Economic Downturn => Downturn in Patent Filings

PTO Director John Doll was kind enough to provide me with updated numbers on patent filings through March 17, 2009. The PTO's numbers tell the story that original utility application filings and continuation application filings have slowed in FY 2009 while requests for continued examination (RCE's) filings continue to rise. The Office is now faced with a serious financial crisis. Original filings (i.e., revenues) are down to FY 2004 - 2005 levels but the budget and backlog are both at all time highs. Although I the numbers are still being compiled, two of the PTO's other primary sources of revenue - maintenance fees and late fees - are also down this fiscal year.

The first chart below shows a time series for the percentage of continuation applications and RCE filings as compared to the total UPR filings (Utility, Plant, and Re-Issue applications). Remember here, that for most PTO statistics, RCE filings are counted as a utility application. According to this data, 27.6% of all of the UPR filings thus far in FY09 are RCEs - continuing a steady trend of of rising RCE filings. (Note - the RCE data also includes historical data for CPA and R129 filings).

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For the next chart, I extrapolated the partial FY 09 data to the entire fiscal year to find some expectation of the total filings for the year. I also removed the RCE/CPA data because most practitioners would not consider those as separate applications. As mentioned above, both the original and continuation filings are down to around FY 04 levels. As compared to FY 08, original filings are on track to drop about 10% while continuations will likely be down over 20%. The large drop in continuation filing is likely an artifact due to the large number of continuations filed at the beginning of FY 08 in anticipation of the looming limits on continuation practice.

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In the title of this post, I link the economic downturn with the downturn in patent filings. Some may also link the drop in patent filings with other recent events that may drop the allure of a patent application - namely, KSR v. Teleflex; eBay v. MercExchange; Bilski; Seagate; the prospect of further patent reform; the Second Pair of Eyes review; 750,000 backlog of unexamined patents; and the 26 month average pendency before the first OA.
> Although not in the title of the graph, the numbers do include plant patent filings which have hovered around 1,000 per year.
Of course, other factors may also

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95 thoughts on “Economic Downturn => Downturn in Patent Filings

  1. MM said, “I apologize for what I said at 11:21.

    It was rude and inconsiderate.

    Please forgive me.”

    Sarcasm?

    Reply
  2. I apologize for what I said at 11:21.

    It was rude and inconsiderate.

    Please forgive me.

    Reply
  3. “These data imply that either the economic downturn is worse in the USA than in the rest of the world, or that innovation is moving out of the USA and to other countries.”

    Thus spake the simpleton.

    Reply
  4. Ah Ha. So you’re not that weary, after all. But, good time to sell the European brute, perhaps? I guess the family would not approve.

    Reply
  5. “So, should we perhaps flip to BOregard, at least while POTUS approval ratings remain high?”

    Nice. By the by, I have an 8-year-old Portuguese Water Dog. It was the right choice for Mr. Obama. But I suspect the price (which was already VERY high) just went through the roof.

    Reply
  6. I’ll remember it next time Lex. Thanks for the nudge. Mind you, English is usually even shorter than either French (bureau) or German (Buro) as we routinely see from the tri-lingual OJ-EPO. So, should we perhaps flip to BOregard, at least while POTUS approval ratings remain high?

    Reply
  7. “The trick is to have burocratic efficiency without loss of due process.”

    I always have to pause for quite some time before successfully spelling “bureaucratic.” The same with “Beauregard.” I like your solution better. And Noah Webster would have approved as well, I think.
    link to spellingsociety.org

    Reply
  8. Erez, I beg to differ. The Government of Singapore is in a different class to that of the USA. It just decides what it wants, and then goes ahead and does it. Some Singaporeans complain, but not many are that brave. Singapore certainly understands “short shrift” but does it have any appreciation of the concept of “due process” which (quite rightly) so pre-occupies US patent attorneys but which also complicates things immeasurably. The trick is to have burocratic efficiency without loss of due process.

    Reply
  9. Max, thanks. I always wondered why Singaporean applications were examined by the Australians.

    Added sidenote: if there was a “free market” to examine applications filed with the USPTO, the backlog would dissappear very quickly.

    Reply
  10. …which reminds me, Erez, of the competition set up by the Singapore Government, to handle examination for its Patent Office. If I am not mistaken, the Austrian and Australian Patent Offices won the bidding competition, and each got 50% of the work.

    Reply
  11. #9, re your comment of 11:11 AM.

    Your suggestion has two weaknesses.

    a) The suggestion fails to account for the fact that it is in society’s interest to have people file patent applications. Society does not want to encourage guilds and trade secrets.

    b) The suggestion fails to account for the fact that “actual cost” can only be determined in a free market, not by a USPTO monopoly. I am certain that Applicants and practioners would love to have “free-market” examination where other patent offices such as the Russian, Korean, UK and Australian compete for examining patent applications.

    Reply
  12. The WIPO just published the PCT yearly review for 2008.

    US filings were down by 1%. Filings from most other countries were up (exceptions: UK at -0.4% and the Dutch at -0.1%)

    These data imply that either the economic downturn is worse in the USA than in the rest of the world, or that innovation is moving out of the USA and to other countries.

    Reply
  13. Interestingly, today’s article in the New York Times says that “Magazine Ad Pages Decline Almost 26% in First Quarter”.

    link to nytimes.com

    Since ads are also pretty critical to business survival, at least this suggests that the downturn in patent filings is no worse then the overall downturn. In fact, it may be tracking it pretty closely.

    Reply
  14. I know its a tad radical of an idea. But imagine the PTO charging the applicants what it actually costs to examine an application.
    You wouldn’t have to increase the allowances and good patents would no longer be subsidzing a slew of crappy applications.

    Reply
  15. “I agree with you: I’d also rather that your taxes were increased.”

    There’s no doubt that they will be, once the Bush breaks are rolled back.

    Reply
  16. bubbers,

    Bad Management is bad management.

    Your quote STILL exemplifies bad management. “…if they don’t want to lose money, they need to allow cases. I’m not advocating that they allow everything.”

    Let’s make it simple. Know the Law (not the 6-made law). Follow and apply the Law. Allow what is proper. Reject what is not. Let the allowance rate fall where it may. Manage the examination process to provide valid and ever speedier examinations, but do not scrimp to make some pre-determined goal that does NOT reflect true quality.

    Cut out the NOISE with tweaks to the system, a count type production system (patents are not homogeneuos widgets), power grabs on the law, and on and on and on. THAT would make me feel better.

    Reply
  17. For chemical inventions, I tend to start with draft claims (or draft independent claims and a a framework of the dependent claims). By that point, I should have understood the invention (being in-house and having done at least a quick and dirty prior art search), and the specification can then incorporate the claim terms.

    There have been times, though, when the invention has been so incompletely disclosed that I’ve instead written the spec first in order to allow the invention to be defined/coalesced during that process. Not the optimal approach, I think, but drastic times sometimes call for drastic measures.

    Reply
  18. When drafting a patent applicaiton, the typical mantra for patent attorneys is , “draft the claims first.” But, for me, that usually means crafting some diagrams to illustrate the claims. Maybe it has to do with being a visual thinker or whatever. I’ve also tried outlining the points of patentbility first in a written outline, but I find it easier to illustrate it. And if I am doing flow diagram and system diagrams, the words that are going to make it into the claims actually go into the figures. But writing the claims first is widely recognized as the “correct” way to draft an application.

    Reply
  19. Dear Just an ordinary inventor(TM): I always start with a first draft of the claims when preparing an application.

    Reply
  20. “Know the law as it is – do not make up the law as you see fit. ”

    If that were to happen it would be your worst nightmare. Because you have trouble understanding the law as it is already, having examiners tell you what it is when you can’t figure it out already would be hugely embarrassing for you. Be glad you get back bad rejections, for your own sake.

    Reply
  21. Dear Malcolm,

    I agree with you: I’d also rather that your taxes were increased.

    Reply
  22. “I know I’ll get a tongue lashing from Malcolm for saying this, but the only way for the PTO to solve it’s budget problem is to start allowing more applications.”

    I’d rather that my taxes were increased.

    Reply
  23. Dear broje & Censored GP,

    Re: “Once the figures are done, writing the claims and spec is like falling off a log.”

    I wonder if most patent attorneys do it that way?

    First the “picture” then a few thousand words. I’ve done a couple of my own applications lately (mechanical and electro-mechanical), and I find the approach you describe works quite efficiently. I advised lay people who ask how to patent their inventions to first search on USPTO.com and google, and then do detailed drawings and give them to a patent attorney.

    Before I file however, I ask a patent attorney to review/critique my efforts, especially the claims.

    Censored GP was spot on when he wrote:

    “It’s all about the claims people. Always has been.
    I try to communicate that to some of the inventors, but they’re usually too prideful to understand.”

    Personally, I take greater pride in my attorneys’ efforts on my behalf.

    Reply
  24. “Everything is the fault of PTO (mis)management. There does that make you feel better?”

    True. And yes.

    But I’m not NAL. I do enjoy NAL’s posts though. They are usually spot on.

    If I want to tell you what a bunch of corrupt, incompetent, do nothing, know nothing, useless, deadweight stooges I think PTO (mis)managers really are, I’ll do so under my own name.

    Does that make you feel better?

    Reply
  25. JAOI siad, “After a search, does anyone start with figures, then draft claims and then write the spec? If so, for what kind of inventions?”

    Yes. I’ve written 250+ applications and that is my preferred method for drafting specifications. The exception is when I am given an academic paper or other overly detailed disclosure replete with figures and description and told to cobble it into a patent applicaiton on a tight budget. Drafting claims off of that type of application is very challenging becasue my hands are tied interms of what kind of language is supported in the specification. I get better results when I can lay out a linguistic ontology of gradual claim breadth by starting out with claim diagrams that outline the claims and the spec first at a high level and then at progressively more detailed levels. This technique works well for software, business method, electro-mechanical, electrical, mechanical, bioinformatics, etc. Once the figures are done, writing the claims and spec is like falling off a log. All the real brainstorming goes into crafting the figures to tell a story about the invention. I start out with a high level establishing shot, like the first shot in a movie, and then slowly zoom in on the new and different components of the invention. I find it takes about three days to do a decent job of it.

    Reply
  26. Sorry JD, I guess I wasn’t critical enough of the PTO for you. All I’m saying is that the PTO makes money off of maintenance fees and issue fees, and loses money on examination fees. Therefore, if they don’t want to lose money, they need to allow cases. I’m not advocating that they allow everything.

    Everything is the fault of PTO (mis)management. There does that make you feel better?

    Reply
  27. After a search, does anyone start with figures, then draft claims and then write the spec?
    If so, for what kind of inventions?

    Reply
  28. James, I’m not sure what to write here.

    I’ve probably drafted 2 or 3 hundred applications in my career.

    Some basic, some not so basic.

    I’ve drafted applications on gene promoter mods in paramecium, amino acid systhesis pathway mods, and scores of others.

    What I’ve found is that the science is usually very simple. There are simply not more than a handful of staggering breakthroughs.

    Most bio apps are simply small tweaks on existing technology.

    I’ve, maybe, had to fight to understand 4 disclosures. Of the 4, 2 were poorly written, and 2 I just had to review and learn/relearn the science.

    That’s the easy part. Any fool with the right degree can do it.

    What sets you apart or clumps you in is understanding how to claim the invention.

    It’s all about the claims people. Always has been.

    I try to communicate that to some of the inventors, but they’re usually too prideful to understand.

    Reply
  29. Oh lawd. If experience has taught me anything, it’s taught me that “scientific knowledge” is extraordinarily overrated in patent practice….my experience has taught me the reverse…If you want to write a patent you have to know what your writing about..and with increasingly complex inventions (at least in the biological arts that I deal with), knowing the invention is the hardest first step. But knowing the law is important too..speaking of that might be nice to have discussion threads on claim drafting and the like in light of KSR, etc…some more real world discussions rather then just discussion of the cases (which I think is great though as well as all the other esoteric topics on here).

    Reply
  30. bubbers,

    Are you in line for a management position at the PTO?

    Your logic is astoundingly bad. For your knowledge, the production system is a joke and setting your logic on what the PTO pays based on equivalence of output of the production system compounds the errors. Breaking out costs to the PTO and to the applicant while dismissing the true cost driver to both (time) is more bad math.

    Your second point about the production system driving out examiners should be noted – those who remain are likely masochists or truly logically befuddled (like 6).

    Simply saying “allow more applications” is just as wrong as saying “reject, reject, reject”, and creates more noise to obfuscate the obvious solution:
    Do your job. Know the law as it is – do not make up the law as you see fit. Examine the applications according to the law. Allow those applications that are worthy. Reject those applications that do not meet the law. Artificially setting allowances rates for anything other than the merit of the particular application is garbage (mis)management.

    Reply
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    Reply
  32. Somebody upthread said something to the effect that if the PTO loses money on RCEs, then they must lose even more on new cases. However, that isn’t true, at least to my knowledge. With the production system, if you take into account an examiner’s salary and the amount of production he or she is required to work per week, the PTO essentially pays examiners per count. So even though it takes an examiner a lot longer to work a new case than it takes to work the RCE, they essentially cost the PTO the same. RCEs cost slightly less than a new filing, so the PTO would lose more on RCEs.

    Regarding examiner salaries, the base salaries are competitive compared to starting engineering salaries in industry. With the retention bonus, they are even more competitive. It’s the production environment, rather than low salaries, that leads to the examiner attrition problem (see link to popa.org page 2).

    I know I’ll get a tongue lashing from Malcolm for saying this, but the only way for the PTO to solve it’s budget problem is to start allowing more applications.

    Reply
  33. Somebody wrote: “””Everyone is suffering in this economic climate, not just patent attorneys”””

    Better be careful with that – they’ll be looking for us suffering patent attorney types when they get to the pitchfork stage.

    Same guy wrote:
    “””The future will place a premium though on competent patent attorneys; they will need a high level of scientific knowledge to be able to discover prior art and a high degree of legal skill to argue that the patents are true inventions.”””

    Oh lawd. If experience has taught me anything, it’s taught me that “scientific knowledge” is extraordinarily overrated in patent practice.

    Reply
  34. Another factor of the reduced patent filings may be a larger scale shift in patent strategy from filing higher volume lower quality applications to lower volume higher quality applications. I would be interested in seeing a study that controls for page count of the patent applications that are filed – which arguably can be correlated to the legal fees associated with preparing the patent.

    Reply
  35. “I know teachers in NYC starting out at 40k…seems a lot more fun then stuck in an office all day trying to dissect a complex patent application.”

    To each his own, brother.

    Reply
  36. The whole step thing is confusing. For instance, I came in as a step 10 GS 7, got promoted and am like a step 5 GS 9. As I understand it, your step goes up by no. of years (or some other time period) here, and your step goes down each time you get a promo. It’s all a complicated way of denying giving much of a raise when you get a promo so far as I can see. Like if I were to get this upcoming promo to 11 I’d only go up to like 75k, but then in like a year I might hit 78k. I think I’ve heard they can deny you a step increase if you sucked that year but I’m not sure of that.

    All that said, the easiest way to the big dollars by promo is to crack into GS 13 and above. You notice the sharp 15k increase in even the min step at 13.

    And with that said, the easiest way to even bigger dollars is to work OT as an 11. At least before the cap on OT that is.

    But I’m really not all that concerned with making a few thousand extra. More concerned with not frazzling myself.

    Reply
  37. “Regarding PTO pay, using 2009 scale and Washington DC locality rate.”

    I know teachers in NYC starting out at 40k…seems a lot more fun then stuck in an office all day trying to dissect a complex patent application. Granted it may not be bad for this recession economy but I still think if the PTO wants to attract content and qualified people with lower turnover rate, they should pay examiners more.

    Regarding the link and starting out around 65K for a GS 7, that appears to me to be someone at a step 10. Don’t you have to be around say 4-6 years before you get a step 10. Also, as I understand it if the GS level is capped you dont go up any GS levels no matter how long you stay.

    link to apps.opm.gov

    As said, this may be viable right now, but when the economy gets going again the PTO is going to have the same problem; trying to attract experienced examiners, in my opinion.

    Reply
  38. “6, you crack me up. How come you are finding better art lately?”

    It’s all in the googlin baby, you could come down sometime and I can show you how it’s done.

    You guys want to hear about something funny? I had a case finaled 05/08 with a notice of appeal filed 08/08 and now I call up the in house attorney that they recently power of attorneyed in today to find out why they haven’t filed an appeal yet. Turns out they filed for bankruptcy a few months back, and can’t spend money on anything except what the court will let them spend it on, how embarrassing is that? Then again, the claims were embarrassing as well, 102a over his own AAPA 2x.

    Reply
  39. Tazistan Jen,

    Thank you for your comment: “6, you crack me up. How come you are finding better art lately?” I had the exact same thought! Bet his applicants appreciate the 2 year delay in getting a proper rejection…

    There are plenty of really good examiners at the PTO. Unfortunately, they are diluted by the 1000′s with poor training, no mentoring (thanks hoteling), etc. I think the good ones learn to work with blinders on and flee for the special asssignments like CRU the second they can.

    Reply
  40. Anyone who wants to be associated with Glenn Back and his tea parties has real issues. It was Beck who was pouring “gasoline” on people and insuating Obama may as well burn constituents – not funny and not appropriate.

    Reply
  41. Malcolm: Here we go again. Let’s see all these claims that so clearly should have been allowed but weren’t because of a “bad rejection.”

    Oh, I’d love to post the publication numbers of some doozies I’ve gotten recently. However, I fear Malcolm might then take a look and explain in his view why they are still unpatentable (and I’m sure he would be much more skilled than any examiner). And then I’d have an ethical issue of whether a blog post made after the filing date is nevertheless “material to patentability” and whether I would have to cite it in the file.

    I’m not going there.

    Reply
  42. If this is a lagging indicator – it is going to get worse before it gets better.

    I would expect fewer filings going forward because of the anti-patent atmosphere in the courts and the Office.

    Reply
  43. “There are only some very few of us, so I understand if, to the unexperienced, we would seem to be but a legend. The perceptive old hands will tell tales of having seen such animals in the wild. Keep your eyes open and you too may one day bear witness.”

    6, you crack me up. How come you are finding better art lately?

    Reply
  44. “A new examiner usually started at GS 5-10, GS 7-10, or GS 9-10, depending on experience or education. A new GS7 hiree have received an annual salary of $66587.”

    Just makes my case better.

    What first year high school teacher makes $66,000?

    What 6 year teacher makes over $110,000?

    Reply
  45. “You need something more revolutionary. Have you considered throwing a ‘Patent Tea Party.’ Be sure to invite the white rabbbit.”

    Just be sure that you always refer to it as a “non-partisan” Patent Tea Party. Because that will fool everyone.

    Malcolm, are you referring to JAOI’s white rabbit?

    Reply
  46. SZ said, “many of the patents filed in the past few months were initially commissioned in a more favorable era. Going forward…”

    I think it would be interesting to see which traditional applicants/assignees are recently absent from the filings, and see if those companies have gone belly up. We’ve all seen the articles about companies that are traditionally patent filers actually filing more patents now and increasing their R&D budgets. I wonder if the reduction in patent filings can be directly correlated to the failure of companies that used to file patents.

    Reply
  47. MM said, “In that case you should be extremely happy with the direction the PTO is heading because the more crappy patents the PTO rejects, the stronger the issued patents become.”

    But you know by stronger patents I meant giving of favor to patents by the Courts. What you are talking about is issuance of only the most deserving of patents, and then only with overly narrow claims, and only at much more expense than warranted. And making patents less likely to issue more expensive to seek does nothing to motivate patent filings. Remember, we are presuming that generation of the contents of the USPTO patent database is the benefit and the goal. Less patent filings does nto accord with that goal. Narrower claims means stronger patents ony in terms of challenges to validity. More certainty in validity of patents runs counter to the presumed goal of generating the USPTO patent database contents, the more the better.

    Reply
  48. I’m wondering if the data understates the true magnitude of the problem, or at least is a lagging indicator. Many patent applications take months to go through various drafts and approvals, and the final filing step is often the least expensive part. If this is the case, then many of the patents filed in the past few months were initially commissioned in a more favorable era. Going forward…

    Reply
  49. Old Timer: “Add into the mix the additional uncertainty created by Bilsky and its subsequent interpretation and then query: why would businesses bother to invest in patent applications?”

    Ummmm … mabye because they have a real invention that they want to protect? I’m still getting claims issued all the time, relying on KSR to argue for the *non-obviousness* of the claimed inventions.

    I agree that anybody who files an application on a “A system for creating profit from re-sale of virtual doohickeys” is a m0r0n. But that was true before KSR. But as we know, many m0r0ns played the game anyway, in some cases simply because they were ready to try anything that might make them “fame and fortune on the Internet.”

    I think you folks that you are so bent out of shape about the PTO’s problems should get organized. Clearly the “whining on blogs” approach to increase the allowance rate has failed you. You need something more revolutionary. Have you considered throwing a “Patent Tea Party”? Be sure to invite the white rabbbit.

    Reply
  50. Somebody upthread observed that, while PCT filings are up, those originating in the USA are down. Somebody inside the EPO just told me that their research shows filing activity at their Office to be counter-cyclical, in other words, when times are hard, innovative manufacturers file more, in order to have their noses in front, when the good times return. I proceed on the basis that American manufacturers are just as innovative and just as hard-headed as those elsewhere in the world. I guess that the decline in filing activity at the USPTO will come from non-manufacturing areas, like banks, insurance companies, business method innovators, who see the writing on the American wall, know they can’t patent their stuff outside the USA, and act accordingly. I can see why some US patent attorneys might suffer financially as a consequence.

    Dennis, do you have a breakdown of which class headings are seeing the most decline in filing activity at the USPTO?

    Reply
  51. broje “in view of the observable correlation between strong patents and increased rates in patent filings, we have, in my view, the strongest argument for advocating a strong patent system to motivate filings of patent applications”

    In that case you should be extremely happy with the direction the PTO is heading because the more crappy patents the PTO rejects, the stronger the issued patents become.

    It’s interesting: the best clients, the ones who actually make new stuff as opposed to simply filing reams of empty pie-in-the-sky verbiage, are still doing okay in this crap economy. And they are still filing patent applications.

    Go figure.

    Reply
  52. Shorter Steve Fox: Is there a place on the Internet that I can whine like a baby without being laughed at?

    Reply
  53. And I couldn’t agree with you more:

    Re: “…in short, under KSR everything is obvious if the BPAI or the court wants it to be obvious.”

    Reply
  54. “A first year GS-7 examiner starts at $41,210. Agreed this may be less than an engineer in industry, but these are people who either couldn’t find work in industry or wanted the safety of government.”

    Idk about your chumps over in horse feeding bags arts but I started at like ~65 iirc with a 4k bonus as a 7. Yes, it is less than I could make at some other jobs. Then again, it is more than I could make at some jobs. Moving just 30 minutes west might lower the costs a lot, but the salary goes to 55k. How do I know this? I know people that work there in the kind of job I would get.

    Reply
  55. Hello Old Timer,

    May I add, from a old-timer self-employed ordinary inventor’s view, eBay is devastating, rendering today’s patent system the shadow of what it use to be a couple decades ago.

    Reply
  56. When I was considering going into patent law, my law school advisor warned me that patent law runs hot and cold. He did not go on to explain that it has only been hot a couple of times in US history, and then only very briefly. But, if you review the history, the recent (and sorely missed) favor given to patents by the Courts was the exception, not the rule. And now that patents are cold again, many worry that innovation will suffer.

    But I am not convinced that rates of innovation are strongly linked to patentability. While it’s true that our emergence from the so-called “dark ages” was coincident with the establishement of patent systems, it is also helpful to recall that those patents were given by fiat to those who would import rather than conceive. Perhaps it is helpful to consider that there is more than one type of innovation, and it is the dissemination of ideas and proliferation of new technologies that is important. Therefore, I think it accurate to think that patents do play some role in motivating this type of innovation, divorced from “conception” per se.

    However, the link of innovation, in terms of “conception,” to strong patents remains tenuous. I think it is at least partially accurate to say that necessity, not patentability, remains the mother of invention/conception. And it appears, subjectively, that innovation, in terms of “conception” and “dissemination,” flourished in the US despite cold patents for the vast majority of our history.

    If only there were a reliable, accurate, and objective way to measure the rate of innovation divorced from patent filings. But without that control, it is not really possible to make a jugment about the existence or non-existence of a link between relative strength of patents and rates of innovation.

    Still, common sense dictates that patents at least encourage the open dissemination and archival of useful applications of ideas that cannot be better protected as trade secrets. In view of that benefit, and in view of the observable correlation between strong patents and increased rates in patent filings, we have, in my view, the strongest argument for advocating a strong patent system to motivate filings of patent applications.

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  57. I’ll venture out on a limb here and assert that the problem is not solely with the PTO or even necessarily the recession. Rather, the problem is the underlying law of patentability, namely KSR and to a lesser extent Bilsky.

    KSR replaced the relatively well established standards for obviousness under 103 with a brand new, shiny, multifacted, seven-part technique for determining obviousness that is so flexible as to be lacking in any meaningful, objective standards. KSR didn’t simply raise the bar for overcoming obviousness; it took the bar away. A cursory reading of decisions from the BPAI and/or the Fed. Cir. confirm this; in short, under KSR everything is obvious if the BPAI or the court wants it to be obvious.

    Add into the mix the additional uncertainty created by Bilsky and its subsequent interpretation and then query: why would businesses bother to invest in patent applications? I can’t think of a compelling reason, particularly if they are in the EE/CS arts, which are in the crosshairs of both KSR and Bilsky.

    Stated otherwise, this isn’t simply a case of the PTO doing a bad job of implementing otherwise good law. Rather, the problem is that KSR and Bilsky effectively broke the underlying law of patentability. Absent intervention by Congress to restore a meaningful, objective standard for obviousness the U.S. patent system will continue its current slow but steady decline into irrelevance. The patent system of the 2010s will look a lot like the patent system of the 1960s and 1970s: useless.

    Reply
  58. “The Office is now faced with a serious financial crisis. ”

    No they are not.

    All those filing fees we’ve been paying for unexamined patent applications are sitting in an escrow account in the Department of Treasury. See the USPTO annual report for details.

    The USPTO’s CURRENT revenue stream is based on the applications we filed 3 – 5 YEARS AGO.

    They’ve got plenty of cash in the bank. All they have to do is issue more FOAMs to get it.

    Reply
  59. “Noise Above Law posted a link above to an article having a comment from a self-identified USPTO Patent Examiner. This commenter says his SPE, in handing down news from upper managment, indicated that the USPTO will soon be eliminating the quality review program to encourage allowances and reduce “churning.” If accurate, this is the best news I’ve heard in a long time.”

    Good. The PTO tried so hard to make its customers go away… then they did… and now they realize “oh. wait. that was a bad idea. we can haz more filings?”

    Reply
  60. Correction to Alan McDonald’s post above, the examiner pay scales are not based on the DC locale, but a special scale listed here:

    link to apps.opm.gov

    A new examiner usually started at GS 5-10, GS 7-10, or GS 9-10, depending on experience or education. A new GS7 hiree have received an annual salary of $66587.

    Reply
  61. Examination is incredibly uneven. I can tell you Stuart Baum will give me a sane rational rejection, and actually read and understand my response while others in the same art unit do not understand basic obviousness and cause the filing RCEs and Appeals. Rejections need to be reviewed much more regularly.

    The PTO is seemingly lucky the new rules did not go into effect, as filings would be down even more!

    Reply
  62. I suspect that one way to get at how much applicants are slashing their IP budgets is to look at the increase or decrease in the number of provisional applications that are being followed on by a utility or PCT filing. Provisionals are pretty easy to prepare and cheap to file, and there are some companies/industries that use them extensively. Failure to follow on within one year therefore represents a “rubber hits the road”-type of decision for many applicants.

    Reply
  63. Noise Above Law posted a link above to an article having a comment from a self-identified USPTO Patent Examiner. This commenter says his SPE, in handing down news from upper managment, indicated that the USPTO will soon be eliminating the quality review program to encourage allowances and reduce “churning.” If accurate, this is the best news I’ve heard in a long time.

    Reply
  64. Regarding PTO pay, using 2009 scale and Washington DC locality rate.

    A first year GS-7 examiner starts at $41,210. Agreed this may be less than an engineer in industry, but these are people who either couldn’t find work in industry or wanted the safety of government.

    A six-year veteran GS-14 primary is at a minimum (first year as a primary) $102,721.

    These are all before any overtime.

    How many teachers start at over $40K? My wife has taught for almost 30 years and does not make close to $102,000.

    Reply
  65. “Original filings (i.e., revenues) are down…”

    And here I’ve thought that government fees were required for RCEs. I can’t understand why the PTO doesn’t like RCEs. They get to charge a fee for a case they are already familiar with. If they are losing money on the RCEs, they have to be losing even more money on the new filings because it takes a lot longer to read an application from scratch and issue an office action than to just issue an office action on a case they already have read.

    I believe that a downturn in filings is due to the increased difficulty in obtaining a patent, the reduced value of a patent due to KSR and lobbying by companies with existing monopolist positions, coupled with budget reductions due to the economic downturn. The second set of eyes reviewing certain allowances is certainly inefficient and the internal policies seem to provide a strong incentive to rejecting cases but no incentive to allow cases.

    I believe that the Examiner’s Union POPA would find most practitioners (except those working for the companies with monopolistic tendencies) to be aligned with most of the Union’s views.

    Reply
  66. I am a patent attorney also not happy with less work around because applicants (particularly the small inventor) have come to realize that they simply cant throw thousands into an application if the PTO is just going to reject it. I am also a patent attorney who will strive to tell my small inventors that a search needs to be done BEFORE throwing thousands of dollars into drafting and filing the application. Usually I do the search for free. Do I like it? Not really. But I do it because the client is everything to me. Everyone is suffering in this economic climate, not just patent attorneys; it is no surprise applications are down combined with the recent harsher view towards granting what some see as obvious inventions. The future will place a premium though on competent patent attorneys; they will need a high level of scientific knowledge to be able to discover prior art and a high degree of legal skill to argue that the patents are true inventions. This will hopefully also force the PTO to pay a living wage to attract quality people. You can earn more teaching high school then what the PTO has been paying anyway…that has to stop…

    Reply
  67. No doubt the PTO response to a very incriminating, suggestive statistic that was posted earlier on this blog. PTO FILING 16 % DOWN THIS YEAR.

    Lets not forget Doll’s response and lengthy “explanation” (drivel, digging out of hole, also come to mind) of this CONDEMNING STATISTIC about the PTO was probably long ago expected by Patentlyo readers.

    Reply
  68. “I’d feel bad for the PTO if I didn’t have strong anecdotal evidence that most RCE’s I file is because I can’t get a decent rejection out of lazy examiners”

    I agree

    Reply
  69. I’d feel bad for the PTO if I didn’t have strong anecdotal evidence that most RCE’s I file is because I can’t get a decent rejection out of lazy examiners. I even filed a pre-appeal brief after three rejections that didn’t even address all of the claim elements in one case and still had to make a personal call to the SPE before someone finally put the examiner in his place.

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  70. Also overlooked by everyone except some Examiners I have spoken with, because of the enhanced quality review, Notices of Allowance are down, and thus Issue Fee and Publication Fee payments are down, which only increases the budget shortfall.

    Reply
  71. A few thoughts:

    (1) The increase in RCEs is because of the recent increase in poor rejections. The first couple office actions are often a farce to be endured.

    (2) The immediate effect of (1) is an increase in cost to obtain a patent. Demand for patents at this higher price goes down. The increase in cost is much more than the RCE fees — each reply costs money to generate.

    (3) Another effect is a decrease in value of the patent — of course there’s lost term, and in fast-changing technologies, the world has moved on by the time the patent issues.

    (4) Because patents are worth less but cost more, applicants are filing less and letting less valuable* applications currently in prosecution go abandoned.

    *valuable = $$$ the patent can earn. For example, if infringement is impossible to detect — the greatest discovery of the decade mightest not get patented. No one will take a license, and when they infringe you won’t know.

    Note to 6: Solid rejections on good art are my favorite rejections to get. Inventors usually take it pretty well, too — they realize that sometimes someone else just got there first. Once the client agrees, we let it go abandoned before wasting money.

    Unfortunately, solid rejections are not even a sizable majority. Most rejections on references feel like the Examiner did a keyword search and rejected on whatever came up. When we finally get to good art or allowance, we’ve wasted a couple years and thousands of dollars.

    The recession has compounded the problem.

    Prediction: layoffs at the PTO within 2 years.

    Reply
  72. This Blog is like a looped All in the Family/Married with Children hybrid episode. Or maybe like the sit com in Natural Born Killers.

    You’ve got your usual characters posting in every single thread (6, MM, played by DC like Sellers plays Dr. Strangelove), you’ve got regular appearances from Max D, JAOI, a few guys who appear to use their real name (probably old timers), then fringe players like me who wander in on occasion.

    And every episode is essentially the same thing. MM and 6 throw out some contention, everybody responds with vitriole, wash, rinse, repeat.

    It’s frankly ridiculous that there are so few patent practitioners who think the system allows far too many patents to issue.

    It’s ever more ridiculous that those same practitioners come to this site and and get into it with the standard foils on a daily basis.

    This Blog, which is awesome and is virtually my sole source of patent information (shame on me), has a forum that has become just one more part of the monotonous doldrum known as “my life as a patent practitioner.”

    Luckily, after I retire, I’ve got a job lined up stocking shelves at Home Cheapo, so the level of intellectual stimulation is going to go off the charts for me. I may have to break in slowly, so as not to be overwhelmed with the harware/fasteneres section.

    Reply
  73. Hi Dennis,

    With all due respect, this blog is becoming a pain to follow. What is the purpose of allowing anonymous postings? Does it really allow a person to express their personal views without effecting client relationships? Is it because there is no practical way to stop it? To me, anonymous posting simply provide a vessel to make this blog a pain in the ass to read? If anonymous postings are necessary then how about limiting coments to 2 or 3. This should be fairly easy to implement. Maybe I should file a patent application.

    Steve Fox

    Reply
  74. The backlog of 750,000 patents which seems to cause a problem should be disposed off under the TARP program: Applicants have already paid for those applications to be examined, but the USPTO is running out of funds – voila, now they are toxic assets.

    Solutions: Offer every applicant $100k to abandon their application. Those $100k per application will add up to $75b. That’s admittedly a lot of money, but it is only 10% of the total TARP budget. And it is a great economic stimulus. Problem solved.

    Reply
  75. “Even as I have seen, they that plow iniquity, and sow wickedness, reap the same.” (Job 4:8).

    “What goes around comes around,
    What goes up must come down.” (Bob Marley)

    Reply
  76. Malcolm, ahem; yes, please provide the serial number of your applications that exhibit the high standards that you espouse.

    Malcolm, why so bitter ? were you found liable for patent infringement ?

    I am a major shareholder in a company that is developing software that is burned onto ROM, and that performs functions that many customers have FAILED to develop successfully; and you think they shouldn’t get patents on their great technology; instead you want them to try to foolishly prevent reverse engineering or copying? My gosh Malcom, you truly are naive about copy-cat companies in China. This company would be cheated out of everything in 2 months if you had your way.

    Reply
  77. One should also study the number of provisional and PCT patent applications filed.

    If the filing downturn is a result of an economic downturn, both PCT and provisional filings should be down.

    If the filing downturn is a result of a lack of trust in the USPTO or in a lower perceived value of US patent applications, PCT and provisional filings should at least remain steady.

    I haven’t found any data relating to PCT filings in Q4 ’08 or Q1 ’09, but from the data I have found for US applicant PCT filings in 2007 and 2008:

    Q1 ’08 -1.5% compared to Q1 ’07 (all applicants +1%)
    Q2 ’08 -1% compared to Q2 ’07 (all applicants +4%)
    Q3 ’08 -6.5% compared to Q3 ’07 (all applicant +1%)

    It seems that Americans are filing fewer PCT applications even though the total number of PCT applications filed is going up.

    Reply
  78. The PTO is like California. When times are good they spend all of the incoming money, and when times are not good they are panicked and confused.

    Reply
  79. “News flash: lots of applications are going abandoned right now because companies are slashing their IP budgets. Most are not due to the examiner being some sort of patent ninja.”

    This is probably true, but in these particular cases it was due mainly to my being a patent application ninja. If you saw the art and application I’m very confident you would concur.

    “The concept of a bada$$ patent examiner is almost as ridiculous as the concept of a bada$$ patent attorney.”

    There are only some very few of us, so I understand if, to the unexperienced, we would seem to be but a legend. The perceptive old hands will tell tales of having seen such animals in the wild. Keep your eyes open and you too may one day bear witness.

    Reply
  80. Malcolm,

    I’ve been reading this blog, which IMHO is very valuable, since its inception. Without fail, in every post that I can think of, you appear and proceed to deride, mock, ridicule, and trash talk the claims, applications, opinions, strategies, and practices of others. By reading your posts, it appears that no patent claim or application ever lives up to your standards.

    All I ask is that you provide a single, real-world example of your prosecution. A single example of original work product to show us how, when faced with the challenges of our craft, you would apply your own advice.

    If you honestly care about constructively adding to the discussion on this blog in view of your pervasive and outspoken criticisms of others, then I’m sure you’ll have no problem giving us an example of your work. On the other hand, if your goal is act as an fool provocateur, which is what many, if not most of us, believe, then you won’t.

    Excuses or derision just won’t cut it. It’s time to put up, or shut up.

    Reply
  81. I love how every time an application goes abandoned, the examiner concludes that it’s because the prior art he or she found was so awesome. News flash: lots of applications are going abandoned right now because companies are slashing their IP budgets. Most are not due to the examiner being some sort of patent ninja.

    The concept of a bada$$ patent examiner is almost as ridiculous as the concept of a bada$$ patent attorney.

    Reply
  82. Is there any correlation between patent filings and patent litigation activity?

    Reply
  83. Patent leather: there is not a full hiring freeze, they are still hiring electrical/computer engineers, everyone other discipline is frozen.

    If I could change quality review I’d make it so that ‘art’ errors would only be counted against an examiner for missed 102 rejections and 103 rejections where the rejection is clear and convincing. I’d also make obvious type DP errors graded on a ‘clear and convincing’ standard.

    Making 103 errors ‘clear and convincing’ would give examiners leeway in not making weak rejections which may come back to bite them in the future because of quality review if they don’t make them.

    Reply
  84. shorter medieval europe: waaaaaah!!!! the financial wizards will take care of everything but only if you don’t regulate them!!!! waaaaaaah!!!!! waaaaaahh!!!!

    Reply
  85. “It ought to be the only type of OA you ever behold, besides a Notice of Allowance”

    If we didn’t have people overclaiming then it likely would be :( Why do you guys f the system over so badly like that?

    Reply
  86. “I have to admit, an OA using bangin’ art is a beautiful sight to behold.”

    It ought to be the only type of OA you ever behold, besides a Notice of Allowance.

    Reply
  87. “PTO Director John Doll was kind enough to provide me with updated numbers on patent filings through March 17, 2009″

    I told you that you could just ask for these types of things.

    “while requests for continued examination (RCE’s) filings continue to rise.”

    That has been the opposite of what is happening in my cases. Then again I have to admit that I’m finding art now that is about ten million times better than the art I was pulling up when I first got here. Stuff is going abandoned left and right. Literally, I’ve had like 2 abandonments per bi week for the last two months. But on the other hand, like I said, that art was pretty bangin’, even for the deps. The kind with no special interpretation of the claims needing to be taken, and no limitations having not been afforded weight. No tricks, no games, just a 102b.

    I have to admit, an OA using bangin’ art is a beautiful sight to behold.

    Reply
  88. “Still absurdly high.”

    Agreed 100%. We need to get back to fiscal year 1930 levels and have the majority of new “inventions” be kept as trade secrets among a few powerful conglomerates/guilds. New products should be sold under strict licenses preventing reverse engineering and downstream sales. Methods of production, manufacturing, and doing business should never be known by the public. Companies should not invest in R&D that cannot be protected through trade secret or licenses (like drugs). The examining corps and USPTO overall should be reduced to about 20% of their current size. These are some of the unrecognized benefits of an economic downturn, coupled with years of the PTO suppressing the allowance rate.

    Reply
  89. patent leather: “This is the result of Mr. Doll’s “quality assurance” program which checks all allowances for “bad allowances” whereby the examiner gets penalized, but bad rejections are essentially unchecked.”

    Here we go again. Let’s see all these claims that so clearly should have been allowed but weren’t because of a “bad rejection.”

    The implicit message in your whining comment is that if the PTO handed out patents to everybody who filed an application, then filings would increase and everyone’s problems would go away. Hooray! Indeed, I’d file applications myself on all kinds of stuff, perhaps in hopes achieving fame and fortune off the Internet. I could certainly afford the investment of ten or fifteen thousand dollars if I knew the PTO was going to rubber stamp my crap which I could then license to a troll backed by venture capitalists. Game on!

    Seriously, everyone has noticed a decrease in filings and an increase in small clients going belly up. It’s interesting, though: the first clients to go are the clients with the crappiest IP. I always sort of wondered why they bothered in the first place. Or, more accurately, I wondered where they found the suckers to finance their sorry pipe dream in the first instance.

    The rate of filings could drop to a quarter of what it is now and nobody would notice except patent attorneys. That’s because 75% of the crap that’s currently filed does not represent “progress” or “innovation” in any meaningful sense of the word. It’s worms on a hook (“here’s a vague idea that someone with money and talent can figure out how to implement after they take a license”), window dressing (“ten applications is a good number”) and/or “strategic” paper shuffling (“keep the family alive”).

    Reply
  90. Dennis: “As mentioned above, both the original and continuation filings are down to around FY 04 levels.”

    Still absurdly high.

    Reply
  91. You can’t blame the economic downturn for the entire drop in filings. Many of my clients have gotten fed up with the incessant flood of bad rejections and art units where it is almost impossible to get an allowance. Thus, they have dropped their filings, even though they could still afford their previous levels if they really wanted.

    This is the result of Mr. Doll’s “quality assurance” program which checks all allowances for “bad allowances” whereby the examiner gets penalized, but bad rejections are essentially unchecked.

    Now due to a lack of maintenance fees and new filing fees, the USPTO has a hiring freeze and thus for every examiner that leaves he will not be replaced.

    Great work on the backlog problem there, Mr. Doll.

    Reply
  92. A happy and blessed Easter to you, Dennis, and to everyone here, at the PTO, and in the IP profession.

    Reply
  93. Can’t wait for this announcement:

    “Responding to the Patent Bar’s requests, pressure from Congress and a changing budget situation, we have switched the second set of eyes from reviewing issuances to rejections”

    Problems solved.

    Reply

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