insisting that applicants merely file fewer applications.

    Stephen

  7. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    Time,

    To follow-up on your comments regarding the allowance rate, the establishment of a procedure for requesting continued examination (RCE) of a patent application came about from the from the American Inventors Protection Act of 1999, effective as of May 29, 2000, and applied to utility and plant applications filed on or after June 8, 1995.

    From the USPTO graph, the allowance rate has been in free fall since about that time. I’m not convinced, however, that the two are related. Prior to 2000, one could have filed an unlimited number of continuation applications — each with its own serial number and each with its own allowance or abandonment.

    I do think that there are plenty of other variables involved in the current practice.

    As you mentioned:

    “There are worthless applications; there are time constraints and there are quality constraints. There are variations in how the law is interpreted; there are variations in prosecution procedures; there are variations among employees and their training. All of these things contribute to an allowance rate that may vary significantly with time.”

    I think that may explain the variation seen before about 2000. I don’t think it could explain the precipitous drop since that time.

    Stephen

  8. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    Actually, the RCE factor makes a huge difference. The USPTO publishes a graph just like the one above, but also adds a second curve that corrects for the internal pseudo-disposals due to CPA and RCE processing practices.

    The real, true allowance rate – that is to say, the number of inventions filed resulting in a number of issued patents – is 62% for 2008 according to the USPTO. It still follows the declining trend, yes, but the allowance rate is not nearly as bad as assumed.

    Here are some other factors that have not been addressed, that are fairly recent changes, both inside and outside IP:

    ~the ability to patent business methods (I do not know what their allowance rate is, but the legal basis for such patents has just occurred in this decade) – this controversial, and booming, portion of applications might have an effect, in combination with other issues.

    ~ the economy – some businesses have given up on patent applications, even those having allowable subject matter indicated, whether due to financial constraints, or claims that are too narrow to justify the expense, etc.

    I recognize the ebb and flow of patent law interpretation. Although most examiners followed the tenets outlined in KSR ever since Graham v. Deere, the TSM-based obviousness analysis enforced by the subsequent Federal Circuit decisions were showing their effect during the boom of allowance rates in the late 90s through the mid 2000s.

    Removing the RCE disposals, we actually see an allowance rate of 79% in 1999, 2000 and 2001, while the allowance rate was over 75% from 1998 through 2004. That’s higher than the “historical” 60% to 70% mentioned in the article.

    Now with more complete and accurate information, may I suggest that this is most likely a natural, cyclic shakeout from inflated allowance rates that people have become accustomed to, now compounded by the economic crisis?

  9. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    Here’s a quote from the article:

    “So while you are at it President Obama, order the Patent Office to issue a patent UNLESS there is a reason to deny it.”

    That is what the USPTO does. The Patent Law States, 35 USC 102: “[a person] is entitled to a patent, unless…” That is what examiners are trained to do – that is the standard to which they are held. This Gene Quinn is coming in from left field somewhere.

  10. Notice: Object of class WP_Comment could not be converted to int in /hermes/bosnacweb01/bosnacweb01ad/b2262/ipw.patentba/public_html/wp/wp-content/plugins/polldaddy/rating.php on line 7

    […] Patent Baristas […]