UPDATED: Tuesday, July 21, 2009 at 6:59pm Pacific Time
The last presentation at the NAPP Annual Conference is presently ongoing, with William Smith of Woodcock Washburn giving a presentation regarding hot topics before the Board of Patent Appeals and Interferences. Smith is a former member of the Board while at the USPTO. His presentation is a good one, and sobering all at the same time. He mentioned my interview with Acting Patent Commissioner Peggy Focarino, and noted that the encouragement of allowances that Commissioner Focarino talked about in my interview is being seen by his firm and evidenced by what he called more “lets make a deal” phone calls from patent examiners who are presumably being told to find ways to issue patents. This coincides with what my firm has seen, and what I have heard from others. Sobering about his presentation so far though is that Smith said he fears that the budget problems facing the Office could cause the PTO to limp through the remainder of fiscal year 2009, and perhaps even limp into fiscal year 2010. He suggested that PTO fiscal year 2010 budget is likely going to be difficult to estimate given current economic conditions, and it is even possible that hiring may not restart in October as had been hoped by many of us. He then suggested there is a chance that even if Congress passes and President Obama authorizes the borrowing from the Trademark Office, the Patent Office may still have to struggle to keep costs down through the end of fiscal year 2009, which will end on September 30, 2009. These budget concerns were raised in a high profile way in a Wall Street Journal article titled Backlog, Budget Woes Await Patent Chief, which appeared in the paper earlier today. I was quoted in the article as being cautiously optimistic of the Kappos nomination, but hoping that he does not take positions only friendly to the high-tech sector.
I am extremely encouraged by the fact that the US Patent Office seems to be increasingly coming under the direction of those who have a sincere desire to see the system succeed and be better. I think Acting Commissioner Peggy Focarino is making real progress with important initiatives, I think it is a step in the right direction for President Obama to appoint a Patent Attorney to run the Patent Office, which as odd as it sounds is a revolutionary concept. I think bringing people like Nick Godici back is a great step, and like I have said on numerous times in my writing we need to leverage the collective experience of the many talented folks who have left the USPTO or been forced out for political reasons. Having said all this, good people who understand the system are only the first step to regaining control of the destiny of the Patent Office. Given the chaos that has lead to unbelievable and counter-productive delays in getting a patent application examined and issued, there needs to be creative outside-the-box thinking in order to get the PTO back on track and innovation flowing to the point where we can dig ourselves out of this horrible recession. Toward that end, I submit the follow recommendations.
Last night the United States Senate passed a bill that authorizes the United States Patent and Trademark Office to shift funds between different USPTO accounts in order to avoid the Patent Office having to furlough or terminate patent examiners. Under the Senate bill the USPTO would be able to shift funds from the Trademark side of the building, which is in the green, to the Patent side of the building, which is substantially in the red. As I have been explaining for many months, the Patent Office budget is in shambles, and is only getting worse. The Patent Office has seen a sharp drop in patent revenues in the last six months, and while there are many who will blame the economy, the truth is that budget problems would have been experienced even without an economic downturn, although the PTO budget has turned into a nightmare because the economic downturn has certainly had an impact, and not a helpful impact at that. The truth, however, is that the Patent Office obtains an overwhelming amount of its funding from patent maintenance fees (I have been told it approaches 70% of Patent revenue) and with the patent allowance rate declining for years thanks to second pair of eyes review, the Patent Office has had the unfortunate circumstance of having to use double the resources to fuel two separate reviews of all applications, while at the same time cutting off future maintenance fee payments because patents were not issuing.
Senator Orrin Hatch (R-UT) has been out in front on patent and intellectual property issues for years, and he is at it once again. Senator Hatch has recently been very active with respect to writing op-ed articles explaining what all of us in the patent community have known for a very long time. My hope is that his profile will bring attention to what is obvious — “If we are to have a durable economic recovery, we must rely on our renowned American ingenuity to lead us into prosperity again.” These words were written by Senator Hatch in an op-ed published by TheHill.com earlier this week. I have been beating this drum for many months now, and with Senator Hatch beating the drum hopefully the rest of America, and in particular the Congress and White House, will pay attention.
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.
By now you have probably heard that the United States Supreme Court lifted the stay Ordered by Justice Ginsberg late on Monday and the bankruptcy deal that will give Chrysler to Fiat, UAW workers and the US and Canadian governments is now clear to go through, most likely on Wednesday, June 10, 2009. I will not call this deal a sale of Chrysler to Fiat, as many are, because a sale presupposes that a buyer will pay for an acquisition. As ridiculous as it sounds, Fiat will not actually buy Chrysler, but rather they will be given a 20% stake in Chrysler without paying a dime. They merely need to share their small automobile technology with the newly reformed Chrysler when it exists bankruptcy, all in exchange for a 20% initial ownership stake, which could grow to 50% or more eventually. This is a very sad day because today marks the day that the US Supreme Court ignored the US Constitution, ignored bankruptcy laws and made it all but certain that it will be impossible for most businesses to afford to borrow money, and extremely difficult for even the most healthy businesses to borrow money. This will cripple much of the US economy, and in particular will disproportionately harm independent inventors, entrepreneurs and start-up businesses who absolutely require funding from investors to successfully launch and succeed. This is a very sad day indeed.
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 June 15, 2009, edition of Business Week has an interesting article about innovation by Michael Mandel, which concludes that during the last decade US innovation has failed to deliver on the hyped promises, and this failure of innovation may have contributed to the economic woes we are now experiencing. Indeed, this article is interesting for many reasons. First, how is it possible that an article that questions American innovation could never once mention the crisis facing the Patent Office? Second, it is not accurate to say that the failure of US innovation “may have contributed,” the failure of innovation definitely contributed to the economic mess we face now because there has been no sustained technological growth that lead to an expansion of jobs. Third, the primary reason innovation has not come through for us is because the Patent Office has for years held innovation hostage, refused patents, extraordinarily delayed even making a decision on patent applications, and this lead to the evaporation of venture funding for many US companies, and prevented many other companies from being able to interest those with capital because no exclusive rights had been obtained, or could be predicted in any relevant time frame.
Admittedly, the selection of an Undersecretary of Commerce for Intellectual Property, a post that also carries the title of Director of the United States Patent and Trademark Office, is not as important in the greater scheme of things as many of the other posts President Obama has had to fill. Having said that, given the unique and real challenges facing the U.S. patent system, it would be nice to eventually have a leader in place. While those within the Patent Office are starting initiatives that will likely help in the long run, the major issues facing the USPTO are not likely to be resolved until there is new leadership. My hope is that a new leader will be able to explain to Congress that more funding is needed, and maybe even explain that patent reform should take actually attempt to help the patent system, and the Patent Office in particular. But with the announcement of Supreme Court nominee Sonia Sotomayor, does anyone think it is realistic to anticipate a nominee for PTO Director to happen before Sotomayor’s confirmation hearings? Add to this the fact that North Korea announced that the Korean War is back on, Vice President Cheney and President Obama are jousting over how to handle terrorists, no one wanting Gitmo prisoners in the U.S., Cap and Trade working its way through Congress and Iran perpetually wanting to erase Israel from the map. With all these issues occupying the President and Congress is there any real expectation that a PTO Director will be named anytime soon?
John White answers a student question in NYC at PLI Headquarters.
I am writing from New York City today. I am here for the PLI Patent Bar Review Course, which kicks off our summer run of courses. Over the next couple months John White and I will crisscross the country from New York, Houston, Boston, Los Angeles, Chicago and Atlanta, spreading patent teachings to aspiring patent attorneys and patent agents. Right now I am sitting in the back of the room at PLI Headquarters in New York City listening to John White talking, waiting for him to discuss interviews with an examiner. At some point John will talk about how you simply cannot show up at an interview and ask the examiner “so do you see anything patentable here?” He will then go on to say that you need to come to the interview with proposals and suggestions in an attempt to provide something to the examiner that is patentable. I have always wondered why that is the case. Why can’t you just go to an interview and ask the examiner whether they see anything patentable? After all, the examiner is going to be the decision-maker. I have never seen the wisdom behind a policy that prevents the examiner and attorney from having a meaningful dialogue to ascertain whether patentable matter exists and what can be done to allow a patent. My thought for the Patent Office is that it be a Patent Granting Authority, and as I have written over many months, a meaningful and early interview that identifies patentable material can and should lead to the issuance of at least one patent quickly, which would be good for the applicant, lead to venture funding and consequently be good for the economy.
As I was reading IP Kat this morning I learned that yesterday the UK Intellectual Property Office announced that green inventions will be fast tracked through the patent process. David Lammy, Minister for Intellectual Property, announced the launch an initiative which will enable inventions with an environmental benefit to be given priority within the patent system. About six weeks ago I suggested in an article that suggested to President Obama that he order the expediting of patent applications on green innovations because it would help the economy, make the world more environmentally friendly and improve US national security. Is it possible that those running the Intellectual Property Office in the UK are reading what I wrote? Is it possible that they are considering policy initiatives I suggested? I suppose it is possible, and would love to think that is the case. Regardless of whether my suggestions were considered or even known about, I think it is fair to say that since those in the UK IPO are embarking upon this path they must think that what I suggested was a good idea. Perhaps with the UK following this path those in power in the U.S. will see the wisdom in trying to expedite patent applications on important technologies that can and will lead to the creation of jobs. I hope those in the White House and in Congress give some serious thought to this UK initiative.
As of today, legislative patent reform efforts are working their way through Congress. We are further along the road to legislative reform than at any point in time over the last 4 years, but the ultimate outcome is still not certain. The Senate Judiciary Committee has reported out a version of patent reform, so there is a real expectation that legislative reform will happen at some point during 2009, perhaps soon. It is expected that if Senator Harry Reid (D-NV) brings the legislation to a vote it will be because he has the votes to pass the legislation. If the Senate passes patent reform there will be patent reform. The House of Representatives has consistently passed patent reform, and there is every expectation that President Barack Obama will sign the bill, thus the Senate is, as is typically the case, in charge.
The average pendency of U.S. patent applications is out of control. Everyone involved in the industry knows this to be true, but it might be easy to forget just how bad it is at times. Like so many patent attorneys and agents, I did not practice during the Reagan years. While I have over 10 years of experience as a patent attorney, that means I did not start practicing until President Clinton was already in his second term, and the Patent Office was already in decline. During my professional life I have not known a Patent Office that could issue a patent on average in 18 months. When Ronald Reagan became President he wanted to revitalize the Patent Office, and he successfully accomplished that goal by bringing the average pendency of patent applications down to 18 months. As you can see from the chart below, this lasted (for the most part) through the Administration of President George H. W. Bush, and almost through the Clinton first term, and then something went horribly bad for the Patent Office, which means that whoever is the next Director of the Patent Office will need to fix a problem that has been brewing for at least 14 years.
Sometimes I wonder if I am dreaming. Virtually all of us have been affected by the economic crisis that has gripped the world, so no one can really claim to be uniquely impacted above and beyond others, although to each their own circumstance no doubt feels unique. There are tried and true solutions that historically have lead to economic growth and prosperity, so the fact that our leaders seem more interested in pursuing strategies that would be first time successes even if they do work, because there is no historical evidence to suggest that spending more, printing money and increasing the size of government will do anything other than make things worse. You cannot borrow and spend your way out of debt. It was Daniel Hannan, a previously unknown member of the European Union Parliament, who best summed this up in a YouTube clip that has been viewed more than 2.2 million times. Yet we continue to borrow and spend, and now U.S. taxpayers are being asked to give away $448 million to other countries to help citizens of those countries hit by the economic downturn, including $100 million for small business and entrepreneurs in Latin America, according to Bloomberg.com. Mr. Obama, if you want to assist small business and entrepreneurs there are plenty here in the United States that could use a helping hand. And, by the way, the best thing you could do would be to come up with a national technology policy to foster innovation and entrepreneurship in the U.S., and you can start with fixing the United States Patent and Trademark Office!
For some time now I have been writing about how a patent stimulus plan would revitalize the economy, but I am all fired up today after a flurry of comments and e-mail exchanges regarding some of my recent blog articles. It is way past time to rethink the patent application process and how patent prosecution is carried out by patent examiners. I know I am starting to sound like a broken record, a dog with a bone, or perhaps even the patent equivalent of Sean Hannity, harping on the same things over and over and over again, but it is necessary at times to get your message heard unfortunately. In any event, call me whatever you want, but the reality is that unless and until the Patent Office actually starts granting patents in a technologically relevant time frame there is little or no chance that innovation will lead to the growth that can and historically has pulled us out of troubled economic times. There is simply no benefit applying for a patent on a high-tech, cutting edge solution when that application likely will remain pending for at least 3 years, and more likely 4, 5 or 6 years. That is not a technologically relevant time frame. A technologically relevant time frame means a patent must issue before the invention is obsolete!
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