Commerce IG Report: Patent examiners defrauded government of millions for unworked time

Department of Commerce, Herbert C. Hoover Building, in Washington D.C.

Earlier today the Inspector General of the United States Department of Commerce released a scathing report titled Analysis of Patent Examiners’ Time and Attendance, which painstakingly details what appears to be widespread patent examiner financial fraud on the Patent Office.

The investigative report, prompted by interest caused by the infamous “Examiner A,” who falsely claimed he worked 730 hours in fiscal year 2014, concluded that for the 15-month period of August 10, 2014 through November 28, 2015, patent examiners submitted 288,479 hours that could not be supported or verified as being worked. These unsupported hours equated to $18.3 million in over payments.

According to the Inspector General, a conservative approach to the evidence was taken to ensure that the amount of unsupported hours did not unfairly assume any particular examiner was not working when they claimed to be working. However, the report explains that a less conservative methodology would “have increased the total unsupported hours by an additional 327,000 unsupported hours,” making the total of unsupported hours 615,479 unsupported hours, which would then correspond to over $39 million in over payments to patent examiners.

Even using the conservative methodology ultimately settled upon by the Inspector General, there are several findings that jump off the page of the report, such as:

• Approximately 28.5% of the total unsupported time consisted of overtime hours.
• 415 patent examiners accounted for 43% of the unsupported hours, which if worked would have lessened the patent backlog by an estimated 15,990 cases.
• 310 of those 415 patent examiners received above-average annual performance ratings and yet accounted for nearly 98,000 unsupported hours.
• 56 of those 415 patent examiners claimed unsupported hours equivalent to three full days for every 80 hours or computer-related work time.

What makes these facts so damning is that it shows hundreds of patent examiners are receiving high performance evaluations and yet apparently bilking the government. This alone is a serious indictment against Patent Office institutional controls. If the Patent Office doesn’t even know what their stellar and above-average employees are really doing what do they really know about what patent examiners are really doing?

Production Goals

But wait, things get worse. The report alleges: “USPTO is paying production bonuses to examiners who are possibly defrauding the agency.” The report addresses this conclusion where it discusses examiner production goals, which are characterized as out of date and not reflective of current efficiencies. The report concludes that examiner production goals need upward revision, which will not be well received by the union, or those patent examiners who have not been engaging in financial abuses.

The report explains:

The OIG’s analysis—particularly the data regarding examiners who claimed a significant amount of unsupported hours and received high performance ratings—suggests that the USPTO’s production goals need revision upwards. As noted above, the majority of unsupported hours identified in the OIG’s analysis are associated with examiners who received above-average or exceptional performance ratings. In fact, the vast majority of the 296 examiners with 10% or more unsupported time during the 9-month period received “Commendable” or “Outstanding” ratings on their annual performance evaluations. Therefore, according to the USPTO’s rating system, their scores indicate that they are high performers who meet or exceed their production goals on a consistent basis. They also received production bonuses for meeting their goals. Yet those examiners accounted for 42,384 unsupported hours, with 14,416 unsupported hours of that total paid as overtime.

These findings suggest that those examiners met—or even exceeded—their performance goals by completing their work assignments in less time than allotted by their production goals. This, in turn, calls into question the adequacy of those production goals and suggests that a potential abuse of time is possible because the production goals for many of the art units do not reflect efficiencies in work processes. The findings also suggest that USPTO is paying production bonuses to examiners who are possibly defrauding the agency.

The production goals for examiners were adopted in 1976 and has been revised up several times, but not reevaluated. The report concludes this has made it easier for patent examiners to meet their production goals even as technological improvements have facilitated patent review.

And just when things couldn’t get any worse for the Patent Office, the report takes a swipe at Office management by acknowledging the obvious: “[T]he sheer volume of unsupported hours suggests that the USPTO’s internal control system used to monitor and prevent time and attendance abuse remains deficient.”

The Patent Office Response

“This report serves as a resource in our ongoing efforts to improve,” said USPTO Chief Communications Officer Patrick Ross in a prepared statement released on the Inspector General’s report.

“It is important to recognize and understand that the OIG report did not focus on individual employees; instead, it was based on a comparative analysis of large computer record data sets,” Ross explained. “The OIG concluded that there was a lack of a digital footprint in approximately 2% of the total hours claimed by the patent examiners during the 15 month period – a percentage that continued to shrink following the introduction of new USPTO controls, and during the course of the IG review. The USPTO recognizes that there may be many reasons for the lack of a digital footprint and is committed to analyzing the recommendations offered by the OIG, continuing to conduct our own review, and, if needed, improving the extensive measures already implemented.”

Ross would go on in his statement to talk about the “stellar work” of the Trademark Office, and you have to give him credit for attempting to put lipstick on this pig, but this is an astonishingly bad report. The Office control mechanisms are deficient and patent examiners seem to be defrauding the agency, it doesn’t get much worse than that. It is also further proof of what has continued to come to light in recent weeks about how some patent examiners simply ignore office policy, ignore the Patent Trial and Appeal Board, ignore the Federal Circuit, preventing cases from reaching appeal, and issuing bogus rejections with impunity. Based on what we know is going on in certain Art Units and the conclusions reached in this report there seems to be a near complete breakdown in institutional control at the Patent Office.

Recommendations

Based on the findings of the investigation, the Inspector General made the following recommendations:

1. The USPTO should reevaluate its examiner production goals for each art unit and revise them, to the extent necessary, to reflect efficiencies in work processes from automation and other enhancements.

2. The USPTO management should require all examiners to provide supervisors with their work schedules, regardless of performance and ratings.

3. The USPTO should reinstate the USPTO requirement that employees use their USPTO-issued ID badges to exit the USPTO facilities through the controlled-access turnstiles during weekday working hours.

4. The USPTO should require all teleworkers to remain logged into the USPTO network during their working hours when the network is available to the teleworker.

5. The USPTO should review its policies, procedures, and practices pertaining to overtime hours to identify and eliminate the areas susceptible to abuse.

6. The USPTO should consider deploying SOHO routers by all teleworkers.

Conclusion

There is no doubt that there are many, likely still the vast majority of patent examiners, who do take their jobs very seriously. I know patent examiners who are very conscientious and struggle to meet their production goals because they do a good job and do not simply issue frivolous rejections. As with so many cases of abuse, those that are abusing the system will make it that much more difficult for everyone else moving forward. This is precisely why the Patent Office must regain control and establish a new culture.

The problem the Patent Office has is that management has absolutely no institutional control over patent examiners. Office struggles to get patent examiners to allow patents and follow Office guidance and policy is well known. That being the case, this story about patent examiners committing financial fraud on the Patent Office simply rings true and fits within the narrative that we know. The facts found and reported by the Inspector General simply reinforce everything we know about the philosophy of rogue examiners, so whether it is true or not ceases to be relevant. Patent examiners doing whatever they want feeds the ongoing narrative of an Office that is out of control.

Patent examiners fudging time sheets or even outright submitting fraudulent time sheets is just further proof that some examiners can and do get away with whatever they want. The Office seems wholly incapable of doing anything about it on any level. But as much as we can and should point to lack of certain institutional and management controls, the real problem is the Patent Office cannot realistically fire anybody even for cause. It is more difficult to fire a federal government employee past their probationary period than it is to fire a tenured professor. Unless and until that changes, or unless and until the Patent Office brings back the old practice of imposing internal exile upon those who refuse to follow Office policy, nothing productive or useful will be accomplished.