Patent Office budget shortfall will have long-term effects

You’re not alone in your financial suffering. The recession has even hit the U.S. Patent and Trademark Office, which is funded by fees paid by applicants for patent applications and other services.

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You're not alone in your financial suffering. The recession has even hit the U.S. Patent and Trademark Office, which is funded by fees paid by applicants for patent applications and other services. John Doll, acting director of the U.S. Patent and Trademark Office, now says the patent office is projecting a two 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," says Doll, adding that the company could decide to abandon much of its portfolio.

So, what does that mean for the patent office? In the short term, the office has stopped recruiting examiners, which it had been doing in an effort to clear the backlog of patent applications. Earlier, the patent office claimed that it would hire additional examiners to deal with the backlog. Doll even 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! And who could blame them? After remaining fairly steady over decades, allowance rates have now plummeted from more than 70 percent in 2000 to an allowance rate of 44.3 percent in 2007. Note that the allowance rate hasn't dropped below 50 percent in 30 years.

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 Barack Obama to issue an executive order directing the patent office to start allowing patents. According to Quinn, "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 eight 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 patent office will not pass go and collect the issue fees on all these applications. This is further perpetuated downstream, as the patent office will not collect the large maintenance fees that would have been due 3.5 years, 7.5 years and 11.5 years after the date of issuance. The low patent allowance rate will set in motion a budget shortfall that will play out over decades.

A PTO examiner recently posted his or her "Perspective of an Anonymous Patent Examiner," on IP Watchdog, commenting, "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 percent. While this may seem high, if you only allow 20 cases a year, it is no problem for quality [control] 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."

Stephen Albainy-Jenei is a patent attorney at Frost Brown Todd LLC, serving up chat at Write him with comments or questions at Albainy-Jenei doesn't own shares of companies mentioned in this article.

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