Patent Allowance Rate Continues to Drop

Allowance RateFor quite a few years, the patent application allowance rate at the PTO was around 65%.  Then, in the late 90s, that number began to increase to a high of about 72% in 2000.  This, along with the increased number of patent applications being filed, caused a significant increase in the number of patents being granted each year.  Since 2003, however, the allowance rate has been dropping significantly.  The number for 2008 is 44.2%.  This is the first time the allowance rate has been below 50% for at least the last 30 years.  It is worth noting that how the PTO calculates allowance rate is not exactly clear.  The PTO states that allowance rate is “the percentage of applications that are reviewed by examiners that are approved.”

The PTO insists that there is no mandate to lower the allowance rate; they are simply reporting the number.  “We would gladly grant 100 percent if they met [the standards],” says John Doll, commissioner for patents.  So, is Commissioner Doll saying that patent application quality has dropped this dramatically in the last five years?  On the other hand, the PTO has earlier noted that the lower allowance rate is a result of a focus on internal quality control.  The lower allowance rate may be due, in part, to the PTO’s response to the media’s coverage of the issuance of “bad” patents in recent years.

There is also anecdotal evidence that in art units that have higher examiner turnover, the rate is even lower.  New examiners seem to be determined not to allow more patents than are absolutely necessary.  Whether this is from internal pressure from Supervisory Patent Examiners (SPEs) and supervisors or simply a lack of confidence is difficult to determine.  Allowances seem to undergo quality reviews at a higher rate than rejections.  The “count” system of measuring examiner productivity seems to encourage Request for Continued Examination (RCE) practice.  The examiner can get multiple counts and does not have to do multiple searches.

What does this mean for the patent community?

The most obvious result is that it is more difficult to get a patent.  It may now take a lot more time and money to acquire a patent, and it may require the application to be re-filed more than once (through continuation or RCE practice) or it may require an appeal.  On the other hand, the result could also be significantly better quality applications that are more complex and detailed.  This isn’t necessarily a bad thing as more complex applications provide more support for claims.  Applicants, however, need to be aware of this when they are budgeting time and money resources for patents.

Another result is that the PTO will have less money to pay and train examiners and may have a resulting negative impact on patent quality.  In FY 2008, the PTO collected $36 million less than it originally estimated.  This reduction is due to a decrease in issue fees and a decrease in maintenance fees from lower issuance rates over the last few years.  After a patent is allowed, the applicant must pay an issue fee to have the PTO issue the patent.  Maintenance fees are fees a patentee must pay at various intervals after the patent issues in order to keep it in force.  This decrease in revenue will only get worse on the maintenance fee end and could have a significant effect on the PTO’s operating budget.

For years, the patent bar and PTO argued that ending fee diversion, the practice where Congress would divert some of the funds collected by the PTO from patent applicants and transfer them to the general budget, would solve all of the ills afflicting the PTO.  This practice of diverting PTO fees ended about five years ago.  The PTO now sets its budget based on funds it projects to collect.  A lower allowance rate results in shortfalls of this projection.

So, does the lower allowance rate mean that the PTO is issuing fewer “bad” patents?  That’s a difficult question.  Probably so, but it may also be keeping applicants who rightfully deserve a patent for their invention from recouping their investment.

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10 Responses to “Patent Allowance Rate Continues to Drop”

  1. Is the Patent Office Against Patent Applicants? « Inventive Step Says:

    [...] the Patent Office Against Patent Applicants? As I noted yesterday, the PTO is allowing patent applications at a much lower rate than in prior years.  You’ve [...]

  2. Non-US Companies Obtain Majority of US Patents « Inventive Step Says:

    [...] reported a 6% increase in patent application filings in fiscal year 2008 to 466,147.  Taking the recent allowance rate of 44.2% into account, one would expect over 206,000 of these applications to eventually issue as patents.  [...]

  3. PTO Budget Shortfall Could Have Profound Effect on Patent System « Inventive Step Says:

    [...] and backlog problems.  If filings are down significantly this year, that, combined with the large reduction in the allowance rate, means that the PTO will be suffering from a lack of funds for a long time into the future.  Fewer [...]

  4. Student Says:

    Is anyone aware of a similar chart (or other statistics) broken down into technology sectors? (i.e. pharma, semiconductors, software, etc.)

  5. Allowance Rates Continue to Drop « Inventive Step Says:

    [...] line with JPO numbers from recent years, ranging from 48.5% to 50.5% since 2003.  Add this to the 44.2% number for FY2008 in the US, and one begins to wonder why applicants are continuing to file applications [...]

  6. Who Will be the Next Director of the PTO? « Inventive Step Says:

    [...] was director of the PTO from 1998-2001 under President Clinton.  With Dickinson at the helm, the PTO was allowing patents at rate of over 70%.  Depending on the side of the issues that you are on, some may argue that this was the hay day [...]

  7. House Passes Bill Shifting PTO Revenue « INVENTIVE STEP Says:

    [...] is the result of the economy, but it is also a result of the PTO’s anti-patent stance with reduced allowance rates and numerous new proposed or implemented rules that make life more difficult for applicants.  An [...]

  8. Nicholas Godici to Aid PTO in Transition to New Director « INVENTIVE STEP Says:

    [...] is interesting to note that Godici left the PTO at about the same time that things began to really go south in terms of management and problems.  Given the confirmation hearings in the Senate for Judge [...]

  9. PTO Issuing Many More Patents in 2010 « INVENTIVE STEP Says:

    [...] the PTO allowing patents at a higher rate than its notoriously low rates of under 45% in recent years?  Probably so, but it’s too early to get a clear indication of [...]

  10. USPTO Issues Record Number of Patents « INVENTIVE STEP Says:

    [...] this time?  It has gone up about 3.3% or 1.7% during those two years.  The rate is up, but historically the allowance rate had been about 65% under the traditional method, so this increase is hardly cause for alarm that quality must be [...]

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