Something came up in the comments to a post earlier today and I want to address it and definitively debunk the rewriting of history that seems to already be started with respect to who is to blame for the problems of the patent system. The question arises with respect to whether the Patent Office has created their own mess by artificially forcing down the number of patents granted because it was believed the allowance rate was too high and fewer patents should be issued. Of course, to the extent that this happened, which we all know it did, this would be malfeasance of the first magnitude. The law says that applicants are entitled to a patent unless the examiner can articulate a justifiable reason for not issuing a patent. For some government official to simply believe the allowance rate is too high and institute means to guarantee it dropped violates not only common sense, not only the spirit of the patent laws and the Constitution itself, but it also runs contrary to the dictates of the relevant statute. As a result, during the first quarter of 2009 the allowance rate sank to 42%, and the Patent Office budget is a mess.
Many will erroneously attribute the reduced number of patent filings to the recession, but this would be the first time in at least recent memory that the number of patent applications did not grow despite a recession or economic downturn. See chart below.
There is more to the decreased number of applications than the recession, as I have pointed out numerous times. The reality is under the previous regime at the Patent Office the likelihood of receiving a patent dropped to unacceptable levels, particularly in light of the many years it takes to receive a decision thanks to the growing patent backlog.
Now to the particular matter at hand. It is now being suggest by some, and this is not the first time I have heard this, that the Patent Office did not create their own budget problems, and that the Patent Office of the past is not to blame for the horrible state the patent system is in. I know I have talked about moving forward, but one of the things that Director Kappos has to do, and quickly, is get the patent examiners to understand that the patent bar and inventors and applicants and corporations are not the problem. The previous regime instilled almost hatred toward users of the patent system and these folks who work for the PTO that believe that will someday run the Office, so this has to be rectified or we are in for a lost generation of innovation in the United States.
The reality is that unwise business decisions and unjustified tinkering with interpretations of the statute and role of the Patent Office lead to a significant reduction in the number of applications allowed based in terms of the work done by the Patent Office. The figures simply do not lie. Take a look at the charts below, copied from the 2008 PTO annual report.
|Utility Applications Filed||Utility Patents Issued|
It does not matter that the number of utility applications allowed in 2008 approximates the number of patents issued in 1999, for example. In 1999 there were 259,618 utility patent applications filed and 142,852 utility patents issued, which correlates to 55% of the number taken in were issued, which is similar to the 54.7% that existed for 1994 and the 56.7% that existed for 1988. I realize that those filed in these years were not issued in these years, but it is an interesting thing to look at this number when compared with the similar number for 2008. In 2008 there were 464,541 utility patent applications filed and 154,699 utility patents issued, which corresponds to 33%.
Why is this analysis important? The Patent Office receives significant portions of its overall budget from maintenance fees due 3.5, 7.5 and 11.5 years after the issuance of a patent. The Patent Office also receives $1,055 for the publication and issuance of a patent for a small entity, and $1,810 for the publication and issuance of a patent for those not qualifying for small entity status. Because the Patent Office is receiving far more applications then they used to, that means more work, but fewer or even the same number of allowances reduces the amount brought in in terms of fees relative to that increased workload. Far more work even with the same amount of fees is a problem, and that is something that everyone seems to understand except perhaps those inside the Patent Office who cling to the erroneous beliefs that got us into this situation in the first place. Unfortunately, there are many who cling to erroneous beliefs as if they are fact, and those that believe the PTO is blameless. I have no particular interest in playing the blame game any more, but when clear, documented facts are ignored in order to not face reality there is a problem.
Whether people choose to ignore reality or not, the facts are what they are. The artificial lowering of the number of patent applications issued has created real financial burdens for the Patent Office. Congress will eventually have to step in and subsidize the Patent Office or innovation that could and should lead to the creation of new jobs will continue to languish inside the walls of the Patent Office.