Hearing on Examiner Fraud a Big, Fat Nothing Burger

Last week the House Judiciary Committee held what seemed like it was going to be an oversight hearing in order to address the allegations of financial fraud by patent examiners made in the Inspector General’s recent report detailing time abuses at the United States Patent and Trademark Office. Prepared statements released in advance of the hearing talked tough, but that was pretty much it. Insofar as getting to the root of the problems identified in the IG report the hearing turned out to be a big, fat nothing burger.

Sadly, it is hardly surprising to learn that some patent examiners are grossly exaggerating the number of hours they work. It is well known inside and outside the Patent Office that there are rogue patent examiners among the ranks of the 8,400 examiners that work at the Office. Some patent examiners proudly proclaim to applicants and attorneys that they refuse to follow Federal Circuit precedent, some patent examiners haven’t issued a patent in years, decisions of the Patent Trial and Appeal Board are ignored with prosecution systematically being reopened, new searches are conducted despite it being explicitly against Office policy, some examiners play games by constantly pulling back applications on the brink of appeal thereby preventing applicants from ever getting to the Board. Given this widely known abuse of power by more than a few patent examiners it can’t shock anyone that the rogue nature of examiner behavior extends to financial fraud.

Congressman Jerrold Nadler (D-NY) defended the Office in his prepared remarks, explaining that there were flaws with the methodology of the IG study, which make the conclusions unreliable. For example, it is entirely possible that patent examiners were indeed working while they were not logged into the Patent Office computer systems. Of course, that at best means there is no way to know whether patent examiners are working or not, which is why the IG report recommended the sensible step of requiring patent examiners to log into the Office computer systems whenever they are working.

But how can any entity operate when they have no way of actually knowing whether their employees are working? As we learned during the “Examiner A” debacle, the USPTO is not capable of knowing when patent examiners are submitting fraudulent time records; Examiner A submitted 730 hours of time that was not worked. Astonishingly, Examiner A, who submitted 19 weeks of fraudulent time and was reprimanded 9 times for low examination quality, wasn’t fired! He quit so that this episode wouldn’t turn into a blemish on his employment record.

Those who want to sweep the IG report under the rug or conclude that the methodology was flawed are missing a much bigger picture. Those making excuses for the Patent Office obviously haven’t been paying attention to how at least some patent examiners are defending their actions in light of the IG report.

Some patent examiners that have commented here on IPWatchdog.com have attempted to explain that their actions are innocent, but have actually admitted to committing fraud. These patent examiners have explained that because of their superior talents they are capable of doing their work in a fraction of the time the Office thinks it should take them to do the work. Multiple examiners have said here on IPWatchdog.com that if they are, for example, allocated 3 hours to do a task and can do it in 2 hours then there is absolutely nothing wrong with them claiming all 3 hours on their time sheet. One examiner actually said that he/she is capable of doing work twice as fast, using an example where the Office allocates 20 hours to complete a task, presumably an entire application, but the examiner is able to do the task in 10 hours. Of course, that examiner explained he/she is completely justified in claiming all 20 hours worked on their time sheet.

These examiners seem to see absolutely nothing wrong with claiming on their time sheets that they have worked the full time that they were allocated regardless of the time they actually spent doing the task. The problem, however, is that if this is happening it is fraud pure and simple. Indeed, this type of billing is fraud that would get an attorney disbarred, and has gotten attorneys disbarred in the past – not to mention charged with embezzlement.

The Patent Office does not seem to have the ability to identify when an examiner claims to have worked the full allocated time but instead worked fewer hours. That is a huge problem that should concern everyone. Unfortunately, this type of fraud is meaningless to a bloated government that year after year promises to address fraud wherever it is, but then turns a blind eye when evidence suggesting a problem is uncovered.

Some will no doubt be disgusted that patent examiners are over claiming the hours they work and still claiming overtime without working more than 40 hours. But what is worse, at least in my opinion, is what this means for patent quality. In the patent sphere, like so many other areas of endeavor, the more time you spend the better your work product. Sure, there will come a point of diminishing returns, but the Patent Office has been pushing a patent quality initiative for several years now and it has been difficult not to notice that the Office idea of quality is that applicants and patent attorneys need to do a better job. What about patent examiners?

Everyone in the industry knows that certain patent examiners produce extraordinarily low quality, and now it seems we have learned that at least some patent examiners are spending only a fraction of the time the Office allocates to complete a task and then they claim the full allocated time on their timesheet? Are you kidding me? In light of these serious IG allegations patent quality initiatives need a reset button. A spotlight needs to be placed on examiner quality, which is unfortunately not what it should be.

There will be some who will want to take issue with my characterization of patent examiner quality, but everyone in the industry (both domestically and abroad) knows patent examiner quality at USPTO is lower than it could and should be. Attend any conference and when the discussion of searching authorities is discussed do you ever hear anyone suggesting that the best searches are performed by the USPTO? Does anyone in the industry ever say that the highest quality examinations take place in America?

Unfortunately, the House Judiciary Committee talked tough in written remarks but didn’t seem at all interested in getting to the bottom of the matter one way or another during the hearing. USPTO Director Michelle Lee was allowed to explain away the very serious allegations contained in the IG report with little or no meaningful push back. Of course, it is at least a little unfair to blame Director Lee for the problems with recalcitrant patent examiners. Even if everyone in senior management were in complete agreement that certain patent examiners needed to be fired it would be impossible to terminate anyone past their probationary period. Indeed, it is more difficult to fire a federal government worker, particularly a federal government unionized worker, than firing a tenured professor at a university. For that we have the federal bureaucracy to blame, not the Patent Office or anyone in particular, but that means the Patent Office is largely left to operate hoping that those past their probationary period remain committed to their jobs.

Members of the House Judiciary Committee did ask Lee about low patent quality, believing that the non-existent increase in patent litigation they seem to believe exists is owed to low patent quality. Patent quality is a perfectly fine topic to discuss, but Congress seems unable to put the pieces together that are right in front of them. Patent quality starts with patent examiners and it seems relatively clear that the Office has on many levels lost institutional control of patent examiners – whether it is with respect to bogus rejections, reopening cases, unauthorized new searches, snatching cases back from appeal, and now by working less than full-time and still getting paid for overtime.

I guess when the fraud is only 2% of the hours worked that is seen as a moral victory and a sign of good government. Perhaps 2% fraud in government is the best we can expect, but if you dig even one fraction of a level deeper within the IG report you will notice that almost 45% of those hours characterized as fraudulent were claimed by fewer than 5% of patent examiners. Of course, that begs further inquiry, but it doesn’t seem like any further inquiry is going to be forthcoming.

How is it possible that less than 5% of patent examiners accounted for nearly half of the fraudulent hours identified by the Inspector General? If there are valid reasons that the many hard working, conscientious examiners might be working and not logged in then why are so many of these questionable hours disproportionately being claimed by only a small number of patent examiners?

Anyone that is objective would have to conclude that there seems to be a small number of patent examiners that are engaging in abuse. That seems obvious just based on the admissions made in comments here on IPWatchdog.com. The sad reality, however, is that the Patent Office is unlikely to do anything or even ask any further questions. Patent examiner abuse by a small percentage of examiners has been going on for years relating to substantive examination and the Office has never done anything to stop it, so why would they do anything here?

Whether the IG report is good, bad, ugly or flawed, everyone in the industry knows that at least some of the inmates are running the asylum at the USPTO. Unfortunately, that doesn’t seem like it will change any time soon. We can talk about patent quality and how important innovation is for the U.S. economy, but that is nothing more than hot air until the USPTO regains control and the bad apples are removed.