An article in the Milwaukee Journal Sentinel has been making its way around the blogosphere. The article rambles a bit and gets some of its information wrong (Judge Michel is not the Chief Justice of the patent appeals court), but its basic points are interesting.
During the second quarter of 2009, more than 59% of patent applications were rejected. I believe this is another way of stating that the allowance rate is about 41%. The article attributes the steep decline in allowances to the negative media publicity surrounding some patents of questionable merit that arose in the late 90s.
The problems, however, with such a low allowance rate, as detailed in the article, are that many legitimate inventions that deserve patents are being rejected. Often, the rejections are reversed on appeal, but only after a significant outlay of money and time on the part of the inventor or the inventor’s company.
This culture of “reject early, reject often” stems from the PTO’s “second pair of eyes” review. The Office of Patent Quality Assurance randomly pulls allowed cases or issued patents and checks to determine whether the patent was properly allowed. According to the article, close calls should be rejections. If the application should have been rejected, the examiner can be penalized by a higher error rate that affects his bonus and even his job retention.
The PTO is trumpeting its decreasing error rate as a way to show that examining quality is increasing. This may simply be the result, however, of the reduction in time for the quality review from 7 hours per case to only 3 hours per case. Less time to check cases for errors results in finding fewer mistakes.
The PTO claims to also check rejections to be certain that they are proper, but its internal philosophy of “reject, reject, reject” seems to have instituted fear in the examining corps. Examiners seem to have much more leeway in issuing rejections than in allowances. Thus, it is hardly surprising that the allowance rate has plummeted.
Also, hardly surprising, the rate of appeals has increased dramatically. Worse than that, however, more than 25,000 appeal briefs were filed during FY2008, but only 6,385 appeals were forwarded to the Board of Appeals. It is possible that some of those cases were still in the briefing stage at the end of the fiscal year, but it appears that well over half, probably over two-thirds, of appeals are sent back to the examiner for further prosecution. Given the cost of preparing an appeal brief, that is simply not acceptable.
Because of the ridiculous backlog of applications and the soaring rejection rate, many inventors are not applying for patents. It’s simply not worth it. This is, of course, another reason for the plummetting number of filings.
The article concludes with some optimism about the new Director David Kappos. Not only does he need to deal with the financial issues at the PTO and the burgeoning backlog, he needs to change the entire culture at the PTO. Good luck.