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Social security doomsday already coming true at USPTO?

By Lawrence B. Ebert, Esq.

On 7 July 2009, a bill passed the House to allow the USPTO to use money statutorily limited to its trademark side to pay for patent-related work. This money would have to re-paid by 2014, and the USPTO is authorized to establish a surcharge to re-pay the funds.

At PatentHawk, there is text:

Mismanagement at the USPTO gets a thumbs up from Congress. The House went along with the Senate in passing a bill Tuesday that would let the PTO rob its trademark kitty to tide over its dwindling patent piggy bank.

with one comment invoking Ponzi:

I guess that the PTO for past six or so years has been like a Ponzi scheme -- taking in new applications, cashing the filing fee checks, but not timely bringing the applications to issuance (or abandonment). Thus they do not collect the issue fees or the maintenance fees.

Now that the recession has hit and filings are down, they don't have the money.

Additionally, and a bit ironically ( though I am not sure that irony is the best word), one of the problems with the long pendency times has been the failure to bring in and train new examiners and to solve that problem there is now (or the possibility of) a hiring freeze.

The problem at the USPTO does not match up to a Ponzi scheme, in which money is given to separate investors from their own money or money paid by later investors rather than from any actual profit earned. However, a comment from the Social Security folks is relevant: "There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system," and "as long as the amount of money coming in the front end of the pipe maintains a rough balance with the money being paid out, the system can continue forever." At the USPTO, the money taken in at the front end of the pipe (fees) is now less than the money paid out to administer the USPTO, and that system cannot continue.

Future users of the US patent system will have to pay surcharges to make up for the short fall arising from past USPTO decisions. Where did this come from? One place is the Quillen-Webster "studies" which purported to show absurdly high patent allowance rates, which studies were used by the IT industry to support arguments about poor "patent quality" at the USPTO. The USPTO, in turn, responded by dropping the rate of allowances, to make a showing about "patent quality" which in turn impacted USPTO patent economics. Was there really a "patent quality" problem that was cured by the drop in allowances? No one really knows. Is there now a bigger problem than that which was "imagined" before? Yes.

**Background

House Passes Patent Office Bailout Bill

http://en.wikipedia.org/wiki/Ponzi_scheme

On the Quillen-Webster business, see PATENT GRANT RATES AT THE UNITED STATES PATENT AND
TRADEMARK OFFICE :

In recent proposals for patent reform made by the Federal Trade Commission and by the National Academy
of Sciences, there has been discussion of the possibility that the grant rate of patents by the United States
Patent and Trademark Office [USPTO] is high compared to that of other industrialized countries, including
that of Japan and those of Europe. This discussion began with papers of Quillen and Webster that
suggested that the grant rate might be as high as 97% and more reasonably is at least 85%. Although the
actual grant rate at the USPTO is typically in the range 62% to 68%, Quillen and Webster suggested the
higher numbers based on an analysis of continuing applications (including continuations, divisionals, and
continuations-in-part). The present paper suggests that the analysis of Quillen and Webster is flawed both
legally and methodologically, and that recent work by Clarke, which places the corrected grant rate at less
than 75%, is more accurate.

[The current (2009) grant rate is below 50%.]

Full post as published by IPBiz on July 11, 2009 (boomark / email).