A Trip to “Homestead”

Last week I made the 4.5 hour sojourn to Hot Springs, VA to speak at and attend the IP Law Summit. I was surprised by the number of IP attorneys who turned up at the event and am still a bit puzzled by the business model. Most of the sessions were well attended and well done. They covered topics like Patent Portfolio Management, How to Create Value from your Patents, Examining the New PTO Rules and Reviewing the Pending Patent Reform Bills. Of course, there was hearty debate about the final two topics.

John Miller from Rockwell Automation and I did a joint presentation about how to “deal with” Patent Trolls (namely, don’t feed them). Surprisingly, I got the largest reaction of the event from the crowd when I proposed raise the patent filing fee to $50,000. There was literally a “gasp” followed by several vocal protests that finally resolved to some nervous laughter. In any event, there were several folks lined up outside the room to discuss the idea with me and more than a few that thought it was a novel approach that should be explored. The GC of the USPTO was asked about raising the filing fee during his presentation later in the conference and he responded that they floated that idea several years back and it was shot down by practicioners. So, he continued the new rules are the approach the USPTO has decided to take, and you will have to adjust.

Hire, Train, Repeat . . . Again

The Government Accountability Office (GAO) recently published a study where the title says it all: “Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog.” The full report is here. First, the report found that over the past 5 years, the PTO has based its hiring upon its funding rather than on the backlog and expected workload. Second, 70% of attrition was from examiners who have less than 5 years of experience. Finally, the report notes that 67% of examiners identified production goals as the primary reason that they consider leaving.

The most illuminating paragraph of the report is on page 12:

“Even with its increased hiring estimates of 1,200 patent examiners each year for the next 5 years, USPTO’s patent application backlog will continue to grow, and is expected to increase to over 1.3 million at the end of fiscal year 2011. According to USPTO estimates, even if the agency were able to hire 2,000 patent examiners per year in fiscal year 2007 and each of the next 5 years, the backlog would continue to increase by about 260,000 applications to 953,643 at the end of fiscal year 2011. The agency has acknowledged that it cannot hire its way out of the backlog despite its recent increases in hiring, and is not focused on slowing the growth of the backlog instead of reducing it.”

So, the best we can expect by 2011 is a backlog of 953,643 applications. I don’t believe that the PTO can even do that well. How does the PTO slow the growth of the backlog? New continuation rules, limitation on claim numbers, making the applicant do the examiner’s job etc. Basically, the PTO is going to limit the growth of the backlog by limiting the value of the patents that work through the system.

PTO Hiring

During the last 5 years the PTO has based its hiring levels on funding levels and the capacity to train and supervise new examiners. The GAO report looks at this practice negatively and insinuates that the PTO should set hiring levels based upon the backlog and expected workload. So, the GAO would like the PTO to ignore its funding in setting hiring goals? Then, the PTO should exceed the capacity of its training and supervisory (note the 12:1 ratio of examiners to SPE’s on page 10) functions in the effort to deal with the burgeoning application flow. Apparently, the PTO should just hire 5,000 new examiners a year and somehow the backlog will be addressed. This makes no sense. The flow of applications is the problem.

One interesting note here: on page 14, the GAO states that it takes 4-6 years of on-the-job experience to become proficient as an examiner and 70% of those who leave have 5 years of experience or less…not surprising, but you do the math.

PTO Attrition

It can not be a shock to anyone that PTO examiners have a high attrition rate. Recent engineering grads doing a few years at the PTO before going on to law school and high-paying patent jobs. Not so, says the GAO. In its survey of PTO examiners, the GAO found that 67% of examiners believe that production goals are the primary reason they would consider leaving the PTO. So, examiners want more time to do their jobs – then they will stay put. The PTO should believe them. How do they get more time? Reduce the number of patent applications coming through the system.

It was interesting to me that 89% of examiners believe that their work is important. That is, in my opinion, an indicator that they like their jobs and would be willing to stay. Fewer cases per examiner would be the key, and more money in DC couldn’t hurt.

Patent Fees Rise!!!!

Well, its only by $30 per application, but its a start....Let's see blogging for under a month and progress at the PTO already. This must be some type of record.

PTO Fee Schedule

Patent Demand Impact

The theory behind this blog is simple: when fees for patent applications are raised, companies will respond by filing fewer, higher-quality patent applications. Of course, that would mean that we should be able to show a negative relationship between filing fees and patent applications filed (stay tuned for the actual data). However, filing fees have been and remain so low (currently $1,000) that they are below the demand curve so the impact of raising the fees will only be felt if the fees are increased on a massive scale, say to $50,000 per application.

Consider this, the AIPLA, in its annual economic survey states that the median charges for US Utility Patents of minimal complexity is $6,500, relative complexity is $8,600 to $12,000 depending on the field of invention (should a minimally complex case be filed at all?). So, the last thing a company considers in filing a patent application is the cost of the filing fees. They should be much more interested in squeezing the outside counsel bills --- “Don’t do a prior art search, that will cost more than the filing fee.” This is a small price to pay to file a case that may someday be worth millions in reduced license fees or litigation expense, no wonder the default position is to file every application possible.

What might happen to the decision process if the fee was raised to $50,000:

Prior art may be found and considered to help define the scope of the invention;

In-house IP counsel may be called upon to make tough choices between filing cases or not (the most important cases would get filed);

Attorneys fees will go from being the largest to the smallest portion of the cost of the application (this may allow the flat fees to rise);

And, most importantly, fewer cases will be filed permitting the USPTO to actually do its job (more about this later).

By now creating a limited resource (the number of cases to be filed), market forces would naturally begin to separate wheat from chaff and improve the quality of patent applications well before the USPTO gets involved in the process.