Chamber report proposes fixes to patent review process

The Patent and Trademark Office is "an agency in crisis" that will face significant challenges in the Obama administration due to a 750,000-application backlog and other internal inefficiencies, a report by the U.S. Chamber of Commerce warned Friday.

The paper, written by former PTO chiefs and patent experts, warns that the incoming Congress might assign even more responsibilities to the 9,000-employee agency. Among proposed fixes for the backlog, the report recommended revising U.S. law so the agency can keep the money it generates from application fees instead of having it diverted to unrelated projects.

In recent years, appropriators have granted that wish on a provisional basis, but stakeholders believe a permanent solution would give the PTO more certainty in longer-term budgeting. Sen. Tom Coburn, R-Okla., saw that such language was included in a bill sponsored by Senate Judiciary Chairman Patrick Leahy, D-Vt., this session that almost reached the Senate floor. Leahy plans to reintroduce the legislation early in 2009.

The Chamber report suggests the PTO be re-established as a government corporation -- an idea supported by groups like the American Intellectual Property Law Association, the American Bar Association and the National Association of Manufacturers as well as other tech trade groups.

The House passed legislation in the late 1990s to make the change, but the bill ran into opposition from PTO labor unions, which argued that corporatizing the agency would weaken employee rights. Other stakeholders criticized the idea as being good for multinationals, but not for universities, independent inventors or small businesses.

In addition, the report proposes that applicants may defer patent examination, which in other countries has effectively scaled back the number of applications processed. Depending on the model used, deferred examination may allow an applicant's competitors to demand earlier examination by paying a fee.

Those with applications on file could be offered a partial refund of fees to opt to defer examination for several years so the PTO could focus on those who want immediate consideration. However, the report notes that such a system could create additional uncertainty because rivals would wait longer before deciding whether they could safely market new products.

It might also be unfair to shift to competitors, as some deferred programs do, the burden to pay for and initiate a proceeding for someone else's application. Furthermore, the proposal could increase patent lawsuits because parties who have invested in new products may be more willing to litigate, the report states.

Former PTO Deputy Director Stephen Pinkos said some of the report's ideas are being implemented or considered at the agency. He said deferred examination is worthy of serious discussion, and that running the PTO as a government corporation "would possess enhanced budget and personnel flexibilities that would allow for better business planning."