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The U.S. patent and Trademark Office (PTO) has failed in its effort to impose unprecedented new rules limiting the ability of applicants to obtain patents. The PTO has stated that it cannot hire enough technically trained examiners to work off its large backlog of pending patent applications, so it needs to ration patent examining resources. The PTO, however, appears to have no real alternative: It must hire and retain even more examiners for many years to handle its backlog while maintaining a robust patent system. The PTO developed these rationing rules in 2006 and 2007 because it was caught in a “perfect storm” of inadequate appropriations from Congress each fiscal year, combined with a rising tide of new applications. The PTO was not allowed to spend about $750 million of the money it collected in fees from applicants from 1992 to 2004, based on statistics from the Intellectual Property Owners Association. At the same time, more than 400,000 new applications were filed in 2007 alone, versus 185,000 in 1992. These and the following statistics are found in the PTO’s Performance and Accountability Report Fiscal Year 2007. The fees charged to patent applicants and patent owners were set at a level just high enough to fully fund the PTO’s operations, so it needed every penny that was withheld. The appropriation problem appears to be resolved, at least for now. But the backlog of pending patent applications in the PTO is enormous � nearly 1.2 million at the end of fiscal year 2007 � and keeps growing. The PTO has undertaken an equally enormous hiring program recently. It has been hiring 1,200 examiners per year for several years, and is adding to a base of about 5,400 examiners at the end of 2007. It has not, however, been able to hire, train and retain enough examiners to handle the workload. The year-to-year gain is roughly half the number of new hires. Many new examiners leave long before they are fully trained and productive, often to take better-paying jobs in corporations and private practice. The patent rationing rules, 72 Fed. Reg. 46716 (Aug. 21, 2007), were intended to allow the PTO to work off the backlog by reducing the number of patent applications and the complexity of each one. The new rules would have limited each application to 25 claims, and would have limited opportunities to resubmit rejected claims. The new rules would have prevented some applicants from getting the amount of patent protection they need to make large, speculative investments in long-range research. Long-range research is particularly required by biotechnology and pharmaceutical companies, which may live or die based on the degree of protection their patents afford. Plaintiffs Triantafyllos Tafas and Smithkline Beecham Corp., respectively an independent inventor and a pharmaceutical company, sued the PTO to prevent these rules from being implemented; the suits were consolidated. Judge James Cacheris granted a summary judgment permanently enjoining the new rules in Tafas v. Dudas, 2008 U.S. Dist. Lexis 26086 (E.D. Va. April 1, 2008). Cacheris held that the rules are substantive, not merely procedural, and that the PTO does not have the authority to impose substantive rules. The decision also indicated that rules limiting the number of opportunities to contest rejections and the number of claims per application are contrary to prior court decisions and long-standing practices. Better salaries and incentives Since Solomon-like rules simply cutting the PTO backlog away are not likely to be approved, the PTO should use radically different approaches to address its backlog. First, the existing salaries paid to patent examiners are not large enough to retain a substantial proportion of its new hires. To retain more of them, particularly the best ones, they must be paid enough to continue working as examiners. Second, the PTO also should make extensive use of nonsalary incentives to retain the many new examiners it hires, such as paying off the student loans or paying the law school tuition of examiners who have been on the job for two years (so they are known to be trained and capable) and are willing to work there several more years while working off their loans or completing law school. At one time, decades ago, examiners did receive law school tuition assistance if they worked as examiners for a certain number of years. Although these examiners often moved on after they graduated from law school, they provided many years of service in the meantime, and many of them also advanced within the PTO. Third, the PTO might consider opening a second office in another area of the country, such as the urban Midwest, where more science and engineering graduates and plenty of law schools are available and competing salaries are not as high as they are in Alexandria, Va., the sole home of the PTO today. By thinking “outside the Beltway,” the PTO should be able to solve the problem Congress created in the long run, without damaging the patent system that is a primary engine of growth and progress in the United States. George Wheeler ([email protected]) is a shareholder at Chicago-based McAndrews, Held & Malloy. He prosecutes patents and counsels clients in patent matters involving diverse chemical, mechanical and medical technologies.

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