In late December, the United States Patent and Trademark Office (USPTO) released its Performance and Accountability Report for 2006. In a year where the Patent Office received over a record 440,000 applications which represents a eighty-seven percent increase in patent filings since 1997, the USPTO Report included some interesting record breaking facts and trends, both good, bad and ugly.

The Ugly

First, the ugly news, the patent allowance rate, i.e., the percentage of applications reviewed by examiners that are approved, was the lowest rate ever in 2006 at fifty-four percent. This percentage is the latest number in a sharp decline from the late 1990s-early 2000s when the patent allowance rate hovered around seventy percent as indicated in the graph below. The graph depicts the patent allowance rate for the past thirty years. However, the graph only represents newly filed applications. How the number of continuations and divisionals filed will affect this graph or the rate is not known at this time. In any case, it appears, at least for the near future, that it is going to be more difficult, and potentially more time-consuming, for patent applicants to get their applications allowed.

The Bad

As mentioned above, the Patent Office received over a record 440,000 applications in 2006. The breakdown of the applications received by the USPTO is over 417,000 Utility, Plant and Reissue (UPR) patent applications (an 8.7% increase over 2005), over 25,000 design applications (a 2.1% increase over 2005) and over 52,000 PCT applications (a 13% increase over 2005). In addition, 121,307 provisional applications were received. The bad news is due to the increasing complexity of the subject matter of the applications filed as well as the shortage of experienced examiners to examine the applications, the backlog of applications continues to grow and, in 2006, the backlog now stands at over 700,000 applications. As the backlog continues to grow, the average first action pendency, i.e., the average time in months from filing until an examiner's initial determination is made in the patentability of an invention, continues to trend upwards. For 2006, the average first action pendency was 22.6 months, up from 21.1 months in 2005 and 18.3 in 2003. Additionally, the average total pendency, i.e., the average time in months from filing until the application is issued as a patent or abandoned by the applicant, in 2006 was 31.1 months, up from 29.1 months in 2005 and 26.7 in 2003. Therefore, applicants, on average, have to wait almost 2 years for a first office action and almost another year after that for the prosecution to be closed. However, as the USPTO charts below from 2005 demonstrate, the average first action and total pendency are completely Technology Center and Art Unit driven.

Not surprisingly, the amount of applications in the backlog is also Technology Center and Art Unit driven as shown by the USPTO charts below from 2005. According to the USPTO, inventory is determined by the number of months it would take to reach a first action on the merits (e.g., an action addressing patentability issues) on a new application filed in July 2005 at today’s production rate. Today’s production rate means that there are no changes in production due to hiring, attrition, changes to examination processing or examination efficiencies, and that applications are taken up in the order of filing in the given art unit/area.

As applied to the chart above, “New Application inventory” represents the number of new applications designated or assigned to a technology center awaiting a first action. “Overall Pending Application inventory” represents the total number of applications designated or assigned to a technology center in an active status. Includes new applications; rejected awaiting response; amended; under appeal or interference; suspended; reexams and allowed applications awaiting grant publication. Total inventory includes applications not assigned to a particular Technology Center, awaiting processing either pre- or post-examination.

Therefore, it might be possible for a patent applicant to move through the application process faster if the specification and claims of a complex technology are tailored in such a way that the application has greater odds to be assigned to a Technology Center and Art Unit with a quick pendency and a smaller backlog. For example, if the invention is a manufacturing control system employing some sort of interactive video distribution, the control system should be emphasized in hopes that it would be assigned to Technology Center 2100 and Art unit 2125 as opposed to Technology Center 2600 and Art Unit 2611.

The Good

However, there is good news in the USPTO's Report. The agency is combating the growing backlog by hiring more examiners and training them in an intense eight month university-type training program. Last year, 1218 patent examiners were hired which far surpassed the USPTO's goal of 200. It is the agency goal to hire over 1000 new examiners every year for the next five years. However, even with the substantial number of new hires, it will take several years for the new examiners to reach optimum examiner efficiency. However, there is hope the increased number of examiners will help take a substantial chunk out of the application backlog. Additionally, the applications that were allowed in 2006 had a very low allowance error rate. In the past year, 164,115 UPR and 19,072 design patents were granted. The USPTO examiners completed a record number 332,000 patent applications in 2006 with the lowest patent allowance error rate of 3.5% in more than twenty years (see the graph below). Patent allowance error rate is the percent of allowed applications reviewed having at least one claim which is considered unpatentable on a basis for which a court would hold a patent invalid. Because allowance occurs before a patent is issued, the patent allowance errors can be hypothetically caught before any patent is actually granted resulting in better and stronger patents being issued.

The Electronic Filing System-Web (EFS-Web) piloted in late 2005 and released to the public in March of 2006 turned out to be a successful endeavor for the USPTO. Since March, 11.1% of all applications were filed electronically, exceed the agency's goal of 10%. Additionally, the number of patent applications filed electronically jumped from 1.5% per month to 33% per month. The EFS-Web allows the applicant to file correspondence with the USPTO faster, more cheaply, and potentially with fewer transmittal errors. Lastly, in 2006, the Board of Patent Appeals and Interference also continues its successful trend. The average pendency for decided patent appeals remained under six months. The average pendency for interferences continues to be less than twelve months with the final decisions in 90% of all interferences posted within 24 months. All in all, the average patent applicant is looking at longer prosecution times, especially in crowded art units. However, the applications that are being granted allowance have fewer errors and the USPTO is attempting to alleviate the backlog by employing more examiners. Unfortunately, only time will determine if it is successful.