Opening Salvo

The US patent system was intended to help promote the useful arts by providing inventors of new technologies the time-limited right to exclude others from the market in exchange for disclosure of their inventions. Thus, it was thought, inventors would be fairly compensated for their contributions and society would benefit because the early disclosure of invention would encourage more rapid evolution of technology.

The current US patent system is in crisis. In my opinion, this crisis is the result of the sheer volume of patent applications that companies file to protect themselves from the threat of patent litigation and to extract as much revenue from the resulting patents as possible. As a result of the volume of patent filings, the USPTO has been overwhelmed and seems to vacillate between the policy of granting patents quickly without the necessary rigorous review and the policy of creating as many obstacles to obtaining patents as possible (the current trend). The USPTO is not primarily responsible for the problems in the US patent system, but rather the volume of patent applications has created an environment wherein no human process can adequately decide whether any single patent application should be entitled to a patent. In other words, the USPTO has been given an impossible task with no rational solution.

Here is the data:

Wow! Over the past 5 years, 1.8 million patent applications were filed in the US. It is no wonder that the USPTO has a 1 million case backlog, and it takes an Examiner nearly 3 years on average to read and reply to one of my cases in the software art. But, even scarier, is to look at a plot of the data over time:

In your mind, just visualize the extension of that line through 2010 (don’t worry, I’ll provide a model that will give accurate forecasts later). Half a million patent applications per year by 2010 is a great possibility. The patent system is collapsing under this weight of patent applications and granted patents and none of the proposed “patent reforms” wending their way through Congress address this fundamental problem.

So, how can we possibly fix this problem? Each year, we hear of some new patent reform, but the reform tends to focus on treating a symptom of the problem (litigation) rather than the actual problem (application volume). Similarly, courts have begun to provide limits on elements of the litigation process. The main problem that I have with these solutions is that they de-value all patents regardless of whether the patent should have been granted by the USPTO or not.

I like to solve problems using market-based solutions if possible. There are too many patent applications, in other words we have a classic over-supply problem. How do you fix an over-supply of goods in a government-controlled market? Raise the price for large entities. Currently, filing a patent application costs $1000 for a large entity, peanuts for any large corporation when you consider the potential benefit of a single patent. Of course, this ignores the attorney fees to prepare the application. My hypothesis is that the $1000 application fee does not provide any disincentive for filing marginal patent applications. A corporation will always file the marginal patent application and the application fee is not even a consideration in the decision process.

PROPOSED SOLUTION

I would raise patent application fees to $50,000 for large entities (no change for small entities, individuals and universities for now). I would make this fee apply to all applications currently being examined by the USPTO. My guess (to be validated later) is that this will dispose of the current backlog of applications and leave the USPTO with about 100,000 applications to examine per year.

Patent Demand is a forum to discuss the proposed solution, its benefits and drawbacks in an effort to improve the US patent system. I hope that you will contribute to the discussion.