Second Pair of Eyes Fails Innovation in the US

By Gene Quinn
June 11, 2009

Monday I wrote about how the United States Patent Office is holding innovation hostage, and is treating applicants unfairly, at least insofar as some applicants seem to have their cases advance quickly and other applicants seem to wait for many years without any action whatsoever. I have gone on record saying that I believe the Patent Office is taking important steps, but the mountain that must be climbed might as well be as high and inhospitable as Mount Everest. When companies and individuals cannot obtain patents, despite the law being stacked to encourage innovation , the issuance of patents and even presumes that an inventor is entitled to a patent, this causes innovation to come to a halt because funding is effectively cut off and deals are put on hold. It seems self evident that when examiners take cases out of order they prevent other applications from percolating to the top of the pile.  Indeed, there seems to be little rhyme or reason with respect to the order some patent examiners take up patent applications, and this is problem one to be addressed moving forward if we are going to be able to do anything about the acute lack of innovation within the US Economy.

Americans have always been innovative, and it is extremely odd that this innovation has dried up over the last few years. President Ronald Reagan always joked about how he got worried when he heard someone say they were from the government and were there to help. That is why Reagan lead a movement to get government off the backs of individuals and businesses. There are many now who want burdensome federal regulations to address the collapse of Wall Street and the Housing sector, but none of them are looking at themselves as a part of the problem, which is at best hypocritical and at worst insane. While so many learned economists and political pundits want to blame Alan Greenspan for this mess because he kept interest rates low, the undeniable truth is that he warned Congress time and time again about the impending doom looming as a result of irresponsible lending practices and the threat posed by Fannie and Freddie. The fact that he was ignored by the likes of Barney Frank does not mean Greenspan was wrong, it actually means Barney Frank was wrong, at least if we are going to at all be honest about what really happened as a matter of historical fact.

But Alan Greenspan also proclaimed in a speech he gave in 2000: “We appear to be in the midst of a period of rapid innovation that is bringing with it substantial and lasting benefits to our economy.” What happened? Of course many will simply claim Greenspan was an idiot, which is admittedly far easier than actually trying to figure out the truth, and far more politically expedient. The reality, of course, is that Greenspan was not wrong, he managed our monetary policy through many years of unprecedented growth, and merely dismissing him as the problem, naive or as one who lacks intelligence is foolish. Greenspan did not have the authority to stop lending to people who could never hope to repay what they were borrowing; it was Congress forcing that to happen. Likewise, Alan Greenspan could not have envisioned that President Bush would nominate two PTO Directors who knew little or nothing about patent law, the economy and innovation.

Business Week observed in a recent article:

If an innovation boom were truly happening, it would likely push up stock prices for companies in such leading-edge sectors as pharmaceuticals and information technology.

Instead, the stock index that tracks the pharmaceutical, biotech, and life science companies in the Standard & Poor’s 500 dropped 32% from the end of 1998 to the end of 2007, after adjusting for inflation. The information technology index fell 29%.

So why is innovation failing or simply not occurring in the US? It seems clear to me that it is because the Patent Office spent much of the last 5 years simply not granting patents, or delaying making a decision on the well over 1 million patent applications that are pending.

Originally, when business method patents started to get bad press, the Patent Office initiated what they called “second pair of eyes” review. What this meant was that any business method patent, or any patent for an invention classified in class 705 whether a true business method or not, could only be granted if approved by two separate examiners. This caused extraordinary delays, and managed to keep the allowance rate for such commercially relevant technologies at extraordinarily low levels, as low as 20% from what I have heard.  Apparently, believing the second pair of eyes review was so successful, it was expanded throughout the Patent Office in 2005. I have anecdotally been told this was because the allowance rate was believed to be too high, and had to be forced downward.  I don’t know whether that is true, but a forcing down of the allowance rate is exactly what happened with the Office wide implementation of second pair of eyes.

But why should the Patent Office want to artificially deflate the allowance rate? After all, patent applicants are presumed to be entitled to an invention unless a patent examiner can articulate a justifiable reason for denial. In fact, the second pair of eyes review created a situation whereby one patent examiner with decision-making authority would be overruled by another patent examiner. I understand that the PTO wanted to increase quality, and a double review probably did increase quality, but at what cost?  I also have to wonder whether such a process is even legitimate under administrative procedure laws and the Patent Act. A two tiered allowance review seems to be inconsistent with the clear thrust of the Patent Act, although I cannot think of a section that it directly contravenes.

When second pair of eyes review became standard at the Patent Office the number of patents issued plummetted and the backlog grew at alarming rates. As it turns out, when the Patent Office forces more and unnecessary work it uses up valuable resources, which leads to lengthy waits for those still in the que.  So the Patent Office created its own problem, which has turned into a nightmare for them, inventors and the US economy. No single development is more to blame for the failure of US innovation than the second pair of eyes review.  While the motivations were likely laudable, it is now time to once and for all acknowledge what really caused this problem to get out of control.

Without assets individuals and companies cannot attract investors, and without capital from investors innovation cannot become a commercial reality. When innovation does not become a commercial reality that affects the bottom line of individuals and companies, which in turn affects the bottom line of GDP. It also prevents the hiring of employees and the growth of industries, which in turn means a smaller tax base and less revenues to governments.  Unfortunately, low allowance rates, increasing average pendency and stories about those who cannot get a patent for 5 or 10 years all contribute to a lethargy that sucks the energy out of innovators.  Why bother?  The truth is innovators still need to bother, and there are early signs that patents are flowing again and in some cases exceptionally quickly, but who can really take issue with those who have just given up?  The system needs to encourage, not discourage, and Congress needs to provide more resources to the Patent Office to help them dig out from the mess created.

What we are seeing at the Patent Office presently is an institution that is attempting to strike a balance and find remedies for problems of the past.  I doubt it is coincidence that forward thinking initiates seem to have started upon the departure of Jon Dudas.  It is really quite remarkable what a group of dedicated career employees can accomplish without misguided leadership of a political appointee who knows little or nothing about patents.  I have been critical of the Patent Office for a while, and was very critical of John Doll.  It was suggested by someone in comments to some of my articles that I give him time, and I dismissed that out of hand.  I should have listened to that comment.  While I don’t agree with everything going on, like deferred examination initiatives (I will soon explain my reasoning and offer an alternative, far easier solution) it is hard to argue against the developing positive change seems that seem to be brewing.  I just hope whoever is the next PTO Director doesn’t get in the way, and I also hope second pair of eyes meets a timely demise!

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 13 Comments comments.

  1. patent leather June 11, 2009 8:49 pm

    “I have been critical of the Patent Office for a while, and was very critical of John Doll. It was suggested by someone in comments to some of my articles that I give him time…”

    LOL he’s had four years! The second pair of eyes may have been brewing longer than you think at the USPTO, see: http://www.uspto.gov/web/offices/com/strat21/action/q3p17a.htm
    I’m not sure who’s more to blame, Dudas or Doll for kicking it up into high gear. One reason I think it was put into high gear is to reduce the “error rate” and so self-serving statistics like the following could be disseminated by the USPTO: http://www.uspto.gov/web/offices/com/speeches/06-73.htm
    The problem is, of course, that the USPTO “error rate” is measured by bad allowances.

    Practicing over 10 years, I have always had a positive opinion of the USPTO until about 4 years ago, when I start getting more misguided rejections than usual and after calling examiners to discuss it I start to hear the same things over and over again: “I wanted to allow it but was told to just write up a rejection” , “I’m sorry but I’m new here and I can’t allow anything” , “our art unit had two bad allowances last quarter and everyone here is now scared to death “, “you have to understand what we have to deal with here.” Yes, I have heard such things over and over until it really got me pissed off. I really care about my clients and the work I do and I’ve seen applicants let good subject matter go abandoned because of lack of funds to appeal.

    As far as bad patents, less than 1% of patents go to litigation. Further, (ex parte) reexamination is a fairly inexpensive streamlined process (I was involved in one recently that closed in under a year). If someone feels a patent shouldn’t have been issued they can file a reexam.

    And I apologize to the USPTO for all my griping comments here and on other message boards. However, as a patent prosecutor and firm partner I’ve been around the block and have become an unhappy “customer.”

  2. Gene Quinn June 11, 2009 10:03 pm

    Patent Leather-

    Trust me, I share your frustration. I have also heard a lot of stories about John Doll, but they are all hearsay. Yes, he played some part in those decisions, but I cannot help but wonder what part. Even if he implemented those decisions, did he do it of his own free will? I have no idea. I know there are a lot who don’t like him, but I can’t help but notice that after Dudas left things started changing, and in my opinion changing for the better.

    As a patent attorney who sees the hurt the PTO causes clients, and as an inventor who realistically won’t get a first office action for the better part of a decade (and that is on something filed 3 years ago) I am also frustrated on a personal level. I hope the signs of change are real.

    Thanks for your continued participation, and trust me, I know many are LOL-ing about that quote you picked. I am just trying to be optimistic. It has been a long time in coming. I hope it is not a false positive sort of thing.

    -Gene

  3. BP June 13, 2009 11:43 am

    Patent Leather: I understand your frustration with Examiners who say “I can’t allow because my boss won’t let me.” This is just lazy, in my opinion. I’m a junior examiner (2 years) and I can say that hasn’t been my experience. If I think something is allowable, I have to convince a primary or my SPE. If they don’t think it’s allowable they give me art, a search, or some rationale to reject. I don’t understand why Examiners say this and I know it has to be frustrating. I hope it gets better.

    I do take issue with you, though, on saying that if a bad patent is issued it essentially doesn’t matter because it probably won’t get litigated or a re-exam can be filed. If that’s the case, why do I have a job? Why not go back to registering patents applications? If you have a “bad patent” and you are collecting licensing fees and sending infringment letters to people, that’s a pretty big stick you’re using if the patent is invalid. I’d rather people not attempt to enforce rights they really don’t really have (I know there is a presumption of validity, but you get the idea). You’re right that re-exam is a good alternative to litigation, but if the office did its job in the first place then there would be no re-exam.

    I don’t speak for the USPTO–only for myself. I’m sorry you’ve had such a bad customer experience. Hopefully it will get better.

  4. Gene Quinn June 13, 2009 12:04 pm

    BP-

    I don’t want to speak for Patent Leather, but I think I might be able to explain a little.

    The cries of so many in the industry, particularly the high-tech sector, cannot be taken seriously. There is no problem with patent trolls in reality. If someone comes to you with a crappy patent and says I want you to license you say no. If they sue you then you defend the lawsuit. If you look at what is going on in the high-tech sector, they complain about trolls and then lose at trial and pay damages based on patent claims they could not invalidate and because there was infringement. Everyone needs to look past the pleas, because they are pure BS. You simply cannot cry about getting sued all the time and how unfair it is when you are an infringer of valid claims.

    The high-tech sector is well aware of reexamination and viable strategies, which they refuse to employ. They would prefer to be able to cry to Congress that they are being held up than go back to the Patent Office and have you all say “nope, this patent is good.” When there is a valid argument to make reexamination is the overwhelmingly smart choice, and statistics show that in reexam a lot of claims are lost or altered. So why don’t high-tech folks use it given it is overwhelmingly successful and far cheaper than litigation? Because they know the “patent trolls” have good patents.

    The other thing to consider is that on the front end of an invention it just doesn’t make sense to leave no stone unturned. If that were the requirement innovation would come to a screeching halt because literally millions of dollars would need to be spent investigating prior art and examining every application. So the system is set up to do the best possible job within the parameters of what is reasonable.

    Lets not forget that 98% of patents relate to inventions that make no money. This gets thrown around all the time as proof patents don’t matter, but 2% is a huge success rate when you are talking about the potential riches possible. How many wouldn’t buy a lottery ticket if the percentage of winning was 2 out of 100? Notwithstanding, 98 out of 100 losers do not justify leaving no stone unturned during searching and examination. It is all about cost-benefit.

    You sound like you are the type of examiner that we need more of. Examiners who care and see their role as vital (which it is) is essential if we are going to dig out of this mess. Unfortunately, the stories of bad customer experiences thanks to examiners is rampant. There are a lot of good folks in the PTO, and a lot of folks who unfortunately are impeding positive outcomes. There are no doubt patent attorneys who also impede, which may be why an antagonistic relationship between the bar and examining corps continues to be bad. Under the previous regime my feeling was that examiners were tainted because Dudas kept saying every chance he could that patent attorneys and patent applicants were the problem, and never saw the PTO as a major player in the problem(s).

    Keep up the good work. We need an examination system, but one that understands that a invention is a wasting asset. Reasonable search and examination in a reasonable time will spur innovation and if a bad patent or two get out there reexamination can handle it. If a stupid patent gets out there, we can laugh and poke fun, but those will never be problematic because they are never licensed and never used to sue.

    -Gene

  5. patent leather June 14, 2009 10:55 pm

    BP,

    Thanks for the reply. In my experience most (maybe 75%) of examiners I speak to are intelligent, professional, and happy to discuss the situation at the USPTO. I don’t consider examiners to be the bad guys.

    Something you said was very interesting though, “If I think something is allowable, I have to convince a primary or my SPE.” Yes, this is exactly the problem. If an examiner wants to issue a final rejection, he doesn’t have to take any additional steps. I know that in theory the SPEs are supposed to monitor their unit’s final rejections, but I also understand that in practice the SPEs have too much to deal with these days to have time for this. An examiner also told me that he once tried to discuss a case with his SPE and his primary to have it allowed, and they both told him to reject it and they were also very condescending to him about it and made him feel like he was doing something wrong.

    As far as the problem of bad patents, yes I agree with you 100% that having people threaten lawsuits or litigate based on bad patents is harmful to our system. It is also harmful when inventors or startups with a “good” application can’t make money or get funding because they can’t get their application allowed because of USPTO attitudes. So, yes, the USPTO has to find the appropriate balance between the two.

    When an examiner has to take extra steps to allow an application (which can also hurt the examiner’s record due to the second pair of eyes) but needs no extra steps to reject (and which also won’t harm the examiners record), then that protocol seems biased to me. My suggestions to the USPTO are to 1) implement some procedures to formally review final rejections (I have some right now on my desk that would be a huge embarassment to the USPTO); and 2) the SPE’s and primary examiners should be careful not to be condescending to examiners when they want to allow something. If they don’t feel a case is allowable, they should say something to the examiner like, “thanks for bringing that to our attention. It’s not ready to allow yet, but you may want to give the applicant a call to discuss amendment X which may move things forward.”

  6. BP June 15, 2009 11:08 am

    Patent Leather and Gene:

    Thanks for your responses to my post. PL, I can’t really argue with your assessment that final rejections are easier to get signed than allowances. I agree with you–maybe more scrutiny should be given to final rejections. LIke you said, in theory, finals have more scrutiny because only SPEs and Primaries can sign off on them, but, as you mentioned, finals just don’t get nearly as much scrutiny as a NOA. For what it is worth, though, the Primaries in my AU do a good job of showing the junior examiners like myself of how to work with attorneys in getting a case allowed.

    I do have to say though that sometimes, particularly in my AU, that the first set of claims is so broad that I give a rejection that reads on claims but sometimes isn’t that close to the “real” invention. If I can find the “real” invention I certainly use that to reject or at least cite it in the pertitent art section. I try to search the invention in the spec but sometimes, if the disclosure is extremely long, I can’t really search all the possible embodiments. I know it’s a bit of a game because the Applicants feel like there is meat on the table if they get a first action allowance–so, they go broad anticipating a first action rejection. The second amended set of claims may or may not be the “real” invention but it usually gets around the cited art. Thus, while the Applcant may have “something” he/she hasn’t really claimed the disclosed invention in the spec. Thus, the claims are still broad enough to go final.

    This process is part of the problem, but I don’t really blame the Applicants or the Examiners because this is how the system is set up. In a perfect world I guess the Applicant would claim what he invented and then the Examiner would thoroughly search the art come back with a rejection or an allowance or suggested amendments. This is what the First action interview pilot is supposed to do, but I don’t know if it has been successful or not.

    Gene: I understand your point that “leaving no stone unturned” is problematic and not practical. That is one of the frustrations of this job frankly. How long do I search? When do I stop? It is sometimes tough to decide because, especially in the software arts, there always could be a website, open source code, or newsgroup post floating out there that could be a possible 102. Plus, frankly, I think it is difficult to really “know the art” in software becasue of the rapid pace at which innovation takes place on the Internet and with software in general. This doesn’t excuse bad rejections, but it is something that I think about when looking at a case. Having said that, I don’t have a problem trying to get something allowed if I can’t find it after a thorough search.

    Thanks for the feedback.

  7. Gene Quinn June 15, 2009 3:23 pm

    BP-

    It is really refreshing to hear an examiner who gives thought to how long to search and when to stop. Perhaps there are many like you, but the past few years has really been a dark period and that has lead to a lot of skepticism on the part of patent attorneys.

    I know a lot of senior examiners who have retired, and a lot of them tell stories about this type of thing. One in particular explains that when he was young he asked the same questions, and then when he was a SPE those under him would ask him the same thing. The answer he got, and the answer he gave was at some point if you cannot find something you need to issue. Many examiners think it is their job to reject, but the law is really set up to presume a patent is entitled. That is why 102 explains a patent shall issue unless… With a functioning quota system you would have guidance. You search and work until you hit a certain time limit and if you haven’t found anything by then you should issue. Mistakes will be made, but it is not your job to find everything and anything. Whether we like to admit it or not, examiners are doing the best good faith job of due diligence they can within time restrictions and search limitations. You are looking for a needle in the haystack, or a couple needles that can be pulled together in the case of obviousness.

    The best thing you can do (in my opinion) is become the best searcher you can. Learn to use the real world resources, and not just the search software. Combine search techniques and realize the role you play is vital to our system. If you find stuff reject, otherwise get to the end of your time (with enough left to go through the allowance procedures) and then issue. Not issuing and holding back because you know there is something out there is detrimental to the industry, and to the US economy. Patents are needed to raise capital from investors, which can be used to expand and employ individuals. So those who reject, reject, reject at all costs are really harming the US economy for no good reason and ignoring the law.

    I wish you well, and I hope you become a frequent contributor here at IPWatchdog.com.

    Thanks.

    -Gene

  8. New Here June 17, 2009 10:49 am

    I don’t agree with the idea that the Patent Office is holding innovation hostage because applications are not granted patents. Innovation like beauty is in the eyes of the beholder and most owners of applications rejected I would bet believe their ” innovation” has been done wrong, and that is normal for people, but not a problem for the Patent Office. Innovation today, in my “nasty” opinion, is those with the resources run through the winners line at the PTO and having others fight through the courts for one reason or the other over such patents. The wrong here is innovation in this context I outline above has nothing to do with “new” or “different” ; the fact is one does not learn nor grow in the world in a vacuum, therefore shapes our ideas information in such a way we are sharing without knowledge of it and questions claims of innovation.

  9. staff June 17, 2009 3:29 pm

    “In fact, the second pair of eyes review created a situation whereby one patent examiner with decision-making authority would be overruled by another patent examiner. I understand that the PTO wanted to increase quality, and a double review probably did increase quality, but at what cost?”

    let’s not forget that in most instances allowance is reviewed by the supervisor. plus, there’s quality assurance. further, there never was proof that there was a problem with lax issue standards. in the end the PTO screwed inventors, is still screwing them, and there is no end in sight.

  10. Noise above Law June 18, 2009 7:48 am

    New Here,

    Please try to formulate your thoughts a little more coherently.

    For example, diagram the following sentence: “The wrong here is innovation in this context I outline above has nothing to do with “new” or “different” ; the fact is one does not learn nor grow in the world in a vacuum, therefore shapes our ideas information in such a way we are sharing without knowledge of it and questions claims of innovation.”

    What do you mean to say? At “therefore shapes” you open the spigot and all your thoughts rush out. If you want to make an impression that you have something to share and care that your idea will be taken seriously, spend some time putting your thoughts together. Write what you want to say on a piece of paper and review it before you post. I am sure your perspective has value, but your writing is getting in the way.

  11. New Here June 18, 2009 10:20 am

    Noise above,

    Hello, I read all the time where people’s thoughts are written by the “rules” and somehow the thought just gets lost and fails to get across anyway. I read without “filters” because people are people, I find I enjoy reading more because details of rules fog the point in some cases keeping me from making that try to understand. I again thank you for the input, I enjoy it as well even though the point is not written clear.

  12. Noise above Law June 19, 2009 6:56 am

    New Here,

    Thanks, I think.

    You are correct in that even with following the rules of English, there are posts that simply do not make sense (posts by 6 immediately come to mind).

    I am not certain how “details of rules fog the point in some cases”. How does following the rules of English copntribute to the fogging of the intended statement (perhaps the lack of understanding the rules, but that’s a different issue)?

    Never-the-less, I am interested in what you are trying to saying and still would like to understand what you meant with your run-on sentence, running at full speed with “therefore shapes”. You do seem to have an earnest thought that you want to share, and I appreciate that you seemingly take my criticism as it is intended – not to stifle, but to promote.

  13. New Here June 19, 2009 10:10 am

    Noise above Law,

    I wish to end this please, I post here because I find I enjoy the reading and best I’m here with people that understand the Law to a degree I don’t, so I learn something from time to time. The question of “”how “details of rules fog the point in some cases”.”” is a point made by a man I knew (dead ’91), he had many published works and the reading was not for everyone (me included). His point was, “you must break rules sometimes even though others may not understand it”. He made this clear with an example that may at first seem odd, he said, “as we have found lost language(s), no rules to go by, we have had to make that understanding through other means when our own understanding (rules) offer nothing.” So, “details of rules fog the point in some cases” ?, is that if the rules are a filter, you may find they have “fog” the point, the meaning, to a degree it is lost to you the reader. I talk to people and they say things in ways I have to re-write it in my head, if you know what I mean, never thinking to tell them about it. I fail to see that you cannot understand anything I have written if I understand your claim right ?, the fact that I do put many points opinions together, that one may have some problems following what is not a single point or meaning ..and yes, I may just not follow the “rules” everytime: Understanding is an art, not learned.

    Thanks for the input, I always enjoy talking to people.