The Milwaukee Journal Sentinel Gets It Right about Patents

    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 addition:

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):

This [the application backlog] is a time bomb that will bring the whole system down," Gulbrandsen said.  "If we want to be a leader of innovation in this country and the world, we have to get patents issued.

Comments

[Thomasina Barrett]

I agree that the "patent backlog clogs recovery" article was very well researched and written, and also agreed with the main points. The only thing I didn't like about it was the examples they gave of thwarted applicants, in which they implied that the backlog was responsible for worthy applicants being denied protection. It was not at all clear that either MatriLab or Roger Hoffman should have received patents, since there was no mention of what prior art or other problems might have existed. Also, I am confused by the statement about Roger Hoffman that "[b]y the time he'd waited five years for a patent, the technology was in wide use and he couldn't benefit from it." Huh? But I agree the rest of the article was excellent and appeared to be very well researched, so I guess I shouldn't quibble.

[I Claim:]

Very refreshing. Now, back to dealing with an Examiner who resolutely declared in an interview that once ingested, all extended release dosage forms are the same. So, we have to argue past that mountain of ignorance before we even think about the claims. Is this the culture of fear or plain incompetence? I suppose the end result is the same - just make it final so I can take it to the Board and maybe somebody who still has some authority will agree on the patentability of the subject matter.

[Kevin E. Noonan]

Dear Thomasina:

There are imperatives that come with writing in the popular press, and one of these is "humanizing" the story. Not worth mentioning in the post, but I agree it doesn't detract terminally from the message.

Another aspect of the piece we didn't discuss is related to the human side of the message - that undue delay can affect investment. As the CEO of MatriLab said, the delay caused investors to avoid the company. And WARF eventually received a patent on the technology.

But you are correct that there are many possible legitimate reasons for the delay the the article didn't mention. (However, see the next comment.)

Thanks for the comment

[Kevin E. Noonan]

Dear Claim:

I think the "reject, reject, reject" mentality (as well as the "common sense" approach under KSR and the practice of (over)interpreting claims broadly) contributes to the problem you describe. I also think that In re Sullivan is a good weapon in this regard, because an expert declaration can go a long way towards forcing an examiner to re-examine their own presumptions.

I had a case involving in vitro culturing of the spirochete that causes syphillis. The Examiner kept on citing the Difco manual, and it was only when I sent her a half dozen scientific journal articles that mentioned that you could not culture this bacteria using conventional techniques that she relented - after calling me to say "Who knew?" (and, of course, ignoring the Background section where we described the difficulties known in the art).

What the present culture has done is make it harder to convince an examiner, since the "us-against-them" mentality causes (or at least encourages) a greater level of suspicion and an unwillingness to accept affirmative assertions on the record as being true (just consider the tone that our friend 6 takes regarding applicants in most of his comments on this and other blogs).

Thanks for your comment.

[6]

I have a couple of questions for you kev since I respect you as an honest practitioner of your trade even though I disagree with your views on some of the various minutia involved in the practice.

1. What is your view on whether or not the dip in allowances was due in large part to PG pubs kicking in and expanding the amount of easily usable art by a hundred fold?

2. If your answer to 1 is "yes", then do you feel that there is a reasonable expectation for the allowance rate to ever go back to (or even approach) the historical norms?

3. What amount of consideration do the folks talking about the backlog give to the fact that the backlog is concentrated in a few areas where "protection" of "innovation" means little, if anything (see biz methods, software). And, if the consideration given is not all which you feel should be given, do you thus feel that we need not be as concerned about the backlog as they are alarming us to be?

4. In the bio arts do you feel as if there is a substantial backlog piling up? If so, do you feel as if this might be the result of continually exploding application numbers and lengths/claims just as much any "culture" of rejection?

I ask because for all the talk about historical norms and everything, I realize that I got to the office in around 2007, after the dip just started. And I know, beyond a shadow of a doubt, that at least 50% of my rejections would never have happened without PGpubs being available for me to cite.

Given this, I personally have to agree with Jules on watchdog/PO on the subject of PGpubs being the overall driver of the expanded rejection rate.

And for 3, I ask because in my art, we're not doing all that bad for a backlog. We're not running out of cases, but we don't have a huge backlog either. Thus, the innovation in our area is doing just fine getting protection. Most of the delay beyond the first 1.5 years of waiting in line is from the applicant wasting time responding.

Also, I'm not really sure, but I seem to recall that there might be a decent backlog piling up in Bio, so I tossed in 4.

[6]

""Who knew?""

Kev, you know all examiners haven't been in in your niche of the syphilis art or whatever for 20 years or however long you and your client have been in it. There are plenty of tidbits of "hard" things to do in my art that I'm not aware of at any given second. My art is HUGE, as is your own.

At the same time there are a lot of little tidbits I've picked up over my few years looking over art.

Try to keep the sarcasm under control in the face of the sum of human knowledge you know?

[6]

"the "us-against-them" mentality causes (or at least encourages) a greater level of suspicion "

I will tell you, right straight to your face if you come down here, what causes this great level of suspicion isn't some "us v them" mentality. What causes it is the overwhelming number of misleading arguments made by attorneys that we have to see through, validly. With a side dish of ambiguity and unknowns in the information which they are presenting. I'm not so sure why you'd have trouble believing this. But if you were an examiner for like a month you'd know right quick. You're going to get a bunch of bs arguments back and it is your job to not buy them. Many of the arguments will be well meaning, and based upon either a misunderstanding of something or etc. But that doesn't change the fact that it is on us to be technically accurate etc. in what we accept from you.

Of course, I suppose you could misleadingly characterize office personel becoming validly suspicious of arguments after they've had their plate loaded up time and again with bs as there being an "us v them" mentality. Perhaps such a mischaracterization best serves an alarmist's point of view but there is no reason for you to take such a position.

[Kevin E. Noonan]

Dear 6:

(I'm responding in reverse order.)

I have always had the good fortune of good interactions with examiners and other Office personnel. I have no problem with the give-and-take of arguing my position, and I respect examiners who do so (the vast majority).

But I think it is human nature to resent being put in the position examiners were put in over the past 5 years. If you read the piece carefully, my gripes are with management, not the examiners.

But I also find it hard to believe (but I'm willing to be convinced that I am just being naive) that the arguments you get from attorneys are "bs." This is because any tendency or temptation to try to "pull the wool over your eyes" as an examiner has a double-whammy consequence for the patentee (our clients). First, it will make it easier for opposing counsel to invalidate the patent at trial. And second, it will make it easier to establish inequitable conduct by the attorney. It is the attorney who will have to answer for arguments that don't pass the blush test, and no one wants to try to defend an on-its-face implausible argument. (Plus, since in my experience the best arguments are logical and scientific ones, implausible arguments are the least likely to work, to be utilitarian about it.)

So while I think you are correct that the job of an examiner is to critically assess the validity of attorney arguments, I don't think that is the same as "not buying them." And, with respect, perhaps unintentionally your tone on this and other blogs seems to support my opinion that the consequence of Office working conditions has bred an "us-vs-them" mentality. If am wrong about that, I'm sorry.

Thanks for the comment.

[Kevin E. Noonan]

Dear 6:

Apologies for the "who knew" - it was kind of gratuitous.

However, the point I was trying to make was that there are many "everybody knows" situations where what someone honestly thinks is just wrong. I have had this with clients, who will say "How can [my competitor's] patent be valid? We were doing that in the '60's!" But when we dig down to the art the client remembered, lo and behold it isn't what she thought it was.

That's the utility of 37 CFR 1.104(d)(2) - I can't tell you how many times I've requested some evidence for a proposition asserted by an examiner, and only then are we on the same page. I don't blame the examiner - the point of the piece was that as a group examiners are overworked and overmanaged - but we all have to face up to the reality of the situation.

It wouldn't be an invention if was something "everybody knows." Since an invalid patent is like an unloaded gun in a liquor store heist - just plain trouble for everyone involved - I think most attorneys try to get patents for things that are inventions (even if they turn out to be unpatentable inventions).

Thanks for the comment.

[John Doe]

The increase in patent rejection rate is a good thing! In my field (computing), the US Patent Office has been issuing far too many obvious for years. As a result, software patents are more of a nuisance than a benefit. I find it hard to feel sorry for the US Patent Office; they've royally screwed up software patents, so it seems like just a good thing that they're getting bogged down and issuing fewer of them. If anything, in the software industry, we could use more of the "reject, reject, reject" mentality, not less.

[Kevin E. Noonan]

Dear 6:

On the 4 points -

1. I think that PG pub has had some effect (and maybe in some arts more than others), but I honestly believe that the higher pendency times and the backlog has to do with the quality review process and its consequences. I have had allowances pulled by QC for reasons that made it obvious that the issues I had hammered out with the examiner were not considered - more "everybody knows" situations. So while I think PG pub has made it easier to find relevant prior art, i have no evidence that it is patent-precluding prior art.

2. Since my answer is "no" to question 1, I think the patentability rate should fluctuate around a pretty stable mean, and 65% sounds right. This is mostly because I think most attorneys want to be "successful" for their clients, and prosecuting easily-invalidated claims (before the Office or at trial) is no way to be successful. So I think the rate will be greater than 50% (after all, if not just flip a coin), but not greater than about 75%.

3. The truth in your presumptions in this question raise the issue of whether PTO management used the "bubble" of genomics applications in the bio area and business methods applications to justify the "sky is falling" approach to all the benighted rules packages. But I do think the risk of averages for things like pendency across art units is getting false statistics, and think it a good idea to look at each art unit separately. But this is something I think newspapermen like the authors of the Sentinel-Journal would have a hard time appreciating.

4. There is a backlog in the bio area, due in part to the genomic patent "bubble" and also in part to applying the varying utility/written description/obviousness tests to this art since 2001. But I think this is an expected occurrence when there are so many applications for a new technology, especially where there are questions about how best to foster innovation while not giving patents that have too broad a scope.

Thanks for the insight on your art area - I'm glad that there isn't a significant backlog somewhere in the Office.

And thanks for the comment.

[Kevin E. Noonan]

Dear John:

I can't speak to software patents, and they may be in as sad a state as you contend. But wishing the Patent Office to be dysfunctional is like blowing up the local Starbuck's when they make your latte too hot. It would be more productive to fix the problem than to reduce the "harm" in your area (while perhaps increasing it in other areas) by having the system grind to a halt.

We all may be able to live without another software patent, but what happens when the next anticancer drug isn't brought to market because the inventors couldn't get a patent?

Thanks for the comment.