Yesterday David Kappos, the Director of the United States Patent and Trademark Office, wrote on his blog an article titled Reflections on the USPTO Dashboard. Largely the article discusses the statistical reporting of the USPTO, and provides a look back at fiscal year 2010 and offers some comparisons to fiscal year 2009. One paragraph in particular captured my interest:
Overall in FY 2010, the allowance rate increased to 45.6%, compared to an allowance rate of 41.3% in FY 2009. In addition, actions per disposal decreased to 2.42 from 2.73 in FY 2009. Furthermore, as a result of a concerted campaign to begin turning the tide on our backlog, the patent application backlog dropped from 718,835 at the end of FY 2009, to 708,535 at the end of FY 2010. Pretty remarkable considering that application filings were up about 4%, that our examiner workforce shrunk and we were unable to authorize overtime for most of the year due to funding challenges, and that we affirmatively gave our examiners *more* time to examine each application as a clear signal that quality is our first priority.
If you ask me it is rather remarkable that team Kappos was able to dig into the backlog despite having fewer patent examiners month after month for virtually all of fiscal 2010, not being able to authorize overtime and giving more time for examiners to work on cases. True, the more time may have been a bit of a gimmick because patent examiners were encouraged to engage in early interviews, which leads to a more streamlined review of the application, but that only means that the methods encouraged by Kappos are working. Still, an allowance rate of 45.6% seems remarkably low compared to historical averages.
There is no denying that an allowance rate increase of 5.3% is not something to shake a stick at, and I am certainly grateful for the increase, but even a nice increase in an otherwise abysmally small number results in only a slightly larger abysmally small number. So I decided to set out and see if I could make any sense of this, given that there is a perception in the industry that things are remarkably different in terms of allowances under the Kappos Administration when compared to the Dudas Administration. So what gives?
Take a look at the allowance rate for utility patents, plant patents and reissue patents during fiscal year 2009 and 2010, looking at allowance rates by month.
This chart uses data available through the USPTO Dashboard. For those who might want to verify this information I took a screen shot of the allowance data available for fiscal years 2009 and 2010, not knowing whether this will remain available moving forward on the PTO website.
The blue line in the chart represents the allowance rate for applications that do not require a Request for Continued Examination. The red line represents the overall allowance rate when you factor in allowance in RCEs. Director Kappos took the helm at the USPTO in early August 2009. You can see the blue line starts a slow but largely steady increase starting in August of 2009, and the overall allowance rate factoring in RCE filings starts that same assent in October 2009. Thus, under the stewardship of Director Kappos it looks like things are getting better, albeit slower to rise to a historically appropriate allowance rate than anticipated by many.
The chart below shows the historical allowance rate as presented by Rob Clarke at the PLI Patent Law Institute in March of 2009.
As you can see, between 1975 and 2002 the allowance rate largely varied between about 62% to 72%, with the majority of years between 65% to 70%. In July 2010 the overall allowance rate was 60.1%, in August 2010 it was 60.2% and in September it was 61.1%. So for the last quarter of fiscal year 2010 we have finally inched back up, but barely, to the very low end of the historical average of between 60% to 70%.
If you look at the raw numbers in September 2010 the allowance rate without RCEs was 45.6%, which is what Director Kappos said in his blog was the overall rate for the entire year, so it would seem that the numbers are cumulative. Thus, which much of the year being in the between 43% to 44%, that would mean there was rapid increase in allowances in the later part of fiscal 2010, which likely accounts for the feeling in the industry that the Patent Office is once again open for business and allowing patents. But 45.6% without an RCE and 61.1% with an RCE seems quite low still, although no doubt an improvement.
It is hard to compare historical allowance averages to today without acknowledging the 800 pound gorilla in the room, which is the Request for Continued Examination. Section 4403 of the “American Inventors Protection Act of 1999” amended 35 U.S.C. § 132 to provide, at the request of the applicant, for continued examination of an application for a fee, without requiring the applicant to file a continuing application under 37 CFR 1.53(b) or a continued prosecution application (CPA) under 37 CFR 1.53(d). To implement RCE practice, the Office added 37 CFR 1.114 to provide a procedure under which an applicant may obtain continued examination of an application by filing a submission and paying a specified fee, even if the application is under a final rejection, appeal, or a notice of allowance. The final rule went into effect on August 16, 2000, so at that point the RCE monster was let out of the box and patent examiners who were already not getting nearly enough time to examine an application found that they could force RCEs by simply not allowing a patent in the first application. This would lead to increased quota points for the examiner, longer delays in getting a patent, enhanced frustration for applicants and their representatives, but it did provide examiners more time. What is interesting is that the precipitous decline in allowance rate didn’t start until 2002, which is well after RCEs first became available. What is also interesting to note is that this also coincides with the reigns of Q. Todd Dickinson and then Nick Godici coming to an end, and a start to the Bush era where political appointees without any patent experience took the helm at the USPTO.
What is less clear, however, is why with all the improvements to the examiner quota system and the Kappos encouragement to allow patents if there is any subject matter that can be allowed has not lead to a more dramatic increase to the allowance rates. The one hypothesis I think is most likely relates to the fact that the enormous backlog lead to nearly ridiculous average pendency, and in some technologies patent applications that realistically would need to remain pending for upwards of 5 or 6 years, sometimes much more. This means that by the time an application is picked up by an examiner it may no longer be relevant in any real technological sense, the industry passing by the inventor. This is tragic because in many cases it would represent businesses that could never get off the ground because no patent meant no investment, or not enough investment to last long enough to get a patent or see the development of a truly viable technology. I know for many with patent applications pending for many years they simply gave up once the patent examiner got around to issuing an Office Action. I know this for fact since it happened to me personally on an application where I was the inventor.
Thus, while it is disappointing to see such low allowance rates for fiscal year 2010, the numbers do truly demonstrate that we are better off than we were in 2009, and better off without overtime from examiners and with fewer examiners and more applications. As team Kappos continue to dig into the backlog and eventually start to decrease average pendency we will get to the point where we can see more realistically what the picture looks like at the Office, hopefully not being clouded by applications that go abandoned due to lack of interest after missing windows of opportunity. Those missed windows of opportunity caused by the backlog and pendency problems not only make getting a real sense of the magnitude of the Kappos difference, but are also quite depressing given it represents countless jobs not created and an unacceptably high number of patent applications pending and waiting far too long for consideration.
Hopefully the seemingly modest successes of team Kappos in fiscal 2010 will be viewed for what they are, which is rather extraordinary, by our leaders in Washington, DC. With all the odds against them, having to fight daily for adequate funding, fewer patent examiners and a Congress that STILL siphons money paid by innovators away from the Patent Office, team Kappos was still able to increase allowances by 5.3% and dent the backlog. Can you imagine what they could do with adequate funding?