Patently Alarmist — What's Really Hobbling U.S.
by Mike Drummond

U.S. patent filings likely will decline this year for the first time since 1996, according to a government report, fueling more handwringing about the fate of American innovation.

David Kappos, the former IBMer now in charge of the U.S. Patent & Trademark Office, discussed this and a raft of other issues with me last month, shortly before the agency released its 2009 Performance and Accountability Report. He noted that patents are linked to innovation and job creation.

Yet history shows dips in patent filings are natural responses to economic downturns. Data also show those dips are short lived and application filings roar back.

And I suspect Kappos and his beleaguered corps of examiners may be thankful for the decline in filings — at least in the short run.

The USPTO has fewer examiners now than it did at the start of this year. The agency faces a $200 million budget shortfall. It's instituted a hiring freeze and can't pay for needed IT upgrades. All of this makes it harder to tackle the persistent backlogs in patent applications.

This backlog — not a predictable dip in filings — is the greater threat to innovation.

The number of pending applications was 735,961 in 2009, a 5 percent drop from an all-time high of 771,529 in fiscal year 2008.

Good news, on the surface. Yet it's not a demonstrable trend and it likely has very little to do with increased efficiencies at the USPTO.

More applicants than ever are abandoning applications, the USPTO report shows. What it doesn't show is that many likely are bailing because of mounting delays. I'm hearing all too often that capital-starved startups are unable to secure funding because they can't get a timely patent issued.

It now takes on average 34.6 months to get a patent, compared with 29.1 months in 2005. That trendline doesn't look promising.

Kappos is instituting sound policies to address the backlog. I like his proposal to fast-track patents for independent inventors and small entities, provided they abandon one of their less-pressing applications. He should consider a similar plan for large corporations, including IBM, which filed a record number of applications last year. His other fast-track initiative for eco-friendly patent applications is another winner.

Likewise, Kappos has improved relations with USPTO union workers, is overseeing a Lean Six Sigma Process Improvement Program, and seeks to continue telework and other efficiencies, including sharing certain examination work with foreign patent offices to reduce redundancies.

Too bad he's not getting much help from Congress. The USPTO is funded entirely through fees, but Congress controls its budget. In a rare Sunday session last week, the U.S. Senate passed an appropriations bill essentially leaving USPTO funding for 2010 the same as 2009. Worse, the bill omitted language that would have allowed the USPTO to realize up to $100 million more if actual 2010 fees exceed estimates. Excess revenue would be diverted to the Treasury, a wholly misguided reversal of previous policy.

For the USPTO, fewer patent filings are actually a godsend. The backlog, however, is evil.
"Every patent application that we sit on is an American job not being created," Kappos told me. "It's a product that's not going to market. It's someone's life that's not being saved. It's growth for our country that's not being delivered."

If his office can't deliver patents in a timely manner, we all suffer. And for those of us who make a living nurturing new technologies and economic opportunities, there are few things more agonizing than still-born innovation.

Mike Drummond is editor-in-chief of Inventors Digest, an international publication exploring the intersection of business and innovation.