Saving US Innovation: More Patent Funding Needed

Yesterday I posted an article titled Innovation Held Hostage by the Patent Office.  In the article I detailed some troubling things I have learned regarding what appears to be best explained by patent examiners taking cases out of order.  The Patent Office is a first-in-first-out (FIFO) system, or at least it is supposed to be.  A couple patent attorneys have reported to me that they have received First Office Actions on the Merits anywhere from 4 to 6 months after filing, and one attorney pointed me to a business method patent application filed by Lehman Brothers on November 26, 2006, which issued as a patent less than 7 months later on June 5, 2007.  All of this is extremely troubling, and one person who commented suggested that the reason this was happening was because money was changing hands.  I do not believe that to be the case.

The attorney who broke me in when I was a greenhorn nearly 15 years ago always reminded me not to assume malice where incompetence can be a viable explanation.  His reasoning was that there are a lot of people who are incompetent, and only a few who are truly malicious.  His point was that there are many reasons why things happen and the law never assumes malice and neither should you.  Facts tell a story, and stories have many possible interpretations.  I do not believe the PTO is malicious, and I don’t think they are incompetent either.  They are overwhelmed and bad decisions were made in the past.  In order to get things working again Congress and the President absolutely must provide adequate funding, and soon.

Ordinarily I would not allow a comment suggesting something so far reaching as bribery.  I have turned down stories in the past because I did not think they were real news and might even reflect an agenda, such as one of the threads causing a stir on Patently-O, which I refused to print when it was offered to me because I thought it unfairly castigated the Board of Patent Appeals and Interferences.  Notwithstanding, there is a tremendous amount of frustration in the innovation community.  What is happening within the Patent Office is perceived to be unfair, and rightly so.  The law guarantees similarly situated people be treated similarly, and when individuals and companies have so much riding on an invention emotions understandably run high when it is perceived that they are being treated unfairly.

I am an inventor, and I am frustrated.  Clients of my firm are frustrated, and rightly so.  In one case we represent a “mom and pop” with an outstanding invention with a lot of market appeal.  They have had contact with major companies in their industry, and are prepared to market the invention themselves in the absence of a deal.  The major companies and investors interested in being involved in what will ultimately be an extremely lucrative endeavor are waiting.  You see, if you go to market without patent protection then anyone can simply copy the invention and offer it for sale.  An economic truth is that when someone is making money there will be market entrants, and gearing up and investing the large sums of money required is not seen as good business without a patent.  Unfortunately, these inventors have been waiting nearly 4 years for first consideration by a patent examiner, so they are understandably frustrated to learn others get speedy treatment in some cases.

Perhaps I am naive, but I am not going to take anyone to task for making even scandalous assertions, even though the assertions suggest criminal activity which absolutely begs proof.  Ordinarily I do not traffic in this sort of thing, and would not even approve such a comment, but there is a growing under current of extreme frustration. At times that leads people to ask certain questions, and jump to conclusions. Granting a business method in less than 7 months when others have to wait so many years for a first action on the merits raises serious questions. What happened to second pair of eyes on that application?  How is this fair?  Our leaders need to stand up and take notice that there is a growing and real perception that the Patent Office is not operating fairly, and if this causes innovators to give up the US economy, which is so dependent on innovation, will suffer a tremendous blow.

About 4 weeks ago I had the privilege to speak with Commissioner Focarino, and I believe she is knowledgeable, dedicated and sincerely wants the patent system to be better for everyone.  She has started important initiatives, and I feel certain that if she is given the backing of Congress and the White House she and the many other dedicated men and women who work at the Patent Office can and will get things back on track.  Having said this, she needs help.  The PTO is suffering a tremendous budget crisis due to bad decisions and policies made under former PTO Director John Dudas.  Now is not the time to dive into that debate again, but those in Congress absolutely need to realize that in order for us to pull out of this downward spiral at the Patent Office, and in order to spur innovation and job creation, the Patent Office needs more funding and they need fundamental change from the bottom up.  Not issuing patents and delays are crippling US businesses and independent inventors, and that simply cannot go on any longer.

Thankfully there are those in Congress who get the magnitude of the problem and are trying to do something about it.  For example, Senator Orrin Hatch (R-UT), one of the “get it people” in Congress when it comes to intellectual property matters, understands the Patent Office needs more funding. Senator Hatch co-authored an op-ed piece that ran over the weekend, partnering with Paul S. Otellini the President & CEO of Intel.  What the pair wrote is dead on accurate, and is in fact what I have been preaching for months – see Patent Stimulus Plan.  Here is part of what Hatch and Otellini wrote:

The current backlog now exceeds 1.2 million cases, which includes pending and unexamined applications. The sheer volume not only reflects the innovative spirit that has made America a world leader in science, engineering and technology, but also represents dynamic economic growth waiting to be unleashed. If we are to have a durable economic recovery, we must rely on our renowned American ingenuity to lead us into prosperity again.

We believe that recovery begins with a well-funded U.S. Patent and Trademark Office.

It is one of the few user-funded government agencies. Unfortunately, over many years of fee diversion, approximately $750 million has been siphoned away from the agency. This, coupled with the economic slowdown and the lack of fiscal flexibility for the agency, has created a perfect storm. The office currently has a shortfall of $100 million compared to last year, due largely to a precipitous drop in user fees. Fee diversion has compounded this problem over the years by limiting the agency’s ability to grow commensurate with its workload.

Considering what intellectual property means to our economy, the shortsightedness of those in Congress who have been willing to jeopardize the health of our patent system for the sake of pet projects at home, or other general government priorities, is unfathomable. Why would anyone touch a dime from an agency that almost guarantees job growth in virtually every sector?

Fee diversion is nothing less than a tax on innovation.

A fully funded patent office with fiscal flexibility would at the very least mean more and better trained patent examiners, more complete libraries of prior art, and greater deployment of modern information technologies to address the agency’s growing needs. All of these improvements would lead to higher quality patents being granted sooner. In other words, more jobs.

Amen!  Fee diversion is indeed a tax on innovation, and as I have been saying, recovery can, should and will begin with a well funded Patent Office.  With appropriate funding and committment to the Patent Office the important initiatives started by career officials, who are doing what is best in the absence of political leadership, can and will lead to greater prosperity and job creation.

President Obama, if you really want to “create or save” jobs you need to demand appropriate funding for the Patent Office and let those who know what they are doing address the monumental challenges they are facing.