Alert October 01, 2008

How to Eliminate the Backlog at the Patent Office

The United States Patent and Trademark Office (PTO) claims it is awash in applications awaiting examination due to an increasing wave of continuation application filings, and that this backlog is impeding its ability to provide quality examination. The PTO has attempted to curb all continuation filings through legislative proposals and changes to its rules of examination. The legislative proposals, however, have stalled, and the PTO’s proposed rule changes were recently struck down by a federal district court as exceeding the PTO’s statutory authority. The PTO can best eliminate the backlog internally by providing incentives to both examiners and applicants to more rapidly dispose of original applications, which will have the effect of reducing the number of the specific type of continuation filings that are causing the backlog, namely, Requests for Continued Examination (“RCE” applications). To provide the appropriate incentives to examiners, the PTO should consider overhauling the examination production system, which has not been changed since 1976.

RCE Filings Are the Only Continuations Being Filed at an Appreciably Greater Rate

The PTO claims that the primary cause of its current backlog is an increase in continuation applications. PTO data, however, reveal that not all types of continuations are an equal part of the reason for the backlog. Continuation applications include:  (i) “straight” continuations to file new claims (e.g., to seek protection for a different embodiment or broader claims); (ii) divisional applications filed to pursue different claims subjected to restriction; (iii) continuation-in-part (CIP) applications filed to add new subject matter; and (iv) continuations filed to pursue the same subject matter. Formerly called “file wrapper continuations,” and now referred to as RCEs, it is this final group that has contributed to the rise in continuation filings since 1995. The chart below reveals that it is only the RCE applications that have increased appreciably since 1998 (the percentage of divisional and CIP applications are about the same today, or lower, than they were in 1980).

Why Are More RCE Applications Being Filed?

More RCE applications are being filed because:  (i) changes in the patent laws in the mid-90s resulted in a sea change in the way applicants prosecute patent applications; and (ii) the PTO examiner production system (how examiners account for their time and are evaluated) encourages RCE application filings. While there is surprisingly little written material on the examination production system, much of the material that exists unfortunately is not accurate, and incorrectly states that an applicant can somehow “wear” an examiner down by repeated re-filings because examiners only receive a final disposal “credit” for an allowance or abandonment, but not for continued rejection of a claim.

The change in patent practice resulted in part from the passage of the Uruguay Round Agreements Act (sometimes referred to as GATT or TRIPS) that revised the patent term from 17 years from the date of issue to 20 years from the date of filing for applications filed after June 8, 1995. At around this time, the perceived delay at the Board of Appeals was about four to five years. Many applicants therefore filed continuation applications, attempting to convince the examiner to allow the claims, rather than appeal and risk losing valuable patent term. A less time-consuming appeals process would contribute towards reducing the applicants’ incentive to file RCEs. The PTO began a pilot program in 2005 to ease the appeals process, but this program is not yet finalized. See New Pre-Appeal Brief Conference Pilot Program, 1296 Off. Gaz. Pat. Office 67 (July 12, 2005). The PTO also recently passed rules to make appeals more efficient, (Rules of Practice Before the Board of Patent Appeals and Interferences in Ex Parte Appeals, 73 Fed. Reg. 32938 (Jun. 10, 2008)), but these rules actually make it more expensive and burdensome on applicants, although they appear to streamline the process for the PTO.

Examiners also have an incentive to encourage applicants to file RCEs. Imagine obtaining about 25 hours worth of credit for about 30 minutes of work. This is essentially what happens when an applicant files an RCE, and an examiner quickly issues a first office action on the merits (“FAOM”). Examiners have this incentive because of the archaic manner in which they are evaluated using a quota or “count” based system that allocates credits to the examiner depending on the particular action taken. This system has not been modified since 1976. See Office of Inspector General, U.S. Dept. of Commerce, “USPTO Should Reassess How Examiner Goals, Performance Appraisal Plans, and The Award System Stimulate and Reward Examiner Production,” Final Inspection Report No. IPE-15722 (Sept. 2004) (hereinafter, “Inspector General’s Final Report”). In essence, an examiner is allocated two counts per disposal of a patent application, and depending on the grade level (seniority or skill level), area of expertise (complexity of technology examined), and other factors, each examiner has a certain period of time to complete a disposal.

If we assume that an examiner has 25 hours per disposal, the examiner must complete the examination of that application, from first action to disposal, in 25 hours. This would be consistent with a GS-9 examiner processing applications in class 435, chemistry, molecular biology and microbiology. See Inspector General’s Final Report at p. 7 (the Inspector General found that about 95% of the art units processed applications in less time than their allotted goals established in 1976, i.e., the examiners achieved greater than 100% production, and that patent quality is improving). The examiner only obtains a “count” for two types of examination activities: (i) the FAOM; and (ii) a disposal, where the FAOM in an originally filed application typically is the most time consuming. The FAOM is the first count, and a disposal is the second.

The Manual of Patent Examining Procedure lists the various actions that count as a disposal, and for which an examiner receives a disposal count, namely:  (i) Allowance; (ii) Abandonment; (iii) RCE; (iv) Examiner’s Answer (sending the application to the Board of Appeals); (v) International Preliminary Examination Report (a FAOM in a PCT application); (vi) SIR disposal (only after a FAOM); and (vii) Interference. Examiners encourage the repeated re-filing of patent applications since they receive a disposal count for each RCE filed, and then another count preparing the FAOM, which takes very little effort if no amendments are made to the claims and no new evidence is presented. So the repeated filing of an RCE allows an examiner to obtain about 25 hours worth of credit for about 30 minutes of work.

It is this credit, or count-allocation system that provides examiners with an incentive to “encourage” applicants to file RCEs. Moreover, as the number of RCE filings increases, the number of originally filed applications receiving FAOMs decreases. Increased RCE filings thereby contribute to an increase in the backlog at the PTO because fewer originally filed applications are being examined.

Any proposed solution that attempts to eliminate the backlog therefore should focus on reducing the filing of RCE applications, and in particular, altering the incentives of both the examiner and the applicant.

Any Solution Should Consider Replacing the Count-Based Evaluation System with an Hours-Based System

The PTO should consider following the advice of the Inspector General’s Final Inspection Report and re-evaluate the examiner production system. Any reform should establish examiner production goals that encourage early disposition of originally filed patent applications. This will dramatically reduce the backlog at the patent office.

One possible measure to encourage early disposition of originally filed applications is to replace the count-based system with an hours-based system. The PTO possesses reams of data on examining activities and can easily assess how many hours (or fraction thereof) each examination activity should take, depending again on the examiner’s pay grade, or seniority, and the complexity of the technology.

Using the same hypothetical described above, the PTO could easily translate the 25 hour per disposal figure into an hours-based system. Each action taken by an examiner would be accorded a certain number of hours (or fraction thereof), and consequently, examiners would be given credit for second action non-final rejections, final rejections, restriction requirements, interviews, consideration of an IDS, etc. The time allotted for each action also may depend on the type of application and the number of claims examined and not subjected to restriction.

In addition, examiners should be incentivized to discuss the merits of the application with applicants at a very early stage in the examination process. For example, an examiner could be allotted adequate time to conduct an interview before a second action on the merits of an originally filed application (or divisional or CIP or “straight” continuation), say 3.0 hours, but only 1 hour for interviews after a final rejection or upon filing an RCE. This would provide both applicants and examiners with an incentive to discuss the case early, assess whether meaningful patent protection is possible, and then determine whether to appeal, pursue narrower claims to allowance and file a continuation to pursue broader claims, or abandon the application. The PTO also should permit additional bonuses above the 110% production, up to and including 150% production.

The PTO also should consider policies that encourage applicants to dispose of applications early in the process. One policy is described above – make the appeals process less onerous and less likely to result in a loss of patent term. At the same time, the PTO could charge applicants additional fees for filing RCE applications, for filing amendments after final, and for filing multiple continuations. These fees would encourage applicants to dispose of originally filed applications early in the process. Creating the incentives to dispose of originally filed applications early in the process will help streamline the examination process, will reduce pendency, and will reduce the backlog.

Conclusion

The proposal mentioned here is merely one of many that could help the PTO reduce its backlog, and is intended to serve as a departure point from the legislative and rule-making mindset that pervades the PTO today. The current count-based system is out-dated and requires reassessment. Moving to a more merit-based hour-centric system, with additional bonuses above 110% production would be a move in the right direction.