By Kevin E. Noonan --
Published articles in the popular press rarely report accurately about patents and the patent system. That's why it is unexpected, remarkable, and incredibly timely that the Milwaukee Journal Sentinel published not one but two in-depth articles about patents and the U.S. Patent and Trademark Office this week. Written by John Schmid and Ben Poston, the articles, "Patent backlog clogs recovery" and "Patent rejections soar as pressure on agency rises" document the current (parlous) conditions for patenting in the U.S. Most importantly, the articles recognize the importance of innovation in pulling the country out of the current economic crisis.
The authors cite statistics familiar to anyone involved in the patent system: that Congress spent almost two decades raiding Patent Office coffers to fund other programs, to the tune of $752 million during that time (accounting for about 7% of the Office's budget) and reducing its ability to hire new examiners. That while that trend ended in 2005, and the Office added 1,200 new examiners per year from 2006-2008, attrition is a serious problem, with one examiner leaving the Office for every two that are hired. And that the current budget crisis has frozen new hiring, exacerbating the problem of a 1.2 million application backlog facing the Office and an average pendency of 3.5 years.
But beyond the statistics, the articles outline how ill-considered (or at least ill-fated) policies have contributed to these problems. One of these policies is the increased rates of rejection; the article states that "[a]fter consistently rejecting applications at a rate of about 35% since 1975, the Patent Office -- faced with a growing backlog -- underwent a convulsive shift around 2004 and now turns down well over half. In the quarter that ended June 30, it denied more than 59%." This is something that John Doll, who until last Thursday was the Acting USPTO Director, has been touting as a desirable result for the past few years: "[i]f the allowance rate is falling because we are improving quality, then that's a good thing." The article pointedly characterizes this as the "culture of rejection," which it attributes to the rise of business method patents in the late 1990's and some unfortunately trivial patent grants (including the laser cat exercising method patent (U.S. Patent No. 5,443,036) and the children's swing patent (U.S. Patent No. 6,368,227) that became lightening rods for those (like Josh Lerner) who argued that the patent system was "broken" (see "Once again, The New Yorker Gets It Wrong on Patents").
The response to these developments was that "[t]he Patent Office starting running scared," according to former USPTO Director Bruce Lehman (at right), by setting up a "second pair of eyes" review of a random sampling of newly issued (more accurately, allowed) patents to "double check that they have merit." The article described the consequences for the examiner responsible for applications deemed to have been improvidently granted:
Those that turn out to have been strong candidates for rejection can count as errors in the performance reviews of the examiner. Errors whittle down examiners' bonuses. . . . Close calls became rejections. And rejections, according to critics, became the path of least resistance to meeting in-house work quotas, which also are used to grade examiners.
As a consequence, patent examiners exclaim that "We're the ones who put 'no' in 'innovation," according to a current PTO joke. As the authors recognize, it's not funny. As a further consequence, "a culture of fear" has taken hold, a feeling that, "If I make the wrong step, I could lose my job," according to Robert Budens, president of the examiners' trade union.
These developments have not gone unnoticed, most pointedly by Judge Paul Michel (at left), Chief Judge of the Court of Appeals for the Federal Circuit. Judge Michel is quoted as characterizing the increased rejection rates as "suspicious" and as saying the agency is "practically dysfunctional."
The authors clearly believe that a dysfunctional
Patent Office is not in the best interests of the country, particularly during
times of economic crisis. While
conceding that most patents "have little or no economic impact," the
articles cite a Research-Technology Management report from 1997 for the
proposition that 5-10% have "potential market relevance." But:
[T]hat 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.
The articles also quote 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. (As a local newspaper, the article notes that Wisconsin is 12% above the national average and ranked 14th nationally with regard to patents per capita.) Mr. Lehman is quoted as saying patents "are essential instruments for an innovation-based economy," and that neither Silicon Valley nor the Madison biotechnology industry would exist without patent protection. "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," according to Mr. Lehman.
The article notes further consequences of a "dysfunctional"
agency unable to meet its responsibilities. "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." In
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.
The authors also recognize that the significance of
delay is particularly important for the U.S., and why:
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."
Carl Gulbrandsen, the Wisconsin Alumni Research Foundation's managing director, is given the last word in the article (and we can't improve on them):