Is It Time to Privatize the Patent Office?

I am in New York City for the next few days for the PLI Patent Bar Review CourseJohn White and I traveled up from Virginia together yesterday and we did what we so often do — talk patents.  A fun life we lead no doubt, but someone has to do it!  In any event, increasingly as we were talking about things we have heard from attorneys, retired patent examiners we know and frustrated clients, something that has been occurring to me with more frequency came to mind once again.  Is it time for us to seriously consider privatizing the United States Patent Office, or at least turning it into a quasi-governmental body that has autonomy to run as it sees fit?  I think the answer is a resounding yes.  This is a discussion long over due and I tend to think that objectively reasonable minds at the end of the discussion will come to the conclusion that a Patent Office controlled by Congress has little or no chance of ever fulfilling its Constitutional responsibility again.

Saying that Congress controls the Patent Office is something of a misstatement really.  It would be far more accurate to say that Congress starves the Patent Office and is constantly demanding more and more with less and less.  At a time when $1 trillion is spent like Monopoly money to put Trump like towers on Boardwalk and Park Place it is not only irresponsible, but down right embarrassing that our political leaders in Washington are starving our innovation agency while they hit the campaign trail with all the required high-tech, innovation and job growth platitudes that the evening news demands in 15 second intervals.  There is plenty of blame to go around with respect to how we got into this state, but does anyone think we can realistically get out of this mess without thoughtful Congressional assistance?  Then the real nightmare question becomes: Does anyone really think we will ever get thoughtful Congressional assistance?

The fact that any Congressional assistance seems unlikely, let along thoughtful Congressional assistance, is what leads me to ask whether the only answer is to either privatize the Patent Office or create a quasi-governmental body that does not report directly to either the Executive Branch or the Legislative Branch, but perhaps to a Board of Overseers made up of patent attorneys, inventors and corporate users of the Patent Office— you know, the stakeholders who seem to be the only ones any more that really care whether the Patent Office works, save of course those on the inside on the 10th floor who have the thankless task of making a broken system work the best it can without adequate funding, without enough patent examiners and with state of the art computer systems circa 1990.  How many of you are reading this on a machine that is 5 years old?  10 years old?  15 years old?  The problems facing the Patent Office truly boggle the mind.

I have said it in the past and I will say it again now, hopefully with enough force so that people will read it and understand it to be true, because I believe it to be 100% accurate.  One of the biggest problems facing the Patent Office is a lack of mentorship of the young examiners over the last 5 to 7 years.  On December 1, 2003, the United States Patent Office began its move to Alexandria, where the agency is headquartered presently.  The move was completed in 2005, at about the same time that the Patent Office announced a tele-work program because they didn’t have enough space for all of the employees at the new Alexandria location.  What happened?  The minute the new facility in Alexandria was open and the move complete the offices were inadequate in number to accommodate all of the USPTO employees.  Practically comical if it weren’t true and if the consequences haven’t been so terrible.

If you are running your business who would you allow to work from home?  Those who you trust enough to actually work from home and who don’t need supervision or motivation to work.  That was the same group of people the USPTO thought most appropriate to work form home.  It just so happens that those people were the ones with the institutional memory.  They were the ones with the experience over the years and could remember a kinder, gentler Patent Office that didn’t blame patent attorneys and applicants for all the problems facing the system.  These were the individuals who in years past would have been available to younger examiners to answer questions and provide the mentoring that is absolutely essential.  There has been a brain drain at the Patent Office and many of the day-to-day problems we are experiencing now are almost irreconcilably inter-twined with the inescapable truth that those with 5 to 6 years of experience, the very people doing the heavy lifting, were not properly mentored.

Those who know me know I talk patents to anyone and everyone willing to talk, and thankfully for most of us it is a calling and passion and not just a job.  What that means is I talk to a lot of people, and so does John White.  Some of those that we talk to regularly are retired patent examiners, some of whom man the inventor help line to answer questions.  John and I have both been told by several of those retired patent examiners that they get calls with some frequency from patent examiners wanting to know how to handle a particular situation.  The reply by the retiree taking the call: “Did you ask your SPE?  What did they tell you?”  The reply from the young patent examiner looking for help: “My SPE told me to call you.”

It is increasingly true that those who are becoming Supervisory Patent Examiners have grown up in a Patent Office that had those with the institutional memory and experience out of the building and working at home.  That is not a recipe for passing down knowledge and customs from one generation to the next.  It is a recipe for failure if you ask me.

The attrition rate at the Patent Office has also been a great concern.  This is what the Government Accountability Office (GAO) had to say in September of 2007:

From 2002 through 2006, patent examiner attrition has continued to significantly offset USPTO’s hiring progress. Although USPTO is hiring as many new patent examiners as it has the annual capacity to supervise and train, for nearly every two patent examiners it has hired over the last 5 years at least one has left the agency.

In early 2009 because patent filings were off dramatically compared to expectations the Patent Office instituted a hiring freeze, which has lead to a consistent monthly decline in the number of patent examiners.  So the attrition problem faced by the USPTO is, if anything, worse than identified by the GAO back in September of 2007.

No entity can continue to thrive when there is a brain drain and those who are new hires are largely left to their own devices to figure out the job for themselves without sufficient mentoring.  This is a trend that demands to be reversed, but how?  Congress did appropriate another $129 million to the Patent Office, allowing them to keep those funds collected rather than turn them over to the general Treasury, but what about the other $200 million or more in fees that the USPTO will collect in fiscal 2010 (which ends tomorrow) that they have to turn over to the general Treasury?  Simply stated, taking money from the Patent Office is called fee diversion in the industry but is nothing other than an innovation tax.  Innovators are paying excess fees to the Patent Office and the Patent Office can’t even use them to hire more employees, improve their IT infrastructure or find suitable office space so the work-at-home program can be eliminated.

The problems facing the Patent Office are monumental and I have no faith that they can adequately be addressed without Congressional assistance, an end to fee diversion and a lump sum appropriation so the Patent Office can reinvest in the institution.  I just cannot see that happening, which leads me to conclude that the Patent Office needs to break free of the chains of bureaucracy, operate like a business and be accountable not to Congress but to the stakeholders who pay for the services rendered.

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40 comments so far.

  • [Avatar for Bobby]
    Bobby
    October 6, 2010 02:53 pm

    Gene, you bring up some good points. I will address two of your points, you bring up lots of different ideas:

    You said,

    “You and your friend are entitled to your opinions, but if your friend thinks work at home is the best thing then he is objectively incorrect. It might be good for him, but he is ignoring the drag on mentoring. If he thinks he is able to mentor people while he is home then he is wrong. You cannot be an absentee mentor”.

    It is true that receiving training in person is better than training from someone working from home. My point is that the PTO made a decision around 2005-2006 that certain instructors would be dedicated to training junior examiners while other experienced primaries were left to get as many cases done as possible. I tried to explain this to you that this is the whole purpose of the PTA (patent training academy). The PTA currently requires all junior examiners to get personalized training at the Alexandria office in person at least 1-2 years from what I read. The instructors are there in person. The instructors do not work from home. It is a classroom style environment.

    During the 2006-2008 period the PTO had a huge influx of new hires (thousands of new examiners). There was no practical way to pair up a primary examiner with junior examiners to receive one-on-one personalized training in an apprentice style method of training (which it sounds like is the way you prefer). Due to the current case backlog this would easily extend the initial wait on all incoming applications from 3 years to probably at least 4 years or longer because all those primaries would have to put there work done and spend time with new hires.

    The best analogy I can think of is how an NFL football team is run by coaches. The players do not train each other and give each other strategies. Rather you have a quarterback coach would help the quarterback with his throwing. You have an offensive coordinator who runs the offense the way they want it. The examiners are like the football players in that they do not coach themselves. Rather, the instructors at the PTA are the coaches that do the training.

    Further, PTO made a strategic decision when implementing the telework program. This has resulted in quality smart patent examiners that were more likely to stay longer at the PTO and thus give the work force more experience. Further, the future of the PTO wants to expand the telework talent pool to be nationwide at a later time. This will enable the PTO to choose from a much bigger talent pool rather than simply only relying upon examiners who live in the local Alexandria area.

    The telework program has actually pulled many talented patent agents and patent attorneys away from private practice to work at the PTO. The PTO was smart enough to realized that they cannot compete with the private firms in terms of money and salary alone from what I have read. However, the PTO offers what these firms cannot. An experienced formed agent or attorney can get non-monetary benefits by being able to work from home and with less hours by working for the PTO. The PTO does not have the awful 2000 minimum billable hour requirements that is standard practice at private firms. Instead they can work a normal 8 hour day like a normal person and get to spend more time with their family at home. Some friends of mine at the PTO said this is exactly way they left private practice and have no plans to go back. They are more happy and fulfilled to take the smaller salary but enjoy a higher quality of life. Money is of no use if you don’t have time to enjoy it anyway. The PTO also benefits in that it is keeping this experience in their workforce rather than see talented examiners walk out the door every two years to go into private practice.

    My last point, is that you say the government has failed, but how are determining this? The most major problem I see is the delays in how long it takes to get a patent. The PTO is not run into the ground because it is still functional to this day. The PTO this year has processed thousands of patent applications. The backlog is definitely a huge problem but it is very complex problem and privatization will not solve all the issues. For example, a big part of the backlog is due to the ever increasing complexity of our technology and inventions. A hundred years ago the patent office most likely would be getting applications on say a new piece of farming equipment (for example a new type of plow).

    Nowadays, your applications are mostly going to be cutting edge drugs or a complex piece of computer software. The PTO wants the national talent pool because they need people with the technical training to understand these inventions. Secondly, I have to question the industry practice of the billable hour. Gene how do most attorneys get paid? It is per case or per hour? The billable encourages firms to draw out prosecution to be as long as possible. Of course, they are supposed to be working in the best interest of their clients. Often time they are but I have to question an incentive system that rewards inefficiencies. I personally believe that a significant portion of the backlog is due to firms that need to make their bills and need their clients on a continued long-term basis. Part of this is through litigation for going away infringers but also some of this is in prosecution through applications in the PTO. RCEs, continuations, divisionals, re-exams this all plays a big part in the backlog currently. These all result in long, drawn out prosecutions for the private firms billing their clients based upon time. If the inventors very quickly got there all patents and went happily on their way, how many hours would that attorney actually get for that case? Quick results would mean that firms have to go find more customers and more clients, which is not always an easy thing to do especially in this economy. Privatization would only shift the game to a new organization. The attorneys would still be extending prosecution on this new privatized organization rather than the PTO after all they have bills to pay too.

  • [Avatar for American Cowboy]
    American Cowboy
    October 6, 2010 10:24 am

    The irony is that politicians tout innovation and want to support it in their speeches, but almost never do they include aid to the PTO in their programs. It is all tax strategies, R&D credits, grant-making… stuff like that. My guess is that their “thinking” is a product of not being patent lawyers, but rather sociology and/or accounting majors who when to law school and think that finance makes the world go round.

    Plus, by being able to give benefits to selected parts of the economy, they can reward or solicit campaign contributions from targeted beneficiaries. A PTO that benefits millions does not tie into that sort of essential aspect of politician thinking, AIPLAPAC notwithstanding.

  • [Avatar for Gene Quinn]
    Gene Quinn
    October 5, 2010 10:58 pm

    PTO non-examiner-

    A constitutional amendment would not be necessary. The Patent Office is not mentioned in the Constitution, just that Congress has the authority to authorize the granting of patents. The “how” is not specified and could be carried out by a private organization or a quasi-government organization while still being Constitutional.

    I understand your view of the securities trading and Congressional oversight. The trouble is we know for fact that a publicly run Patent Office has not worked and has lead to the Patent Office being a bottle neck and a deterioration of the core Patent Office systems, such as the IT system, to the point where they simply cannot function. So a government run Patent Office doesn’t work because Congress seems to have no interest in the patent system. As awful as it is to say, the point that many in comments are missing is that even a horribly run private organization couldn’t run any worse.

    Kappos et al are doing the best they can, but they don’t get the resources they need. Good ideas, hard work and dedication can only accomplish so much given the USPTO has been neglected by our government leaders for too long. This is not an indictment of anyone at the USPTO. I think with adequate resources and support and a little legislation to reform the system for the better the USPTO could be great. But does anyone really think there is any realistic chance of that happening soon? Ever?

    -Gene

  • [Avatar for PTO non-examiner]
    PTO non-examiner
    October 5, 2010 04:42 pm

    Wouldn’t a Constitutional amendment be required in order to privatize the Patent Office?

    American Cowboy’s idea about a decentralized, privatized patent system with government oversight sounds a lot like our securities trading system – I’m not sure that that system is working well enough to copy.

  • [Avatar for Gene Quinn]
    Gene Quinn
    October 4, 2010 11:22 pm

    Bobby-

    You and your friend are entitled to your opinions, but if your friend thinks work at home is the best thing then he is objectively incorrect. It might be good for him, but he is ignoring the drag on mentoring. If he thinks he is able to mentor people while he is home then he is wrong. You cannot be an absentee mentor.

    As for your comment about former patent examiners being disgruntled, that is rather interesting. Why would they be disgruntled, and how do you know that my information isn’t coming from those who know well about the modern Patent Office? You really ought not to assume.

    I am not missing the point that the PTO is a government entity. What you are missing is the government has failed us. Over the last decade the government run Patent Office has run itself into the ground, Congress starves it for resources, implements an innovation tax by siphoning off money, examiners with experience are working from home and not training new examiners and the backlog and average pendency are completely unacceptable. So if you think the PTO is serving society then you need to wake up and realize qhat is going on.

    You are also wrong to believe privatization is about profit. Where do you even get that? What did I say to imply a profit motive? For crying out loud, wake up will you. The public, government run Patent Office isn’t working and won’t work without a Congress that cares. We have little or no chance of that happening.

    -Gene

  • [Avatar for Bobby]
    Bobby
    October 4, 2010 07:39 pm

    You have a nice theory but its full of holes. Although I do not work for the PTO, I have close friends who have told me about it from various conversations.

    I disagree with your statement: “improve their IT infrastructure or find suitable office space so the work-at-home program can be eliminated”.

    One of my friends has been patent examiner for years and has seen many different ideas through the years and the work-at-home is by far one of the best ever implemented by the PTO according to him.

    I have talked to many patent examiners who would have left the PTO if it were not for the hoteling program (work-at-home program). It is one the most effective ways of preventing examiner attrition.

    Gene, you have to be very careful on where you get your information from. A lot of the retired patent examiners are disgruntled employees who know little to nothing about the PTO’s modern teleworking and training procedures. They may know what happened in 1980s but they know nothing about the PTO in the modern age.

    I know from talking with my friend that the existing PTO IT systems in 2008 are more than capable of handing the current the work-for-home programs.

    As far as examiner training is concerned, you say that senior examiner experience is valuable but that you want personal one-on-one mentoring between junior examiners and experienced ones. The problem with this theory is that the experienced examiners do the bulk of the workload and cases. For every hour you take one out to spend time with a junior examiner, is that much less work is being done. Do you realize that if every experienced examiner took lots of time out of their schedule to devote to training that the backlog and delay for initial examiner of cases would dramatically increase? I have heard lots of this.

    This is why the PTO create the PTA (patent training academy) that you have probably read and heard about. It is so that certain teachers can devote themselves to teaching junior examiners while the experienced primaries can do what they best which is get cases done fast (you know specialization, did you ever hear of it?)

    As far as privatization goes, first of all the PTO does not work for the practitioners interest period. The PTO works for the public not for law firms and not for companies filing for patents. The PTO’s primary mission is to execute the laws as determined by congress and to promote public knowledge in technology. That means the PTO wants public disclosure about how the latest technology is working.

    You seem to be missing the point in that the PTO is a public government office. I know that applicants pay the PTO fees but the PTO is not your CPA doing taxes for you. The PTO does not cater to any given company. It is about creating fairness and a level playing field. The PTO is designed to promote the society and economy of the United States. If want to change the system, it is called Democracy. There is something called elections. If you don’t like your current congress you may vote which is your right as a citizen, but the congress currently stands as it is was voted in. The PTO is an agency to execute and protect laws. Protecting public interest has nothing to do with privatization. Privatization is about a profit motive. The PTO is not about profit, its about protecting the public good. You know that there is a large backlog for examining, but you know what? Every year there are still thousands and thousands of applications submitted, so the system cannot be as bad as you think or otherwise nobody would be filing for patent applications.

  • [Avatar for American Cowboy]
    American Cowboy
    October 2, 2010 10:32 am

    Bobby, I thought about it some more, and I think your idea meshes with my privatized patent office plan. The governmental agency that does the regulatory work would also do the randomly-selected-patent quality control or “second look” that you are talking about. It would not rescind the patent issued by the private office, but give it a grade and analysis that is made public. The cumulative grades of the patents selected for one of the issuing offices would be published more widely, so that customers can see how good a job they are doing. The government agency would pay the costs of the second look, and would be tasked with being objective — if the patent is great, it should say that as well as if it has flaws.

    If the patentee does not like his analysis, he can go seek reexam at his issuing office (or perhaps one of its competitors).

  • [Avatar for Bobby]
    Bobby
    October 1, 2010 05:27 pm

    @AC
    The way I see it, it would probably be mostly pro bono, but if you have any good alternatives, I’m all ears. My line of thought is that by spending a bit of available spare time, they could help clean up the patent ecosystem, which would be good PR for the patent lawyers, and benefit potential clients who are spending less money on fighting junk patents, giving them more money to potentially spend on getting more worthwhile patents. Also, if you can deter the filing of bad patents, then there will be less bad patents adding on to the backlogs, which is beneficial to everyone. A benefit that goes directly to the patent attorney is practice in critical analysis of patent applications. If you are familiar with what a bad patent looks like, you could be much better at not filing bad patents yourself, which would seem to me to be a very useful asset.

  • [Avatar for American Cowboy]
    American Cowboy
    October 1, 2010 04:15 pm

    Bobby, who is going to pay the patent attorneys doing the peer review?

    My guess is the noble members of the bar won’t do it pro bono, so someone has to pay them. If it is private enterprise that pays them, the payor will have a dog in the fight and “encourage” the attorney to be for or against the patent in question.

    If the government does the paying, then that is the system we have now, but much more expensive.

  • [Avatar for Bobby]
    Bobby
    October 1, 2010 02:51 pm

    @Gene
    I have a somewhat related thought. I think we can all agree that some ‘bad patents’ exist, and that having them is not a desirable outcome, especially when these patents are used as a threat against a practicing entity that may be a big innovator itself. Obviously, the USPTO is run by humans and thus prone to error, so perhaps a system of patent peer review could be established to pick up some slack. It wouldn’t even have to have a governmental role, just some patent attorneys and perhaps other experts in the proper fields that can point out and maybe vote that a patent is too broad or was an obvious or trivial improvement over the prior art or other flaws, maybe even giving detailed citations. Being the patent attorney that files a patent that is panned by other patent attorneys could be bad for one’s career long term, and could thus lead to a better patent system by encouraging higher patent quality. The system would need to be carefully implemented from both technical and legal angles, especially to avoid concerns for libel laws, but if there was at least some degree of self-policing, I think there could be a significant decrease in the worst elements of the patent system, which would be beneficial to everyone.

  • [Avatar for Bobby]
    Bobby
    October 1, 2010 02:21 pm

    @Blind Dogma
    This is not an issue regarding the strength of the patent system, although I suppose that this angle could lead to reducing the power of the US patent system. You can claim that it’s the wrong lens, but the reasons for filing for patents is most certainly financial in most cases, even if it’s indirect. There might be a few inventors that simply want credit, but that would be easier (and cheaper) to do by publishing a paper on the subject. There is also a faint possibility that someone might be applying for a patent simply for the power trip of being able to control others for a while. I doubt that is very common, and even if it is, both the credit and power are still both economic motivators, since economics is about value, not money.

    How exactly are you proposing that the patent system works that is radically different? We aren’t injecting chemicals into the brains of inventors to engage that parts of the brain that are needed for innovative thought.

  • [Avatar for Blind Dogma]
    Blind Dogma
    October 1, 2010 11:15 am

    Patentology,

    Just because I do not agree with yourdesire to expand the scope of the discussion beyond the borders of U.S. law for U.S. patents in no way indicates an unwillingness to engage in a meaningful discussion. I would appreciate you being clear on the topic – there is far too much purposeful muddying of the waters in an already complicated area of law. Conflating non-U.S. principles serves no one.

    I am an ardent supported of maintaining the supremecy of the U.S. patent and have zero interest in makiing things easy for others who wish to have a weaker U.S. patent for whatever reason.

  • [Avatar for Gene Quinn]
    Gene Quinn
    October 1, 2010 10:46 am

    AC-

    I like your thinking. It dovetails nicely with some conversations I have had in recent days with John White, who in a brainstorming session also suggested a competitive marketplace with some amount of government oversight. I like your idea of assurance, almost like what the identity protection companies say when they say we guarantee your identity doesn’t get stolen and if it does we will pay up to $1 million to fix any resulting problems and clear your name.

    Anyone else have thoughts? I’d like to continue moving down the path of specifics and ways to actually make it work to get to a point were a more specific proposal could be drafted.

    -Gene

  • [Avatar for 24.Patentology (Mark Summerfield)]
    24.Patentology (Mark Summerfield)
    October 1, 2010 10:34 am

    @Blind Dogma
    You have chosen your handle well. Your unwillingness to engage in meaningful discussion is sad.

  • [Avatar for American Cowboy]
    American Cowboy
    October 1, 2010 09:55 am

    Gene, I have been thinking about this for a while and think the structure needs to be that there is a policy-type patent office that is a government agency and has regulatory authority over the several free-enterprise patent offices that entrepreneurs may choose to establish. The government agency would also continue as the neutral arbiter of patent policy for Congress.

    The key to better performance is not just private ownership or non-governmental status, but competition. Competition in the free market, coupled with the potential for the winners of competition to make sizeable profits, is what makes our traditional economy so wonderful. So, you need the freedom to make a profit and competition. This will yield the most bang for the buck for patent applicants. If you want the lowest cost but don’t care how long your application is pending, one private office may be more attractive to you than another that charges high fees but turns around applications and issues them as patents in a matter of days! Yes, a profit-seeking operation could do that!!
    Another possibility is that one patent office may be the go-to place for software patents and another for biotech. A patent office located in Houston may be the place where the oil industry goes for its patents.

    But, you say, won’t there be a race to the bottom, with the competition being on the level of “if you can fog a mirror and pay enough, we’ll give you a patent on whatever you ask?” That is where the regulatory supervision comes in.

    There would need to be rules on the private patent offices that penalize them for that kind of mindset. One possiblity is that they insure the patentee that his or her patent will be held valid if tested in court, with some payment, say on the order of $100,000 or whatever, to the patentee if the patent is invalid. Yes, there are details to work out, such as what if some claims are valid and others are not, etc. but that can be addressed. The $100,000 is a number I plucked out of thin air thinking it is enough to discourage the race to the bottom but not so much that entrepreneurs would be afraid to participate. Again, the precise amount is one of the things the regulator would work out.

    Another possible discipline would make a required part of every patent validity challenge a factual showing to the judge or jury of the percentage of patents issued by the issuing patent office have been held invalid, as compared to other choices the applicant had. That would make the patent applicant look to file in patent offices that have the best statistics.

    Other great minds in this profession can no doubt find other ways to cause the patent offices to try to do their jobs with integrity. And once, we have shown how it is done, they can copy tat wisdom at the financial ratings agencies…

  • [Avatar for Blind Dogma]
    Blind Dogma
    October 1, 2010 06:32 am

    I appreciate that for many Americans the origins of patent law are seen to lie with the Founding Fathers and are enshrined in your Constitution. It may therefore be difficult for you to appreciate that for most of the world, and even for many US-based economists, the operation of the modern patent system is not analysed in terms of ideals of progress in the technological arts, but in economic terms.

    And I would appreciate it that this is the US system under discussion where what and how most of the world looks simply is the wrong lens to be looking at the issues.

  • [Avatar for Patentology (Mark Summerfield)]
    Patentology (Mark Summerfield)
    September 30, 2010 06:28 pm

    @Blind Dogma
    “Market failure” is a term that economists use when referring to situations in which the free market (which these days is effectively the “default” economic system) fails to produce desirable results. The primary “desirable” result of the free market is broadly understood to be competition which ideally provides incentives for competing suppliers to improve efficiency, if for no other reason that it enables them to reduce costs and therefore compete more effectively in the marketplace.

    This is all great when it works, and it often does. But there are exceptions. For example, it sometimes happens that a corporation gains so much market power that it is able to suppress competition. The policy response to this is to introduce antitrust legislation (a.k.a. unfair competition law) that expressly limits the free use of market power, as well as corporate regulators to do things like prohibiting mergers and acquisitions that would result in unacceptable lessening of competition in an industry. These types of laws and regulations, which interfere with the free market, are justified as responses to “market failure”.

    I appreciate that for many Americans the origins of patent law are seen to lie with the Founding Fathers and are enshrined in your Constitution. It may therefore be difficult for you to appreciate that for most of the world, and even for many US-based economists, the operation of the modern patent system is not analysed in terms of ideals of progress in the technological arts, but in economic terms. Patents interfere with the free market by granting private monopolies. The economic justification for doing this is that there is a type of “market failure” whereby a company that invests in R&D may be penalised if its products and services are then easily and quickly copied by competitors who do not invest in R&D.

    In other words, patent law addresses the potential “failure” of the free market to provide adequate incentives to invest in R&D (and therefore indirectly to promote progress in science and technology).

    Instead of asking other people to provide “credible authority” for views that are so widely held globally that it is impossible to identify a single source that would satisfy you, you could do some research of your own. Start by typing “market failure” into google, combined with terms such as “innovation”, “research and development”, “intellectual property”, “patent”… You will find thousands of “fascinating” articles and opinions on the subject. Indeed, you’re sure to find at least one you like!

  • [Avatar for Bobby]
    Bobby
    September 30, 2010 05:41 pm

    @Blind Dogma
    Market failure doesn’t mean that the market doesn’t work, but that it doesn’t perform as well as it could. If something could be changed to make the market perform better, than some degree of market failure has occurred, and making that change would be correcting the failure.

  • [Avatar for Blind Dogma]
    Blind Dogma
    September 30, 2010 05:33 pm

    If patents are allocating resources better than the free market, wouldn’t that mean that there is some degree of market failure occurring?

    No.

    Why would you assume that the two are mutually exclusive, or that success in one means some sort of failure in the other?

  • [Avatar for Bobby]
    Bobby
    September 30, 2010 02:07 pm

    Chill out, BD. Just as you shouldn’t attribute malice what can be explained by stupidity, don’t attribute to stupidity what can easily be attributed to laziness. Gene’s statement was readily available and seemed appropriate for debate with Gene, and you didn’t provide a clear definition for your criteria of authority. Furthermore, don’t think I am claiming that the market is actually failing, or that this purpose is the only purpose of patents that has ever been proposed, or even that patents actually do correct the market. I’m just saying that it’s a widely accepted economic justification for patents.

    Market failure is defined as inefficiencies in the market to allocate resources efficiently, often because of a failure to include the costs and benefits of externalities. If patents are allocating resources better than the free market, wouldn’t that mean that there is some degree of market failure occurring?

  • [Avatar for Blind Dogma]
    Blind Dogma
    September 30, 2010 01:18 pm

    Do you count Gene as a credible source?

    Bobby,

    I hope that this doesn’t shock you: The answer is “No.” Gene is one attorney and has his opinion. Authority demands more. If you understood law, you would not have to ask such a question.

  • [Avatar for MBT]
    MBT
    September 30, 2010 01:07 pm

    NohjEdo – if my art unit was filled with folks like you when I started, I wouldn’t have made it. Nobody can read the MPEP and make any sense of it without guidance. Fortunately, my art unit had a good deal of senior examiners who were willing to help the new examiners – and the quality shows. The legal field depends on mentorship and like it or not, the PTO is a legal office and should operate like one – mentors teaching the new hires, who in turn pass along the wisdom to those that come after them. The back log will remain unless the PTO starts retaining higher numbers of senior examiners. Work at home helps somewhat, but so does giving more hours per case and allowing a buy-in by the examiners to the overall mission of the PTO. Listening to the concerns of examiners and allowing them to grow academically instead of treating them like assembly-line workers would go a long way as well.

  • [Avatar for Bobby]
    Bobby
    September 30, 2010 12:57 pm

    @Blind Dogma
    Do you count Gene as a credible source?

    In a world where some innovations, particularly those in the biotech and pharma fields that we want most, costs billions of dollars to develop and take to market is is naive on an almost unbelievable level to think that innovation can occur without “government granted monopolies” or in other words “patents.”

    Bobby, you need to do some basic research on free-riders and the generic pharmaceutical industry. Generic pharma innovates nothing. They copy wholesale and sell for pennies on the dollar because they do not research, develop or fund the onerous FDA process.

    He’s clearly stating that he believes that in the pharmaceutical industry, the development of new drugs can’t happen without patents changing the dynamics of the market to be more suited for development. He attributes his belief in the inability for the market to push innovation in this scenario to a high cost of producing the idea in a marketable form and a low cost of copying the idea with generic pharmaceuticals, and claims that patents largely correct this problem.

    http://ipwatchdog.com/2010/09/06/abbotts-hiv-aids-drug-patents-challenged-by-pubpat/id=12373/#comment-15504

  • [Avatar for NohjEdo]
    NohjEdo
    September 30, 2010 12:47 pm

    @Gene

    1) I don’t think only the private sector is subject to corruption. However, you have to admit that more proven and documented corruption has happened in private sector corporations than in public sector agencies. This isn’t me being naive, it is a fact.

    2) I am not acting like the benefits/perks are the only reason that patent examiner’s are retained now even thought they have been retained for hundreds of years and at the same time you can’t say that the benefits/perks don’t keep people and that such a statement is objectively false because you haven’t worked their in the last 5-8 years and can’t surmise as to why people do and don’t stay when I do in fact work their. Additionally, you can’t compare the retention levels of the hundreds of years to the retention levels of the past 5-8 years without acknowledging that the patent office has indeed change along with the rest of the world. It used to be that finding a job and staying with a single company was the best thing a worker could do. Then the world changed and companies died, entire industries died and experience in related areas in an industry trumped loyalty to a single company for all your life. So what I am saying is that in this new environment you can’t honestly believe that the things that kept older generations on a job are the same things that are going to keep newer generations on a job. Just look at the PTO previous retention rates.

    3) Regarding not having senior people to assist new hires, that is a complex problem. The ratio of junior examiners to experience examiner’s is high to the point that one has to way the cost of having a seniour examiner train 3-8 junior examiners over a few weeks when that senior examiner could be putting out a high number of cases which reduces the backlog. So while I am not management, I would rather people complain about new hires not having “institutional memory” than people complain about the experience people not spending less time examining and more time training new hires. And admitedly I am being a hypocrite because I was mentored by senior examiners, but I was also told that the first place I should look is my MPEP, then my fellow examiners, then my SPE or primary examiner. And I do acknowledge that it isn’t happening today and that it may be a problem, I just don’t know what can be done about it. Also, I wouldn’t consider myself senior, because 1) I don’t want to train anyone and 2) I like working at home. The only constant in life is change. You either adapt or get left behind.

  • [Avatar for Blind Dogma]
    Blind Dogma
    September 30, 2010 12:18 pm

    since patents are effectively a method of correcting the “market failure” of ideas having high production costs and a low cost for copying

    Please provide a citation or other credible line of authority for this belief.

  • [Avatar for Bobby]
    Bobby
    September 30, 2010 11:54 am

    @Gene
    The private sector is not the only one capable of being corrupt, but the nature of the USPTO is not very compatible with something a private sector does well, especially since patents are effectively a method of correcting the “market failure” of ideas having high production costs and a low cost for copying, which would at least theoretically deter investment in innovation. There would be nothing remotely close to providing competition, and a business or semi-governmental organization that has a monopoly on granting certain kinds of monopolies, and in your proposed scenario is overseen by a group that wants those monopolies granted as fast and easily as possible seems like a nightmare.

    Perhaps yet another problem is that the courts bear a good share of the cost side of patents, and if they are privatized, then they will be further isolated from these costs. Patents cause litigation, and patent litigation causes costs just in court fees, not to mention the opportunity cost of judges and courtrooms not being available for something else. It makes sense for the USPTO to bear this burden and possibly some others. Perhaps too much is taken out, but that’s better solved by adjusting policy, not privatization. It seems to me to that privatizing patent granting but not patent enforcement would be similar to privatizing the part of the postal service that sells stamps, but leaving the actual delivering to a government agency.

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 30, 2010 11:26 am

    NohjEdo-

    You need to explain why corruption would be more of a problem in the private sector than it would in the public sector. You are not seriously suggesting that only the private sector has the capability of being corrupt, are you?

    What you say about benefits/perks like work at home being the only way to retain examiners, that is objectively false. The work at home program is relatively new and examiners were retained for hundreds of years without it. Low morale for a number of reasons, the inability to advance through promotion and a horribly malfunctioning publicly run Patent Office are to blame for the retention problems over the last 5 to 8 years. Until Kappos took over the trend was that the USPTO would become crippled under its own bureaucracy.

    Flex-time, comp-time and overtime are fine. Not having senior people who have institutional memory available to the new hires is not fine. So you can pretend that I suggested getting rid of flex, comp and overtime, but you and everyone else knows that is just a lie. I suggest getting rid of work from home, which has been an objective failure. What you see to fail to understand is that if work at home is ended and you leave there will be no brain drain at all. You already aren’t at the office mentoring the next generation, and being available by telephone just isn’t the same. If you are honest with yourself, and you really are a senior examiner, you know how you were trained and what worked and you KNOW that is not happening today. That is a problem, whether you choose to acknowledge it or not.

    -Gene

  • [Avatar for NohjEdo]
    NohjEdo
    September 30, 2010 11:07 am

    @Gene

    My view is that 1) privatization of the Patent Office would lead to more problems than it would solve, due to conflicts of interests and 2) the ‘perks’ of the job, like the ability to work at home, serve as a means of retaining quality examiners.

    In regards to my first point, the privatization of an organization which directly influences the direction of innovation and the balance of technological power in the corporate world, would leave the wolves guarding the hen house, so to speak. This privatization would lead to a whole new group of problems ranging from blatent corruption, bribes, extravagant pay packages, etc. And as far as making the PTO a quasi-governmental agency, we only have to consider two prime examples of these quasi-organizations in Fannie and Freddie. Their employees have been the subject of mismanagement, back alley deals, political favors and blatent fraud for as long as they have existed. Their roles have aided in the collapse of our housing market and as a result impaired our entire economy like never before. Would we want to see the same problems plague both domestic and global innovation? I think not.

    In regards to my second point, without benefits/perks like the ability to work at home, patent examiners have very little economic incentives to stay at the patent office. Especially when you consider our scientific backgrounds when combined with our patent and legal experience if compared to the salaries of our equivalents in the private sector. Furthermore, it would be no problem for an examiner of 5+ years to spend a few years in law school while on the job, then leave the patent office for the private sector and have our base salary at a firm start at the cap for all patent examiners (currently around $160K/yr). Then again, there are always other government agencies and consultant firms like Booze Allen that always need scientists (and that is just in the DC metro area). However, perks like the ability to work from home, force one to do a cost-benefit analysis and consider both the economic and non-economic benefits of a job. As for myself, and probably several other examiners, who may have other options, we continue to examine patents not because it gives us the greatest sense of of satisfaction to “drive innovation”, but because of the non-economic benefits when combined with the salaries we get that don’t match our worth. If you don’t think so, do a poll to see what examiners would do if flex-time, comp-time, overtime and all telework programs were eliminated. Talk about a ‘brain drain’ on the PTO.

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 30, 2010 10:44 am

    Bobby-

    Fair point. I agree.

    Sent from iphone

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 30, 2010 10:40 am

    Sam-

    You question my integrity and don’t know me? I guess YOU don’t value intellectual honesty!

    Patents should be easier to get. Please inform yourself of the issues.

  • [Avatar for Sam]
    Sam
    September 30, 2010 09:28 am

    Privatize? I guess you do not care about integrity. What are you going to do when some large corporation leans on the boys running the “prviate” PTO to get a patent through. If the PTO became privatized, patents would be like Cracker Jack prizes.

  • [Avatar for MBT]
    MBT
    September 30, 2010 09:28 am

    Gene, I was an examiner at the patent office when the Alexandria building was being planned. I was a delegate member of POPA, the bargaining unit representative for patent examiners (i.e., I was a union steward). We constantly told management that there wasn’t enough room in the new building plans. This was also at a time when management was loathe to offer telecommunting to anyone. They acted like it was a huge accomplishment for them to open it up for only primary examiners with many years of seniority. The main thing that POPA complained about is that so much square footage of the builidng was being used for non-examination functions, such as the large atrium, which while impressive, starved the building out of a lot of useful space. POPA was ignored. The new complex in Alexandria stands as a monument to the architectural firm and to a few government officials who fleshed out their resumes with a nice-looking building that never had enough space planned into it. I am now happily practicing outside the PTO and can only watch with amazement as my friends that are still there work in what they call a high-tech dungeon.

  • [Avatar for Bobby]
    Bobby
    September 29, 2010 10:25 pm

    @Gene
    I think you are confusing the public’s interests with the public’s desires. To put it in more clear words, what should be looked out for is ‘what is good for the public’, not ‘what the public wants’, and I am saying that we need have policy based in the former. Little kids want ice cream and candy all day, every day, but a well balanced diet is what’s good for them. If the patent system or a portion thereof is not ‘good for the public’, then it is in the interest of the public for those patents to not be granted. However, if the patent system is working great and pushes innovation to a degree that justifies its social costs, then it is in the public’s interest to grant patents under reasonable terms.

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 29, 2010 10:15 pm

    Bobby-

    I disagree. The patent system is working wonderfully in the pharma and biotech sectors and the general public seems to want pharma and biotech companies to spend many hundreds of millions (if not billions) of dollars on R&D and then when a treatment/cure is available have it made freely available for generics to copy. The reason we have those cures/treatments is because there is profit in it for about a decade, after which generics can make to their hearts content. Thus, I think it is incorrect to say that average folks only have an interest in patents not being granted if the patent system fails. There are unreasonable expectations and a complete ignoring of basic math and economic realities in some circles.

    -Gene

  • [Avatar for Patentology (Mark Summerfield)]
    Patentology (Mark Summerfield)
    September 29, 2010 10:13 pm

    Thanks Bobby — when I saw Gene’s reply I thought that perhaps I had been too obtuse, but I was obviously sufficiently clear for at least one person to follow my logic and disentangle my main points!

  • [Avatar for Bobby]
    Bobby
    September 29, 2010 10:05 pm

    @Gene
    “The public at large has a vested interest in there not being patents on the most innovative products and services.”
    Perhaps, but only if the patent system is failing to accomplish its purpose. If the patent system actually works in promoting progress and the pros outweigh the cons, then the public has an interest in waiving some freedoms temporarily to patent holders. I don’t think Mark is suggesting that patent examining should be the next jury duty, but rather that there should be somebody overseeing the system that doesn’t have incentives to grant as any patents as SCOTUS will let them get away with.

    “I don’t see any reason to have those who don’t use the system to have any input into how the system operates. ”
    The problem with that argument is that EVERYONE uses the system except perhaps some mountain men and the Amish, and even they might be affected in some indirect way. When you buy something that uses patented technology, you pay a price that is almost certainly adjusted by the patent system, which means the patent system affects you.

  • [Avatar for Gene Quinn]
    Gene Quinn
    September 29, 2010 08:50 pm

    Mark-

    I understand your point, but disagree. The public at large has a vested interest in there not being patents on the most innovative products and services. Putting those who know nothing about innovation or the patent system in any position of overseeing the PTO is, in my opinion, inappropriate. The overseers would only make sure that the law is fairly implemented and would not make policy. I don’t see any reason to have those who don’t use the system to have any input into how the system operates. If they want to change the system then lobby and get a change in the law.

    -Gene

  • [Avatar for Patentology (Mark Summerfield)]
    Patentology (Mark Summerfield)
    September 29, 2010 07:32 pm

    Gene

    …a Board of Overseers made up of patent attorneys, inventors and corporate users of the Patent Office— you know, the stakeholders who seem to be the only ones any more that really care whether the Patent Office works…

    The problem I see with this proposal is that it leaves out the single largest body of stakeholders in the patent system— the general public! As patent attorneys, we tend to think in terms of the rights of our clients, and there is absolutely nothing wrong with that.

    However, I don’t think that we should lose sight of the fact that a patent confers a monopoly right, which is a legislated exception to the general rule of free competition. The private benefit of patent ownership is part of a bargain with society that (hopefully) balances the pros (e.g. the incentive to innovate and advance the interests of society through new technology) with the cons (e.g. reduced competition in relation to patented products, social cost of litigation and enforcement). Every substantive aspect of patent law, from the term of the monopoly right, to the threshold of inventiveness, to the requisite level of disclosure, affects this balance.

    In other words, patent law is an instrument of economic policy, which makes it entirely appropriate for the Department of Commerce to consider it part of its “turf”.

    Of course the PTO should not be starved of the funds necessary to do its job properly, and this needs to be addressed. But a board on which stakeholders in the system were proportionally represented would be dominated by the public at large— presumably through the agency of their elected representatives. Which is, for all practical purposes, exactly how things are now!

  • [Avatar for Timothy Dyson]
    Timothy Dyson
    September 29, 2010 03:40 pm

    Gene, interesting points you have here, but Privatising any public institution is unlikely to get rid of the root of the problem. It will only temporarily hide it. As an example look at your healthcare system. Although arguably better than most healthcare systems in the world, it is also one of the most expensive (if not THE most expensive)
    Let them fix the USPTO first, then they can break it apart / privatise it to different undertakings. In the Uk, the railway industry is another example. Although arguably efficient – when it is- its also very expensive.
    Another factor is that of private interests, which could drive official fees up.
    A faulty car will not become fixed just because its in the hands of a new owner. It must first be fixed before being sold off, otherwise it will only give the new owner further problems.
    As an example look at the rail industry in the UK. Its private, and although it functions well-sometimes, probably most times, its very expensive, and in my view hasn’t been able to successfully lure enough people out of their cars.

    You mention “One of the biggest problems facing the Patent Office is a lack of mentorship of the young examiners over the last 5 to 7 years.”
    A good place to start would be for the USPTO outsource its work to experienced agents, such as yourself? Why can’t they do that? Seriously, they have no excuse. They could adopt a credits system that would allow firms to file applications for free, establishing some checks to ensure no conflict of interests. As vast a country that you have, this should be easy. I repeat EASY. Surely, this will not cost them much but will at least begin addressing some of the backlog.

  • [Avatar for EG]
    EG
    September 29, 2010 03:19 pm

    Gene,

    I can remember at least as far back as the early ’90s or even back to the ’80s talk of making the USPTO a governmental corporation to give it more autonomy. The major stumbling block I heard to this move was that the Department of Commerce, under which the USPTO is included, didn’t want to lose this “major” piece of its turf. So that’s as far as it went. We’ll also need to curb Congress from continuing to skim funds from the USPTO through fee diversion (or as it’s technically called “failure to authorize spending”) to make this work as well.