The U.S. Patent and Trademark Office (PTO), conceived in horse-and-buggy times, is finding it harder than ever to meet the demands of a high-tech era.
Patent filings are at an all-time high—more than 350,000 annually—testing an examiner corps already challenged with keeping pace with complex, fast-moving fields ranging from genetics and microelectronics to nanotechnology and software.
Meanwhile, Congress in recent years has diverted tens of millions of dollars in PTO funds that are desperately needed for more examiners, as well as new electronic search and examination tools.
The result of these pressures: A rising backlog of pending patents and longer waiting times for patents to issue. The quality of patents is also slipping in some key sectors of technology, some experts say, opening the door for court battles.
"In 2001, we called the PTO situation a crisis in our House testimony," says Herbert Wamsley, executive director of the Intellectual Property Owners Association, whose members account for 30 percent of patents filed annually. "Now we are searching around for a stronger word."
Longer waits, money woes
Statistics for the latest full year available—2003—show a record 674,691 patent applications pending, 471,382 of which had yet to be reviewed by an examiner. The amount of time it takes for the average patent to issue, known as pendency, has climbed to 27.6 months. PTO officials have warned that this figure could increase to more than four years by the end of this decade without additional funding and implementation of reforms noted in the agency's own 21st Century Strategic Plan.
These longer pendency times, which are already stretching to three and four years in certain sectors of biotechnology, telecom, and electronics, threaten to make some patents obsolete even before they issue. It also dampens interest from venture capitalists who want the assurance of patented technologies before they invest their money. "The situation is particularly tough on independent inventors and small companies who need those patents to secure funding," says John Allison, a University of Texas intellectual property law professor.
Suggestions abound for addressing these problems, but Mike Kirk, executive director of the American Intellectual Property Law Association, believes the problem boils down to one thing: money. "For 12 years now, the PTO has not received its fair share of the fee revenues it collects," Kirk says. "Over that time, Congress has used $650 million of PTO money for other purposes."
Log Jam: New patents are being filed at the rate of more than 350,000 a year, piling up work for an already overburdened examiner corps.
In late November, the lame-duck session of Congress passed a fee modernization bill that would, among other things, institute fee increases averaging 15.5 percent. However, the legislation did not include a House-supported clause to end fund diversion.
The $300 million in additional funds that this legislation would give the PTO over its current $1.2 billion annual budget would allow it to hire 900 new examiners in fiscal 2005. "This will allow us to put more examiners to work across the board but especially in fields where the backlog is highest, particularly those related to computer technology and telecommunications," says Nick Godici, the commissioner for patents.
However, Kirk, a former examiner himself, sees that as only the beginning. "You have to hire 2,500 examiners each year just to cover attrition. So you really need to hire 900 new people for several years if you really want to reduce pendency problem." He explains that hiring new recruits, while beneficial in the long run, has the temporary effect of slowing down experienced examiners who must train the newcomers.
"Examiners are under a quota system, and the pressure is enormous," adds Ronald Stern, president of the Patent Office Professional Association, which represents the examiners. "It amounts to a legal sweatshop."
Stern points out that the average examiner has to handle about 100 cases a year, with an average of 20 hours per case. At the same time, the application load is growing by 6 percent a year, and patents are growing more complex with more claims. "Many examiners are putting in unpaid overtime to get the job done," says Stern. The only solution in his view: more examiners.
Joining the electronic age
Others, such as Andy Gibbs, an inventor and founder of a popular patent website called PatentCafe, insist that the PTO needs a huge electronic initiative. "The PTO is still struggling to take the agency into a paperless, purely electronic realm."
As far back as 1987, the PTO began a campaign to move away from the quaint wooden "shoes" that housed paper patents dating back to 1790. The agency has electronically scanned all issued patents, which can now be accessed on the PTO website. The agency is also completing a two-year campaign to capture in an image-based (PDF) system all pending applications. These Image File Wrappers (IFW) replace the old paper files and contain all elements of the application, such as specifications, claims, drawings, disclosure statements, amendments, correspondence, and office actions by examiners.
Under a system called PAIR (Public Access Information Retrieval), individuals and companies can check the progress of their patent application by viewing these IFWs online. Then, 18 months after an application is filed, the general public can also access these files on the PTO website. "Public PAIR is definitely good news," says Wamsley of the Intellectual Property Owners Association. "It should create more certainty about patent rights and reduce litigation."
Still, there are deficiencies in the PTO electronic efforts. Issued patents are text searchable only as far back as 1970. Before that date, scanning based on optical character recognition resulted in many errors, most of which have not been corrected, says Stern of the Patent Office Professional Association. What's more, while applicants are encouraged to file their patent applications electronically, Gibbs of PatentCafe observes that the system is too cumbersome for most applicants.
In the face of such criticism, the PTO is working on a simplified, Web-based e-filing system. Commissioner Godici also notes that the increased 2005 funding will help the office move toward its ultimate goal of switching from an image-based system for patent applications to a fully searchable system based on Extensible Markup Language (XML).
Drive for quality
Observers also see the need for a stronger focus on patent quality. "The patent office needs to take the quality issue more seriously," says Professor Allison. But he adds that the burden of insuring patent quality shouldn't fall only on examiners. "Currently, there is no legal duty on the filer's part to conduct a thorough search into the prior art."
Many patent experts now advocate the establishment of a review period after a patent is granted, which would allow competitors and others to file objections to patent claims. This idea, which is expected to find its way into proposed legislation in 2005, could reduce the number of legal battles over patents, observers say.
To speed patent processing and boost quality, some reformers are calling for at least a pilot program to demonstrate the feasibility of outsourcing the search function. Stern objects to this idea, arguing that it would result in a duplication of effort without improving quality.
For his part, Commissioner Godici sees quality as the number one issue. Increased funding, he says, will allow the PTO to boost training for examiners. He also points to newly implemented policies, such as the certification exams that new examiners must pass in their fields, as well as recertification every three years.
At stake in this growing debate, say the PTO's constituency, is the future of a system that plays a vital role in protecting intellectual property rights, encouraging innovation, and enhancing the careers of inventors.