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A declining focus on patent quality at the USPTO and what it means for startups
Last month, the United States Patent and Trademark Office (“USPTO”) announced a reorganization which, among other things, eliminated the positions of Deputy Commissioner and Associate Commissioner for Patent Quality. This is the latest in a series of policy developments which have had the effect of deprioritizing patent quality in the U.S.
Patent quality is particularly important for innovative, high-tech startups. High-quality patents can be a valuable asset for many emerging companies. Low-quality patents—those that claim things that were already known or that are written in vague, overbroad terms that are difficult to understand—on the other hand lack value. But such patents of questionable validity are also, unfortunately, weaponized against domestic startups—for example, in lawsuits filed by “patent trolls.” Startups threatened with low-quality patents have to divert their limited resources to defend or settle frivolous cases. And abusive patent assertion can (and has) led to startups being harmed or even forced to close up shop.
Stakeholders from all sectors have long recognized a need to improve patent quality at the USPTO. Enhancing quality would both increase confidence in the U.S. patent system and make it harder for abusive patent assertion to hamper innovation. And up until recently, it seemed like the USPTO agreed, having established quality-oriented programs and initiatives under the authority of the Deputy Commissioner for Patent Quality. With the latest reorganization, it is difficult to tell which direction the USPTO’s quality efforts may take. But the recent reorganization is a troubling sign that quality is no longer a priority at USPTO, and that patent quality in this country could continue to slip.
A brief primer on patent quality.
The concept of “patent quality” can be viewed through multiple lenses, but one common and helpful definition centers around (1) increasing the likelihood that granted patents are valid and (2) reducing the likelihood that valid patent applications are rejected during the review process. A high-quality patent satisfies the statutory requirements for patentability—e.g., by claiming a truly novel and non-obvious invention with language sufficient to define and disclose its scope. And a patent system focused on quality should ensure that such valid patents are granted and that invalid patents are not.
While the idea of only granting valid patents seems simple—indeed, it is what U.S. law calls for—in reality the situation is more complicated. Upwards of 40 percent of the patents that are challenged after issuance are determined to be invalid (i.e., they should not have been granted in the first place). And this may not be surprising, considering that the volume of applications is always growing (last year the USPTO received over 600,000 new patent applications), but a patent examiner is only able to spend, on average, less than 20 hours evaluating a patent.
Shifting patent quality initiatives at the PTO.
Concerns over patent quality have been on the radar for decades. Over the last twenty years, independent experts and the USPTO have identified problems, proposed solutions, and engaged with stakeholders over questions of how to improve quality. Patent quality was a particularly high priority in the previous administration: the Federal Trade Commission and Department of Justice, a Government Accountability Office report, and the Office of the Inspector General have all called for better patent quality. And scholars have identified a number of policy levers and incentives for improving quality. As the gatekeeper against the issuance of invalid patents, the USPTO has a key role to play in any quality-oriented efforts.
In 2015, while there was a lot of attention and positive momentum around improving patent quality, the USPTO instituted a number of organizational and functional changes. The Office launched the Enhanced Patent Quality Initiative and created the position of Deputy Commissioner for Patent Quality. Among other things, the Deputy Commissioner oversaw improved training for examiners and other stakeholders, conducted regular meetings and events about advancing and measuring quality, invested in improved IT and processes, and focused on measuring quality.
However, current USPTO leadership has deprioritized patent quality. These steps have not gone unnoticed, and problems with patent quality persist. For example, after a Senate hearing last year about patent quality, the USPTO was specifically asked why the patent quality team and initiatives established in 2015 were no longer very active and if the Office had plans to reinvigorate those efforts. And the U.S.’s global rankings in patent quality have dropped. A recent survey of patent practitioners rated the USPTO fourth out of five patent offices for quality, behind the EU, Japan, and Korea. And “a lower proportion of respondents regard the office’s patent quality as excellent or very good [this year], and fewer survey takers say that [U.S.] patents have improved year on year.”
But against that backdrop, the USPTO recently announced a reorganization eliminating the patent quality leadership positions created five years ago. The fact that other countries are out-pacing the U.S. in patent quality suggests a need to reinvigorate, not erase, promising efforts to improve the quality of U.S. patents. The recent reorganization appears to be a step in the wrong direction.
What patent quality means for startups.
Patent quality is particularly important for startups. For innovative, tech-oriented companies, high-quality patents can be an important asset. But low-quality patents—those that do not satisfy the statutory requirements and should not have been granted in the first place—are a drain on innovative new companies.
As Engine explained in comments to Congress late last year, “[t]here are at least two reasons why efforts to improve patent quality help startups and promote innovation. First, low-quality patents open the door to abuse of the system. They are the type of patents which bad actors assert, or threaten to assert, against startups, . . . . These abusive patent assertions are (at best) a distraction, forcing startups to divert time and resources to litigation defense, when that energy could instead be spent on product development, engineer salaries, etc.”
Importantly, because low-quality patents can easily be weaponized against startups, they become a substantial drain on innovation. Issuance of low-quality patents feeds into abusive litigation activity, which has been shown to cost innovative companies billions of dollars, reduce R&D spending, and reduce venture capital invested in startups.
Second, we noted in our comments how “low-quality patents can pose problems for patent owners. Many startups obtain patents, which can allow them to protect their innovations, attract funding, etc. And the process of obtaining patents takes time and money. It is frustrating for a company to learn that, after spending that time and money, its patent is easily invalidated; if the applicant knew about prior art or disclosure problems sooner, it could have amended its patent during prosecution, resulting in a higher-quality patent that truly passes statutory muster at the end. Similarly, startups benefit from certainty, and benefit from knowing that their patents are actually high-quality assets. The answer to the problem of low-quality patents cannot be to make those low-quality patents (which, again, do not satisfy the statutory requirements and should not have issued in the first place) more enforceable or harder to challenge. To reiterate, those low-quality patents are the ones that are already subject to abuse, and even though they are of dubious validity, are asserted in ways that can slow innovation and harm competition.”
The USPTO’s pivot away from quality is concerning. Last year, Congress had started to turn its focus toward quality. Hopefully as we enter a new year and prepare for the next Congress, the government will return to a focus on quality.
Disclaimer: This post provides general information related to the law. It does not, and is not intended to, provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
