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):
[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.
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