Budget Issues Hit USPTO Hard As Fast Track Patent Examination Postponed; Pendency Reduction, Patent Reform Next To Suffer?

The United States Patent & Trademark Office (“USPTO”) recently announced several spending reductions in the wake of its budget appropriation for 2011. On April 15, the United States government finally resolved its Fiscal Year 2011 budget crisis, and in the process significantly reduced the spending ability of the USPTO. In response, the agency has been forced to cut back and postpone several initiatives it had planned for the year.

Among the most significant reductions to be made are the postponement of its proposed “fast-track” patent examination process. The USPTO previously announced the upcoming implementation of a three track framework for examination of patent applications. The first of those provided for expedited examination of patent applications for those willing to pay higher examination fees. This first track was due to be implemented May 4, 2011. It has now been indefinitely postponed.

Also postponed indefintely is a plan to open one or more satellite offices in different locations around the United States. The USPTO had already announced plans to open one such office in Detroit and had hinted at plans to open other regional offices. These satellite offices had been part of a plan to hire more patent examiners and leverage additional resources and technical expertise in various locations around the country.

The budget problems have also forced an examiner hiring and overtime freeze, which may mean its aggressive patent backlog and pendency reduction goals may be significantly slowed. USPTO Director David Kappos, since taking over at the agency in August 2009, has implemented numerous initiatives to significantly reduce both the huge existing patent application backlog and reduce the total pendency of a patent application from filing to issuance. The USPTO’s data visualization dashboard shows that current patent application backlog stands at 708,912, and traditional pendency is currently at an average of 33.9 months. While the USPTO no doubt intends to maintain these goals, it remains to be seen whether it can continue reducing backlog and pendency while keeping patent quality high in light of the hiring and overtime restrictions it has had to make.

It also remains to be seen what impact the USPTO’s budgetary cuts have on patent reform legislation currently working its way through the United States Congress. The version of the American Invents Act of 2011 recently passed by the United States Senate allows the USPTO to keep all fees it takes in from users of the patent system, and also provides the USPTO the ability to set fees at appropriate levels. These provisions, however, would be directly contradictory with the current budgetary scheme, which is based on a fee diversion framework that sets the annual budget for the agency as a portion of the fees collected. Therefore, any patent reform legislation containing this language would require resolution of the fees issue with the government’s budget, which would seem an extremely difficult political issue given the 2011 budget crisis.