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12 If you have been in the patent industry for any length of time and you represent individuals or small entities, you have almost certainly heard complaints about the perception that corporate giants are treated differently at the United States Patent and Trademark Office. Until recently determining whether there was any merit behind the often mumbled whispers alleging disparate treatment was exceptionally difficult. With the recent unveiling of PatentCore, however, it is easy to collect all kinds of information about Patent Examiners and Art Units.
Although not a part of their basic offering, PatentCore also provides detailed analysis of assignee portfolios, including issued patents, pending applications and abandoned files. So what do you suppose those numbers show? It does seem clear that the allowance rate for large corporations is much higher than the average allowance rate for all patent applications. But does that suggest some nefarious bias? Not so fast my friends!
The table below shows some of the data I uncovered using PatentCore for 10 of the top patent filers at the USPTO.
| Company | Granted | Abandon | Allowed | 1 RCE | 2+ RCEs | Avg. Time | Avg. # OA |
| Canon | 4242 | 474 | 89.9% | 29.8% | 31.1% | 3 y, 3 mo | 1.6 |
| GE | 1227 | 488 | 71.5% | 20.7% | 15.0% | 3 y, 2 mo | 1.7 |
| Honda Motor | 988 | 100 | 90.8% | 18.1% | 16.2% | 2 y, 11 mo | 1.4 |
| IBM | 7930 | 2558 | 75.6% | 20.8% | 22.7% | 4 y, 0 mo | 1.9 |
| Intel | 860 | 311 | 73.4% | 26.9% | 29.4% | 3 y, 8 mo | 2.2 |
| LG Electronics | 1844 | 736 | 71.5% | 28.5% | 27.6% | 3 y, 9 mo | 2.0 |
| Microsoft | 3635 | 719 | 83.5% | 47.5% | 34.7% | 4 y, 4 mo | 2.4 |
| Samsung | 5331 | 2647 | 66.8% | 31.5% | 21.9% | 3 y, 5 mo | 1.7 |
| Seiko Epson | 2726 | 638 | 81.0% | 22.1% | 22.3% | 3 y, 1 mo | 1.5 |
| Sony | 1806 | 498 | 78.4% | 25.9% | 26.5% | 3 y, 8 mo | 1.7 |
The first thing that needs discussion is how RCEs are handled in PatentCore. The first column relating to RCEs shows what percentage of allowed patents required the filing of at least 1 RCE. The next RCE column, which is labeled 2+ RCEs, relates to a subset of the 1 RCE column. So, for example, if there were 2,000 granted patents and 1 RCE or more was required in 1,000 then the 1 RCE column would be 50%. Focusing on those applications having at least 1 RCE prior to allowance, if 400 required 2 or more RCEs then the 2+ RCE column would show 40% (i.e., 400 out of 1,000).
[Varsity-1]
The next thing that bears discussion pertains to the last column, which relates to the average number of Office Actions. The PatentCore data handles this number differently than the USPTO does on its Patents Dashboard. According to the USPTO Patents Dashboard, the number of actions per disposal reflects the average number of examiner actions leading to the final disposition of a patent application, whether the application is allowed, abandoned or on appeal. If an application were to receive a first office action, a final office action and then be allowed, the USPTO would characterize that application as having three actions per disposal.
PatentCore, however, counts all final and non-final office actions that precede a notice of allowance. So, if an application were to have a first non-final action, a final rejection, RCE, non-final action in the RCE and then a Notice of Allowance this would count as three office actions before allowance. The USPTO would presumably count this as four actions per disposal.
According to PatentCore creator, patent attorney Chris Holt, “if you look at Sony, for example, you see that they have more than 400 applications with a first action allowance. That means the office action count attributed to our average in those cases was zero. But before you decide they are getting quick and unfair treatment, I also see Sony has 130 allowed applications with 5 or more office actions.”
Indeed, if you look at the average actions per disposal from the USPTO Patents Dashboard as of December 31, 2012 (the last time it was updated) and appreciate the slightly different way that the USPTO and PatentCore handle this data, you find that the average actions for these 10 representative large companies seems to largely be within the Office average for all applicants. Notwithstanding, 400 applications with a first action allowance? That is something I will be looking at in more detail in the near future. Stay tuned!
Perhaps the one column that jumps out as potentially demonstrative of disparate treatment is the column showing percentage of allowed applications. According to the Patents Dashboard the percentage of allowed cases, including RCEs, in December 2011 was 50.1%. Our representative set of 10 large companies shows allowance percentages well in excess of 50.1%, but does this show bias?
Holt has experience representing large clients that are heavy users of the USPTO. He offered this rationale for why the allowance rate may seem higher than one would initially expect:
For my large clients, I get almost all of my cases allowed. Perhaps it is because I prosecute so many cases that I understand when to compromise, and I do it early. So maybe these companies get outcomes because their representatives are very experienced. Also, my large clients will often abandon cases if allowance is not obtained after two RCEs unless they are really high business importance. As we get close to the second RCE we tend to do what we need to do to get the case allowed.
Holt concluded: “none of the numbers for large companies really surprise me. They seem about right to me.”
If you ask me, Holt is largely correct. Certainly there is a disparity in the percentage of allowed cases for large corporate users of the USPTO, but there are numerous factors that explain why this would be without ever needing to get to the point where a conspiracy theorist would conclude that there is a nefarious effort afoot to benefit large entities while making it difficult for individuals and small businesses to succeed.
First, whether anyone wants to accept it as true or not, disparate financial resources absolutely factors into why large corporations enjoy a higher allowance rate. In many, if not most, situations an individual, small business or start-up company needs to obtain broad rights to build upon. Those broad rights sought require broad claims filed, and broad claims are most susceptible to being rejected as reading on the prior art literally or as being obvious in light of the prior art. Broad patent rights are simply harder to obtain.
Similarly, many small entities affirmatively do not want a patent portfolio. They want a patent that covers all the claims they need. Large corporations will frequently take what they can get from the Patent Examiner and then circle back to file either a continuation or continuation-in-part to seek to obtain broader claims in a future patent. This strategy is an excellent strategy, but it can be expensive. Every time you file a continuation you have a new filing fee, and if you are lucky enough to get that continuation allowed there will be issue fees and maintenance fees associated with that second patent. Pursuing this “take what you can get and circle back for more” strategy costs a lot more in fees; fees that many small entities simply cannot afford. Thus, they are forced to fight over wanting broad claims they think they deserve rather than allowing some claims to mature into an issued patent. This easily depresses allowance rates for small entities.
Another reason large corporations would be expected to have a higher allowance rate than independent inventors and small businesses is because they are deep in the industry and have better systemic knowledge about what competitors are doing and where the state of technology is at any given moment. This allows them to make better filing decisions and not pursue inventions that have marginal likelihood of receiving a patent.
Of course, a comprehensive patent search can help independent inventors and small businesses figure out whether this is a likelihood that any claims can be obtained, but many don’t want the expense of a patent search or prefer bargain basement patent searchers or even patent searches conducted abroad by an individual who speaks English as a second language. I’ll never understand why you want someone who speaks English as a second language doing a patent search. Regardless of how cheap those searches are they are compromised by the fact that the searcher may not grasp the language. If you are not a large corporation and/or are new to the patent world you absolutely need to start with a comprehensive patent search and analysis or you are going to be among those pulling down the allowance averages.
At the end of the day it seems to me that the way patent applications are prepared and strategic decisions made during prosecution of the patent application explain why larger corporations have a much higher allowance rate than the average. I don’t see evidence of anything nefarious, although I am sure there will be some who reach a different conclusion.
SHAMELESS COMMERCE DIVISION: PatentCore is still offering a free 2-day trial, so give it a spin and see whether it might help you obtain actionable information about the Art Units and Patent Examiners you are dealing with.
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Join the Discussion
12 comments so far.
Anon
February 16, 2012 10:37 am“An IDS or ESD’s were just ways for past management to try to avoid doing their jobs,”
That, in a nutshell, is the proper identification of the problem.
Stan E. Delo
February 15, 2012 10:51 pmActually, nearly Always the inventor will be far and away the best person to initiate patent or market searches for prior art. If they are any good at all, they will know Exactly where to look. Once the search is sort of pointed in the right direction, release the hounds! I don’t like the whole idea of an IDS, as if the inventor and their counsel have done their jobs properly, it really shouldn’t be neccesary at all. At one point a former Director was suggesting that extremely expensive Examination Support Documents (Express Suicide Disclosures) might be required. The way I seemed to view it was that the ESD was required to point out how the prior art might obstruct the granting of a patent right, which is totally Crazy. Why would my practitioner Ever consider preparing a document that was in direct opposition to their clients’ best interests and possible success?
It sounded to me like an ESD would probably cost about 5K at the very least, and the Attorney that prepared it could be liable for Inequitable Conduct charges if they tried to cook the case in their favor or missed stuff that they *should have* found. Also, a patent agent is not allowed to write an ESD, so an Attorney is required.
An IDS or ESD’s were just ways for past management to try to avoid doing their jobs, that were bought and paid for by inventors like myself. Not patent attorneys. Not patent agents. The patent process is paid for by the actual inventors or their assignees. At least Congress and our current President have decided to cease and desist from raiding the USPTO cookie jar for at least one year! Yay!
Give David,Teresa and Peggy a few well deserved bucks and a whole lot of new computers and examiners and then stand back!
Anon
February 15, 2012 09:53 pm“An IDS submitted with filing would imply a prior art search was done”
You mean in direct contradiction to what the rules actually state Mark?
There are multiple reasons why I would disagree with such an assumption.
Mark Nowotarski
February 15, 2012 05:02 pmI wanted to echo to message that a thorough patent search done before filing is critical to small entities. Most of my clients are start ups new to the patent process. Getting that initial prior art search done tremendously boosts their allowance rates since we know what to focus the application on.
So to test this statistically, can Patent Core sift out applications that are filed with an IDS and those that aren’t? An IDS submitted with filing would imply a prior art search was done.
Stan E. Delo
February 13, 2012 04:14 pmMichael Z-
I think you have a pretty good handle on why independents often give up just before things start getting good. I organized an inventor group for a few years, with usually 25 members active, so I got a pretty good sense of what goes through the minds of many independents and why. First and foremost it is usually just an extremely expensive hobby for them in most cases. Totally different for the corporate folks, because it is their Job to get things reasonably right in the first place, and demonstrate reasonably sane rationales, as in a good business case for following through to the end, even if it is just a small tree in their thicket.
Most times the independent is relying very heavily on a single patent that they will of course want to be as broad as they can get away with, which puts the practitioners in a somewhat tricky situation sometimes. Do you tell the inventor up front that it might not work trying to get for them what they want, and what the risks might be, or go ahead and file and see what shakes out during examination? Sort of like the lottery or stock market a bit I would suppose.
Also, given that independents have a lot less to spend, they often get jaded when they find that the world isn’t pounding on their door to license their better mousetrap that they finally got a patent awarded for, so they give up due to lack of diligence on trying to market it or even considering if it was of any market value in the first place, and don’t ever try to invent again. Such is life, as Anon seems to get, and inventors either just have to get that, or collect their Darwin Prize a few years hence. The successful ones, once they get something monetized will know the drill by then, but the other 95% will be gone, so practitioners are constantly having to deal with mostly beginners.
Stan~
Chris Holt
February 13, 2012 01:11 pmMichael –
With regard to small entity clients “throw[ing] up their hands in desperation,” I can’t help but put in yet another quick plug for the PatentCore system. When I receive an office action for a small entity, I use the system as basis for setting the client’s expectations. The data enables me to do that because it tells me how the assigned examiner and associated art unit are likely to behave in terms of the likely number of office actions before allowance, the likelihood of encountering a final rejection and/or an RCE before allowance, the likely amount of time between now and issuance, etc. When they know what to expect, it is easier to help these clients make the right decisions. When you can tell them what to expect, they are more likely to trust that you really are trying to get them the best patent that you can, as soon as possible, and for as reasonable as cost as possible under the circumstances. I think it is the trial and error…and our inability to tell them definitively what is likely to happen that frustrates them the most. A final rejection and an RCE is a much easier pill to swallow when they pretty much knew it was coming and understand that it may have been almost inevitable no matter what you, as the attorney, would have advised them to do. Check it out for yourself! Free two day trial….and then ONLY $100 per month!
Anon
February 13, 2012 11:00 amPaul,
There may be more than one disconnect between “considered more “high tech” by the stock market” and “to stop wasting money.”
I recognize where you may be coming from, but from teh business angle, such applicaitons are anything but “wasting money.” Your sense of being a purist is getting in the way of how the world actually works (Wall Street can be funny that way). You have slipped into a “how things should be” as opposed to a “how things really are.” One simply cannot ignore how things really are. That’s just asking for trouble.
Paul F. Morgan
February 13, 2012 10:25 amA major factor is that large companies like to get large numbers of issued patents to be considered more “high tech” by the stock market. Hence, they are more willing to continue to prosecute and issue patents even if the uncovered prior art results in only very narrow claims being allowable. Plus, some foriegn companies in particular seem to lack management or staff capable of telling or authorizing their U.S. patent attorneys to stop wasting money on such applications.
Michael Zall
February 13, 2012 08:36 amI like your columns..keep it up.
Regardless of their attorney’s attempt at educating them, a major reason small entities have a lower allowance rate, is that they do not understand the system and do not have the money. Once that Final Rejection comes in the decision tree gets complicated and expensive for them, and they generally choose the cheapest way out…which is probably not the best road to an allowance. No matter how long you spend with them explaining the “system”, it’s costs and your recommendations for an allowance, they generally choose the least expensive path and then eventually throw up their hands in desperation at the expense and complexity of the system. Larg entities understand the system and have the money to go down the path needed to secure an allowance.
Chris Holt
February 12, 2012 09:46 pmDale –
For the record, the table of the top 10 patent filers reflects a random sampling of applications allowed or abandoned primarily in the 2004-present date range. The sample is relatively well distributed across that data range. Your comment has prompted me to wonder what this table would look like if broken out year by year. I’ll have to see if I can find the time this week to generate that data…and see if any interesting trends pop up.
One of the reasons I would like to break the data out over time is that I suspect many Fortune 500 clients have drastically shifted their approach to patent prosecution in the last four years or so. I think many of these big companies used to treat every patent application as equally important and, for that reason, instructed their counsel to fight it out, fight out, fight it out…which maybe lead to extended prosecution But I feel like things have really changed these days. It seems to me more emphasis is being placed on evaluating/prioritizing cases and adjusting the prosecution strategy accordingly. I think this had lead to more efficient prosecution. This, by the way, is something that the PatentCore data system will enable you to do every effectively!
I also think continuation practice comes into play here. I think large companies are more likely to file continuations that are likely to get to allowance more quickly than the corresponding parent applications, etc…at least because a lot of the important relevant issues may have already been considered and searched by the examiner.
I’m still thinking about all this. I look forward to seeing what others think about this data.
Dale B. Halling
February 12, 2012 09:05 pmGene,
Very interesting article. I disagree slightly. I think difference in financial resources and the fact that most large companies think it is always worth fighting the PTO is the main reason for the difference.
Before the absurd administration of Jon Dudas, I would say my small startups had the best allowance rate with the fewest Office Actions. My startups were much more likely to be working on ground breaking technology (consistent with SBA studies) and usually had a much better idea of the prior art competition than my Fortune 500 clients.
Despite this your article once again shows that the system has become skewed to larger corporations. And this is not just of academic concern, since SBA studies show that most disruptive technology is developed by startups and independent inventors
Rube
February 12, 2012 07:03 pm“400 applications with a first action allowance? That is something I will be looking at in more detail in the near future.”
Sony often files applications at the USPTO that are a direct (unedited) machine translation of their Japanese priority counterparts, including the claims. Often, these claims are much longer and far more densely worded than claims that a US patent practitioner might draft. Hence, it’s easier for examiners to find allowable subject matter early in the prosecution, which may contribute to the high number of first action allowances.