For 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.