The patent system is not broken, just not perfect. That is the viewpoint of Jon Dudas, the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (USPTO).
Dudas knows his way around the patent and intellectual property worlds. He was appointed to head the USPTO in July 2004, was formerly acting Under Secretary and Director and Deputy Under Secretary and Deputy Director from 2002 to 2004, and served six years as Counsel to the Subcommittee on Courts and Intellectual Property, and Staff Director and Deputy General Counsel for the House Committee on the Judiciary.
Speaking at the Tech Policy Summit in San Jose, Dudas said that characterizing the patent system as hurting innovation is a "fundamentally wrong" way to frame the debate. "I have traveled around the world, and every nation is thinking how it can model [intellectual property governance] after the U.S," Dudas said. "It's a proven system, over 200 years old. The Supreme Court, Congress and policy makers are involved [in cases and legal reforms] not because the system is broken. It's not perfect, and we should be having the debate on how to improve."
Dudas' view on the health of the patent process wasn't fully shared by a panel of patent experts at the Tech Policy Summit. The critics claim that the USPTO lacks enough qualified examiners and issues too many bad patents. The delivery of patent rulings takes longer than applicants would like, slowing down the introduction of innovations into commercial markets.
The agency is trying to remedy that problem in part by hiring more examiners, Dudas told me. Last year, the USPTO hired 1,218 patent examiners, for a total of 5,500, and plans to hire 1,000 per year for the next five years.
The USPTO received in excess of 440,000 patent applications and completed 332,000 patent applications in 2006. However, the total backlog of patent applications in around 700,000.
In previous years, funds collected in the patent process were diverted from the agency, and now they have been reconstituted, allowing for the mass hiring of examiners. The USPTO budget for 2007 is $1.8 billion and the agency employs 8,500 people.
Dudas said that the average examiner salary is in six figures, and that the agency can offer competitive salaries for college graduates. The USPTO, headquartered in Alexandria, Va., is also flexible on workplace location--85 percent of trademark examiners work from home and currently 10 percent of patent examiners are working remotely.
Dudas countered the claim that the agency issues an excess of unwarranted patents. "Only 54 percent of cases and some claims get approved," Dudas said. "Most important, our error rate [3.5 percent, based on random checks at the end of the review process] is the second lowest it's been. We are making sure to focus quality at front end in patent reform debate."
The biggest threat today on bad quality patents is the "law of obviousness," Dudas said. The Supreme Court has heard oral arguments in KSR v. Teleflex, a case that could determine what makes up a 'nonobvious' invention. Dudas said that examiners need to be given more deference in determining what is obvious.
Dudas doesn't believe the answer to improving the speed and efficiency of the organization is merely hiring more people and having them work at optimal production capacity. "Perfecting the system means an error rate of zero, which we are not likely to achieve," Dudas said. "We have to get more and better information and make sure the examiners have the right tools and information to make the best decisions."
In the category of getting more information, Dudas said the having applicants submit more complete information, including their own search reports and analysis of why a patent should be granted given similar existing patents. Patent attorneys have been concerned that providing more information could be a liability. If information on a patent application is found out to be false, or a 'lie,' the application is summarily thrown out. Statues need to be changed to accommodate a standard of information accuracy that clearly allows for truly unintended misinformation.
In addition, sharing information with other countries--short of a world patent organization--could speed resolution on patent applications. Dudas cited an example of Microsoft U.S. patent information shared with Japan that led to faster approval of patents in Japan.
Allowing third-party information to be contributed to patent cases is another of the area of improvement at the front end. "We want to give third parties the opportunity to give information to the USPTO," Dudas said, "so the examiner has information from their own research, the applicant and from third parties. When examiners have all information, they almost always make the right choice."
The USPTO is experimenting with New York University on building wikis to collect data, such as prior art, from various participants and sources in the patent application process.
With the more open environment, companies and individuals could more easily game system, loading up examiners with more and more information from friendly or unfriendly parties. "We certainly can't allow having more information come in and harrassing the applicant, and we can't hold up the timing of application processing," Dudas said.
The agency is trying to improve procedures for post grant reviews, presenting a case before three USPTO judges.
Some of the proposals, such as third-party submissions and requirements for submitting information, as well as litigation reforms, require changes to laws and are part of the bill in the works from Congressman Berman and Senator Patrick Leahy due to be presented to Congress in the next few weeks.
Ultimately, "the measure of innovation and competitiveness is not the number of patents but the quality of patents," Dudas concluded. But, the measure of success for the USPTO will be the quantity and quantity of patents that it can process. Improvements are in place, but a backlog of 700,000 will take years to dissipate.