Patent Office Problems Stifle Innovation, Economy

Technology innovation is both the lifeblood of our economy and the driving force of everyday improvements in our lifestyle. But all that is threatened by problems in a government agency which few of us ever think about.

That agency is the Patent and Trademark Office (search ), where existing troubles are real and destined to get worse unless Congress acts.

While we take patents for granted, we seldom stop to think about the overwhelmingly positive impact that patents have on our economy. Copyright industries, including the software industry, contributed $791 billion to the U.S. economy in 2001 and are growing faster than the rest of the U.S. economy, according to a key study. The licensing of U.S. patents contributed an additional $150 billion to the economy, according to KPMG. Intellectual property protections are particularly vital to innovation and investment in the information technology industry.

All this is, of course, good news. The bad news is that the Patent and Trademark Office, as currently funded, is buckling under the growing demands placed on it. Currently, more than 450,000 patent applications are waiting to be reviewed and the lag time between application for and issuance of a patent is about 27 months. This number is expected to rise to nearly 45 months by 2008 without additional resources. If the Patent Office grinds to a near halt it will not only adversely impact our economy but will also slow the introduction of new products that enhance our standard of living.

Most Americans are aware that the Patent and Trademark Office examines applications for patents and grants legal protection -- in effect, property rights -- for those who demonstrate innovation and original ideas. This patent protection is critical to business in the information technology industry. Patents are often a technology company’s most important asset and are critical to attracting investment, creating value and enabling mergers and acquisitions. In addition, patents are needed when we have to share our software or technical information widely in order to promote standards and inter-operability.

Fortunately, a fix is available. In fact, it has already been approved by the Judiciary Committee of the U.S. House of Representatives. The pending legislation to address the plight of the Patent Office is H.R. 1561 (search). There are two key provisions in the bill -- and they must be retained as the legislation works its way through Congress if the Patent Office is to be brought into the 21st century.

First, H.R. 1561 would increase the level of fees for a patent application anywhere from 15 to 25 percent depending on the technical field. The industry is widely supportive of increasing fees, knowing this will help shorten the huge delays.

This, in turn, leads to the second key provision of the pending legislation: that all patent application fees go to the Patent Office. Many Americans are unaware that the Patent Office receives all of its funding from fees paid by its users. Unfortunately, during the past 12 years, more than $650 million of these funds have been diverted to pay for unrelated government programs.

This diversion has drained vitally needed funds from a key government agency in what many now recognize as unwise public policy. Therefore, many business organizations, along with the Bush administration and leading members of Congress from both parties, are joining together to work toward passage of H.R. 1561. Support for the reform embodied in the bill is bi-partisan and widespread.

In Congressional testimony earlier this year, Commerce Secretary Don Evans said that “to support technology innovation and provide for intellectual property protection, the [Commerce] Department is working to eliminate the practice of using [Patent Office] revenues for unrelated federal programs.”

Congressman Howard Berman of California, a member of the House Judiciary Committee and the ranking Democrat on the Subcommittee on Courts, the Internet and Intellectual Property, called the practice of diverting Patent Office funds to other agencies a tax on innovation that should be ended.  He noted that “life-enhancing, job producing” innovations are likely trapped within the application backlog at the Patent Office. 

These comments represent a growing awareness that short-changing the Patent and Trademark Office stifles innovation. For the sake of consumers who benefit from this innovation, Congress should act promptly to fully fund the Patent and Trademark Office. If it does, there are no losers.  More importantly, there are many winners.

Jim Prendergast is the executive director of Americans for Technology Leadership.