The USPTO's release last week of its Proposed Patent Fee Schedule will likely spawn a wide range of reaction. Almost certainly some will raise a "hue and cry" and claim that the USPTO is needlessly enriching its coffers in a way that unfairly disadvantages the community of USPTO users. Others, like Horacio Gutierrez, Corp. VP and Deputy GC for Microsoft, will tend toward a more balanced view. In comments posted Feb. 9, 2012, Mr. Gutierrez observed that "Arguably there is no good time for a fee increase, and some will question whether increasing fees in challenging economic times is the right thing to do. But to us, there should be no question that now is the right time to have a discussion about the benefits of investing in further improvements in patent quality and the potential costs of delaying that investment." Mr. Gutierrez is right – this is the right time to have a discussion, and that discussion, at least in the initial stages, should focus on the big picture questions:

• How important is reaching 10 months to first action and reducing total pendency to 22.9 months by 2015? This is a major assumption that cuts across virtually all the proposed fees.
• How important is it to build a reserve fund equivalent to 3 months of the USPTO's annual operating expense, and how quickly does that need to be done? By some estimates, the reserve may be being funded at levels ranging from 150 million to 300 million dollars per year. Does this rank in importance with reducing pendency? In other words, should the user community be willing to simultaneously fund both of these objectives through higher fee increases, or would the user community prefer to see a more gradual, staged approach to building the reserve fund so that fee increases need not be quite so steep, at least for the next few years?
• Will the currently proposed fee schedule permit adequate investment in critical USPTO resources such as improving its IT systems, and continued hiring, training and retention of qualified examiners? What are the projected costs and time frames for accomplishing such investments in human and physical resources? And do these costs rank in importance with reducing pendency and creating a meaningful reserve fund? One could argue that investment in critical resources such as its IT systems and the hiring, training and retaining of qualified examiners is one of the best things the USPTO could do to improve and insure patent quality.

With any proposal as sweeping as this one, and particularly where the impact goes right to the bottom line, there will be a tendency to want to dig in and debate whether the fee changes proposed for each part of the USPTO examination process are justifiable. This will have a tendency to compartmentalize the debate in a way that may not be helpful. That is not to say that it is inappropriate at some stage to have a candid and probing dialogue between the Office and the user community that is designed to help the user community understand the methodology, models and assumptions behind the USPTO's proposed fees. This can only ultimately help the user community provide more meaningful response and guidance to the USPTO. But before that happens, we should first attempt to provide some sense of priority to the Office on the big picture questions, since those will impact fee setting across the board, and in a very substantial way. In other words, as users, we need to help the Office understand what is most important to us, and then be willing to help fund those priorities.

Once that happens, we can then invite the Office to share the assumptions and modeling (such as cost recovery assumptions, front-end fee vs. back end fees as mechanisms for cost recovery, etc.) that will invite productive dialogue and input on the specific fee proposals on a more individualized basis.

In any discussion of this type, the process has to begin someplace. The USPTO's Proposed Patent Fee Schedule released last week is just that – a starting point for discussion. As users of USPTO services, we will have the opportunity on Feb. 15th and Feb. 29th to engage the process and begin providing response to the Office. PPAC should be applauded for providing a set of thoughtful questions to guide those hearings, with focus on the big picture issues. Hopefully, those of us who participate in the process will understand the need to start with the big ticket issues, and will not let the discussion become embroiled in minutiae.

The USPTO's Board of Patent Appeals (BPAI) has an incredibly large backlog of ex parte appeals pending – more than 25,000. In 2006, that figure was less than 1,000 pending appeals. Since then, the backlog has grown month-after-month-after-month. Cases being decided by the BPAI now were fully briefed more than two years ago, and began the appeal briefing process more than three years ago. Most of those are on applications filed at least five years ago with priority claims reaching back even further. The current USPTO solution is to hire more Administrative Patent Judges – 100 new judges this fiscal year with at least that many arriving next year. I agree that this is an important part of the solution. However, in my view simply hiring more judges is insufficient.

The following chart looks at the number of BPAI decisions each month. The pattern reveals the results of a performance rating system (i.e., quota system) used to judge the Judges. Ordinarily, BPAI judicial performance is reviewed two times per year, and that process is reflected in a systematic incentive for the judges to do more work at the end of the fiscal year (September) and at the midpoint (March). The chart shows those months as the high-points for BPAI output and the subsequent months as low-points.

It seems to me that the current cadre of Administrative Patent Judges have proven that they have the capability of increasing their throughput by 60% or more in any given month. But, the Judges only act on that capability when properly motivated. I hate to play the "if I were manager" game, but once these phenomena are recognized, a likely general solution is fairly obvious – provide motivation for the Judges to more often work to their potential. Economists have shown that people almost always act in their own self-interest – that's why personal incentives work. However, in a team environment, personal incentives are rarely sufficient. Most highly successful teams also rely on team and other goal oriented incentives that suggest a culture of success. In my mind, the chart showing high-effort-as-deadline-approaches suggests a commitment to personal achievement but also a lack of commitment to the broader timeliness goal of ex parte patent appeal administration. Of course, timeliness is only one variable in the time-quality-cost equation, and the other important elements cannot be ignored.

As the PTO moves to more than double the size of the Board, now is the time to make structural changes to ensure a better future for this important segment of the Office.

Note - A key feature of the chart above is that the figures for FY2012 are significantly higher than for prior years. Unfortunately, the increase in productivity is still only slowing the growth of the backlog. With the increase in judges, I expect for the backlog to begin declining by the end of this fiscal year. Further, once implemented, the proposed increased appeal fees will also tend to reduce appeals filed.