Those of you who follow me on Twitter may have seen a post last night pointing to a newly published resource about the US patent system from Wisconsin's leading newspaper, the Milwaukee Journal-Sentinel. In addition to a fascinating interactive resource at JSOnline.com, John Schmid and Ben Poston, two outstanding reporters, have prepared a valuable two-part series on the US Patent System. I've spoken with John recently and appreciate his genuine efforts to not only be fair, but to dig deep and understand complex issues. He and his co-author have obviously been burning the midnight oil to craft their series on the patent system and probe how some of the challenges in the US affect companies, universities, and entrepreneurs.
Their first article, "Patent backlog clogs recovery: Agency’s inability to keep pace undermines American innovation, competitiveness," raises some serious red flags about what is happening in the USPTO. It's not pointing fingers at the USPTO per se, but at the need for Congress and other elements of our government to do more to strengthen our patent system and US competitiveness. Here are some of their findings:
Amid the worst downturn since the Great Depression, the U.S. Patent and Trademark Office could be seen as a way to jump-start the economy. Instead, it sits on applications for years, placing inventors at risk of losing their ideas to savvy competitors at home and abroad.
The agency took 3.5 years, on average, for each patent it issued in 2008, a Journal Sentinel analysis of patent data shows. That's more than twice the agency's benchmark of 18 months to deal with a patent request.
The total number of applications waiting for approval, more than 1.2 million, nearly tripled from 10 years earlier.
The Journal Sentinel also found:
• 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. [Update: Actually, if the patent is filed in the US only, it is possible to request nonpublication, in which case the invention isn't public knowledge until it is issued as a patent.]
• For more than a dozen years starting in 1992, Congress siphoned off a total of $752 million in fees from the Patent Office to pay for unrelated federal projects, decimating the agency's ability to hire and train new examiners.
• As its backlog grew, the Patent Office began rejecting applications at an unprecedented pace. Where seven of 10 applications led to patents less than a decade ago, fewer than half are approved today - a shift that a federal appeals judge termed "suspicious." The same judge calls the agency "practically dysfunctional."
• Staff turnover has become epidemic. Experts say it takes at least three years for a patent examiner to gain competence, and yet one examiner has been quitting on average for every two the agency hires.
• Patent activity, a widely accepted barometer of innovation, is showing exponential growth in increasingly competitive economies such as China, South Korea and India. As developing economies strive to commercialize and protect their technologies throughout the world, they add tremendously to the U.S. Patent Office's workload.
• 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. "Patents are becoming commercially irrelevant to product life cycles," said John White, a patent attorney and former examiner.
For an American start-up company, a patent application is often the only asset, which creates a Catch-22: Start-ups often need a patent in order to get funding; yet without that funding, entrepreneurs can't afford the mounting fees and legal costs to keep the patent application alive or to fend off infringers.
The article continues with a look at the impact of these problems on several Wisconsin companies.
Part 2 of the series is "Patent rejections soar as pressure on agency rises: Penalized for flawed approvals, examiners keep pace – and pay – by refusing applications." This deals with the increasing barriers to allowance and the loss of morale among many seeking patent protection. Here's an excerpt:
After 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%.
Critics contend the agency’s efforts to catch up with the burgeoning backlog have only made things worse. At the same time, the number of appeals filed by rejected applicants such as Mertz has skyrocketed, further clogging the system.
The agency has become “practically dysfunctional,” says Paul Michel, chief justice of the Court of Appeals for the Federal Circuit, the branch that handles the nation’s patent cases.
“Innovation is supposed to get us out of this economic crisis,” said patent attorney Teresa Welch, who works in the Madison office of Michael Best & Friedrich. “But if the Patent Office is not issuing patents — and they’re not — it’s not going to happen.”
The Patent Office contends that more patent applications are being rejected these days because more deserve to be rejected. Patent Commissioner John Doll, who started as a patent examiner in 1974 and served as the agency’s acting director from January to August this year, proudly spent the past two years showing off a chart depicting the declining allowance rate — the percentage of applications that are granted as patents — as he made public appearances.
As one who has faced some arguably unreasonable rejections and lengthy delays in obtaining patents, I can sympathize with these frustrations. Of course, every patent applicant believes they have an allowable application and will feel that a rejection is unfair and harmful to the business opportunity they are pursuing. It may be that the higher rejection rate does not reflect a serious drop in the quality of applications but may at least partially reflect internal pressures of an overwhelmed and under-funded USPTO, but rejections per se are not a problem.
I would suggest that we should also remember that each allowed patent affects more than just the patentee. A patent can shut down competing businesses or squelch entrepreneurial plans. It is right that the original, true inventor should have some protection for unique intellectual property that he or she developed. But when a patent is allowed for something that is not novel or truly is obvious, then that which should have been part of the public domain may be removed and capricious barriers to business success may be imposed that can actually hurt innovation in the long run. In our book, Conquering Innovation Fatigue, we support protection of property rights and advocate a strong patent system, but we also dedicate an entire chapter to a case study of the harms that ensue when a bad patent is issued. In the case we explore, an innovative Wisconsin sprout farmer nearly lost his entire business because of a clearly questionable patent from Johns Hopkins University. In spite of "slam dunk" prior art, it still took five years and most of the retirement funds for our local innovator to stand against the high-paid team of lawyers from a powerful university and prevail. The balance between allowing valid patents and not allowing invalid patents is a delicate one that requires caution. Not just caution, but plenty of time and resources for careful examination and highly skilled examiners.
One interesting step for improved and accelerated examination, which we discuss in our book, is the Peer to Patent pilot program with the USPTO. My experience with my own patent for a security system was remarkably positive. Got an excellent examination and rapid allowance of the software/business method patent, shaving years off the normal examination time. I hope that Peer to Patent continues to expand. Meanwhile, I agree with the gist of what John Schmid and Ben Poston are saying: we need to strengthen our US patent system to reduce the backlog, maintain high quality, and promote sound intellectual property rights in the US. Easy to say, but carrying that out is a remarkably difficult task.