Wealth of Ideas Newsletter

FTC Report on PAEs Is Not the Condemnation the Anti-IP-Rights Groups Wanted

As we went to press with the October Wealth of Ideas® e-letter, the Federal Trade Commission (FTC) released its long-awaited report on Patent Assertion Entities (PAEs). Titled “Patent Assertion Entity Activity: An FTC Study,” this report was generated at the request of the anti-IP-rights lobby that hoped it could use the report to push through patent-weakening legislation. The report turned out to NOT be the smoking gun that Big Tech was looking for!

Launched in 2013, the 269-page report was three years in the making. The FTC used authority granted to the agency by Congress to subpoena documents for the study that focused on patent “acquisition, litigation, and licensing practices” at both assertion firms and operating businesses.

The FTC divided PAEs into two segments: Portfolio PAEs (larger, often publicly held companies that own, manage and license hundreds of patents) and Litigation PAEs (smaller, often privately held companies that hold fewer patents and rely on litigation to generate revenue). The FTC study also analyzed the wireless chip set sector since it includes both Non-Practicing Entities (NPEs) and operating companies.

Information was analyzed from 22 PAEs and over 2,500 affiliates and other related entities, and covered their activities form January 2009 through September 2014. The FTC also identified 2,189 “Holding Entities,” companies that own patents but do not practice, license or assert them. The FTC did not study those patent assertion firms that send out “demand letters” since it determined that the revenue generated from this effort is minimal.

Key Data and Differences

The FTC found that 93% of the licenses secured by Litigation PAEs were the result of litigation, while just 29% of the licenses secured by Portfolio PAEs were the result of litigation. Among the patents held by PAEs, 88% were under the Computers & Communications or Other Electrical & Electronic Technology categories, and more than 75% were software related.

The study reported that 73% of all assertion targets were defendants in only one patent infringement lawsuit, and just 13% of all assertion targets were defendants in two lawsuits. Just a small number of businesses reported multiple PAE-filed lawsuits.

Companies that were defendants in patent infringement lawsuits were primarily in the “Computer & Electronic Product Manufacturing” industry. Firms in this sector accounted for more than half of the top 25 firms that received the largest number of demands, were sued for patent infringement, and paid the largest royalties to PAEs.

In the wireless chipset sector, the FTC found, patents are asserted differently. The agency observed that manufacturers sent demand letters before executing licenses, while Litigation PAEs filed lawsuits prior to securing licenses. The study also reported a difference in the licenses. Manufacturer licenses frequently included field-of-use restrictions, cross-licenses, and complicated payment terms, while PAE licenses involved a simple lump-sum payment with few restrictions, if any.

Not surprisingly, the FTC reported that patent infringement litigation is a key element in the PAE business model. Among all patent infringement lawsuits filed by PAEs, 93% resulted in a license. Among those companies that took licenses, 34% did so within six months of the filing of the lawsuit, 66% within one year, and 83% within 18 months.

FTC Recommendations

The key sentence in the FTC Study is this: “The FTC recognizes that infringement litigation plays an important role in protecting patent rights, and that a robust judicial system promotes respect for the patent laws.” This sentence was a serious blow to the anti-IP-rights lobby. However, the study then added that, “Nuisance infringement litigation, however, can tax judicial resources and divert attention away from productive business behavior.”

The FTC study proposes four reforms.

  1. Address Discovery burden and cost asymmetries in PAE litigation: Because PAEs do not invent, develop or manufacture products that use their patented technology, they generally have less discoverable information than the party accused of infringement, and they are not subject to a countersuit for patent infringement, so they do not face potential Discovery relating to infringement counterclaims. This imbalance in the Discovery burden can give PAEs an advantage in litigation.
  2. Provide the courts and defendants with more information about the plaintiffs that have filed infringement lawsuits: This recommendation is consistent with the Obama Administration’s recommendation that Congress “require patentees and applicants to disclose the ‘Real Party-in-Interest,’ by requiring any party sending demand letters, filing an infringement lawsuit or seeking USPTO review of a patent to file updated ownership information, and enabling the USPTO or district courts to impose sanctions for non-compliance.”
  3. Streamline multiple cases brought against defendants on the same theories of infringement: For example, when a PAE sues a manufacturer and its customers on the same claims of infringement, Congress and the Judicial Conference should enact provisions that encourage the District Court to stay actions against end-users until the manufacturer's lawsuit has been resolved.
  4. Provide sufficient notice of infringement claims as courts continue to develop heightened pleading requirements for patent cases: As courts continue to address the “plausibility” of pleadings in patent cases, ensure that patent infringement Complaints provide sufficient notice to the accused infringers.

Analysis

The recommendations made by the FTC have all already been included in various patent bills introduced in Congress. What the anti-IP-rights lobby was looking for from the FTC – a broad condemnation of Patent Assertions Firms and other Non-Practicing Entities – was NOT in the study. What was in the study was that using the term “Patent Troll” to describe an NPE was “not helpful.” This study will have little effect on the current patent rights debates before Congress as it does not provide a strong argument for – nor a strong argument against – increasing or limiting patent enforcement rights, but comes down in the middle.

GAO Makes Two Recommendations for Improving Prior Art Searches

The General Accountability Office (GAO) issued three reports this year regarding the U.S. Patent and Trademark Office (USPTO). In August, we summarized the first of these reports, Patent Office Should Define Quality, Reassess Incentives, and Improve Clarity. Last month, we provided a summary and analysis of the second report, Patent Office Should Strengthen Search Capabilities and Better Monitor Examiners' Work. This month we wrap up the trilogy with a summary and analysis of Patent Office Has Opportunities to Further Improve Application Review and Patent Quality.

Purpose of the Third Study: The House Judiciary – that is considering several patent “reform” bills – asked the GAO to develop information that it could provide as testimony before the committee. The Judiciary Committee specifically wanted to know what the challenges are that patent examiners face in reviewing applications and issuing high-quality patents, and what steps the Patent Office can take to improve patent examination and the quality of granted patents.

We put “reform” in quotations in the previous paragraph because attempts to weaken the U.S. Patent system by agents for “Big Tech” have cleverly disguised these efforts as “reform” when their sole purpose is the exact opposite. We do not in any way mean to impugn the efforts or motives of the General Accountability Office, an independent agency with an impeccable reputation. We do, however, question the motives of the anti-patent members of the House Judiciary Committee.

Survey of Patent Agents: The GAO surveyed a cross section of USPTO patent examiners and received an 80% response rate. The agency also used input from Patent Office documents, relevant patent-related laws, and interviews with USPTO officials and what the agency calls “knowledgeable stakeholders” – patent agents, patent attorneys and patent litigators, but no actual inventors.

The survey of patent examiners included many questions, but the most telling data is from the question regarding if patent examiners believed they have sufficient time to complete a “thorough prior art search” in their examination of a patent application. Figure 1 shows the results from that question.

The survey showed that:

  • 24.8% reported that they had “much less time than needed”
  • 42.2% reported that they had “somewhat less time than needed”
  • 21.7% reported that they had “about as much time as needed”
  • 6.8% reported that they had “somewhat more time than needed”
  • 3.3% reported that they actually had “much more time than needed”

Our Analysis of the Survey: We are not surprised by the results. Two-thirds of the patent examiners surveyed believed that they did not have sufficient time – either had “much less” or “somewhat less” time than needed – to complete a thorough prior art search. What employees in any organization are going to admit they have more than enough time to complete the work they have? Virtually every employee is going to claim that he or she does not have enough time. So we have to take the survey results with a grain of salt.

It would have been more effective if the GAO had conducted an independent study to determine what the steps are in a prior art search, and how much time an effective prior art search should take; or they could have observed the work of a sample of patent examiners to see how efficient they are in their prior art search activities. Also, patent agents and patent attorneys (or their staffs) regularly conduct prior art searches. It would have been informative and – we suspect – enlightening to find out how long a prior art search in the private sector takes.

GAO Conclusions: The GAO reports that patent examiners face a “variety of challenges” when reviewing patent applications with the goal of issuing “high-quality patents” and that prior art searches are the most time-consuming task that a patent examiner has. The GAO concluded that the search tools the USPTO provides to patent examiners may be insufficient, and the clarity of patent applications and the amount of time that is allotted for an examiner to complete his or her work affects an examiner’s ability to ensure that patents that are issued are high-quality.

The General Accountability Office acknowledged that the Patent Office is taking steps to address the challenges patent examiners face in reviewing applications in such a way that they issue high-quality patents – most notably through the USPTO’s Enhanced Patent Quality Initiative – but the GAO believes that opportunities exist for further improvement. Here are the agency’s observations:

  • The USPTO is taking steps to strengthen the monitoring of patent examiners’ work, but the Patent Office still faces limitations in assessing overall patent quality – including the thoroughness of the patent examiners’ prior art searches – because the USPTO has not established a consistent definition of patent quality or guidance as to what constitutes a thorough prior art search for different technologies.
  • While the USPTO has an overall strategic goal that includes optimizing patent quality, the Patent Office has not developed specific goals and performance indicators related to patent quality and prior art search improvement.
  • The USPTO has not comprehensively assessed the time patent examiners need to perform a high-quality patent examination – including a thorough prior art search – and has not fully assessed the effects of other agency incentive policies on patent quality. For example, the Patent Office recently adjusted the time allotted for patent examiners to review patent applications in some technologies, but it has not assessed the time needed for a thorough patent examination in all technology areas.
  • The GAO estimates, based on its survey, that 70 percent of patent examiners say they do not have enough time to complete a thorough examination given a typical workload. Additionally, most of the stakeholders the GAO interviewed said that the time pressures that patent examiners face is one of the central challenges to ensuring patent quality; however, the USPTO has not analyzed the effects of its production-based incentive policies on patent quality. According to federal standards for internal control, operational success requires providing personnel with the right incentives for the job. Without comprehensively assessing the time needed to conduct a thorough examination or the USPTO’s current incentives, USPTO cannot be assured that it's time allotments and incentives support the agency’s patent quality goal.
  • Patent examiners reported that they had difficulties with the amount and relevance of the prior art references provided by patent applicants. The GAO estimates that 82% of patent examiners “sometimes,” “often” or “always” encounter patent applications with what they considered an excessive number of submitted art references.

GAO Recommendations: For all of the problems and shortcomings it found, the General Accountability Office came up with two recommendations in its third report.
1. The USPTO must consistently and clearly define patent quality and what a thorough prior art search is for different technologies, and it must establish goals and indicators to monitor the work of patent examiners.
2. The USPTO must assess the time allotted for a patent examination and analyze the effects that other Patent Office employee incentives have on patent quality.

Upon receipt of the report, the Patent Office reported back that it “concurred” with the GAO’s recommendations.

Our Analysis of the Recommendations: The GAO’s recommendations are thoughtful, reasoned and practical. There needs to be a determination of exactly how long a thorough prior art search should take. It should be noted, however, that the recommendations presented by the GAO in all three of its reports do not support any of the anti-patent bills currently before Congress.

GAO Makes Seven Recommendations for Improving Prior art Searches

Last month, we summarized and analyzed one of three reports issued by the Government Accountability Office (GAO) this summer, Patent Office Should Define Quality, Reassess Incentives, and Improve Clarity. This month, we summarize and analyze a second report from the GAO, Patent Office Should Strengthen Search Capabilities and Better Monitor Examiners' Work.

Purpose of the Report

Acting under a request from the House of Representatives Judiciary Committee, the GAO looked at how the USPTO goes about the process of examining patent applications to ensure that inventions meet two key requirements for a U.S. Patent: They are novel and not obvious. Patent examiners accomplish this by comparing applications to “prior art” (existing patents and applications in the United States and abroad as well as any non-patent literature such as scientific articles). Thorough prior art searches help ensure the validity of granted patents.

The GAO was asked to identify ways to improve patent quality through use of the best available prior art. The GAO included in its report:

  • The challenges examiners face in identifying relevant prior art
  • How selected foreign patent offices address challenges in identifying relevant prior art
  • The extent to which the USPTO has taken steps to address challenges in identifying relevant prior art.

Survey of Patent Examiners

In addition to surveying a cross section of USPTO patent examiners, the GAO interviewed experts active in the field such as patentees, attorneys, academics, and officials from both the USPTO and similarly sized foreign patent offices.

The survey conducted by the GAO was of 3,336 patent examiners. It asked the patent examiners for their perceptions of the Patent Office’s approach to patent quality, the challenges the agency faces in finding relevant prior art, and how the USPTO might improve patent quality and its prior art search capabilities. The GAO received responses from 2,669 patent examiners, an 80 percent response rate.

The survey was conducted across a random sample of patent examiners from eight of the technology-based subject matter groups into which patent examiners are divided, and patent examiners who had been with the Patent Office for less than one year were excluded.

One of the most telling questions was No. 3. It asked patent examiners approximately how many hours they spent per patent application on prior art searches over the past quarter in the preparation of the original First Action on the Merits, the notice patent examiners send to applicants about the patentability of their inventions. Here are the results for the eight technology areas.

Technology Area Average Hours
Biotechnology and Organic Chemistry 5.2
Chemical and Materials Engineering 6.7
Computer Architecture, Software, and Information Security 10.9
Computer Networks, Multiplex Communication, Video Distribution, and Security 8.8
Communications 8.9
Semiconductors, Electrical and Optical Systems and Components 7.4
Transportation, Construction, Electronic Commerce, Agriculture, National Security,and License and Review
Business Methods 7.3
Not Business Methods 7.1
Mechanical Engineering, Manufacturing, and Products 7.9
Overall Average 7.8

 
Foreign Patent Office Input

The GAO found that the European Patent Office and the Japan Patent Office face similar challenges to the USPTO when it comes to identifying prior art, and these offices use various approaches to improve prior art searches such as leveraging work of other patent offices on related patent applications, and integrating non-patent literature into their search tools. In some cases, these approaches are coordinated with – or are very similar to – what the U.S. Patent Office does.

GAO Recommendations and USPTO Responses

A draft of this report was given to the U.S. Patent and Trademark Office prior to the report’s official release, so we include here both the GAO’s seven recommendations, and the Patent Office’s response to each.

Recommendation No. 1: To ensure that USPTO's collaborative efforts on classification help examiners find relevant prior art, the USPTO should work with the European Patent Office (EPO) to identify a target level of consistency of Cooperative Patent Classification (CPC) decisions between USPTO and EPO, and develop a plan to monitor consistency to achieve the target.

USPTO Response: The USPTO concurs with this recommendation. Efforts are currently underway between the USPTO and the EPO to develop objective, consistent target levels called "objective metrics" for CPC. These objective metrics will allow for the determination of CPC symbol allocation by both the USPTO and the EPO in an effort to identify areas of classification practice convergence and divergence. Divergent areas will then be targeted for further investigation and corrected through bi-lateral training, revision, and reclassification. The USPTO has also been working with other partner patent offices, the Republic of Korea, in particular, to develop consistent target levels. Objective metrics are important to ensure confidence in the CPC system and confidence of examiners in their search. The USPTO's objective metrics have been well received by Korea in helping its office produce work sharing.

Recommendation No. 2: To ensure that the USPTO is able to take full advantage of its investment in new information technology tools and capabilities, the USPTO should develop and periodically update a documented strategy to identify key sources of non-patent literature for individual technology centers and to assess the optimal means of providing access to these sources, such as including them in the USPTO's search system.

USPTO Response: The USPTO concurs with this recommendation. The USPTO's Scientific and Technical Information Center (STIC) currently conducts analyses on existing and new non-patent literature (NPL) sources to be made available to individual technology centers as well as assesses usability for incorporation into the USPTO's search system. The USPTO currently has a documented monthly process whereby it measures and reports on NPL utilized by individual technology centers and adjusts NPL sources accordingly. As part of the analysis and implementation of the elements of this recommendation, the USPTO will investigate the development of a documented strategy to identify key sources of non-patent literature for individual technology centers and assess the optimal means of providing access to these sources.

Recommendation No. 3: To improve its monitoring of prior art searches and provide the USPTO with the ability to examine and address trends in prior art search quality at the technology center level, the USPTO should develop written guidance on what constitutes a thorough prior art search within each technology field, technology center, art area, or art unit – as appropriate – and establish goals and indicators for improving prior art searches.

USPTO Response: The USPTO concurs with this recommendation. The USPTO will develop technology-based search training guidance and establish enhanced goals and indicators for improving prior art searches.

Recommendation No. 4: To improve its monitoring of prior art searches and provide the USPTO with the ability to examine and address trends in prior art search quality at the technology center level, USPTO should ensure that sufficient information is collected in reviews of prior art searches to assess the quality of searches at the technology center level, including how often examiners search for U.S. patents, foreign patents, and non-patent literature.

USPTO Response: The USPTO concurs with this recommendation. A great deal of information is collected and recorded by examiners during a search of prior art. In addition, the Office of Patent Quality Assurance also makes efforts to sample examiner search data during its review of issued Office Actions. These efforts are in addition to the review of search strategy and results carried out at the technology center level by training primary examiners, supervisory patent examiners, and quality assurance specialists. These reviews are utilized by the examiners and supervisors to make the search process more effective and more efficient. Responsive to this recommendation, the USPTO will work to ensure that adequate search data are collected to assess the quality of searches at the technology center level.

Recommendation No. 5: To improve its monitoring of prior art searches and provide the USPTO with the ability to examine and address trends in prior art search quality at the technology center level, USPTO should use the audits and supervisory reviews to monitor the thoroughness of examiners' prior art searches and improvements over time.

USPTO Response: The USPTO concurs with this recommendation and will investigate utilizing audits and various reviews to monitor the thoroughness of patent examiners' prior art searches and improvements over time.

Recommendation No. 6: To ensure that examiners have sufficient time to conduct a thorough prior art search, the USPTO should – in conjunction with implementing the recommendation from GAO's patent quality report to analyze the time examiners need to perform a thorough examination – specifically assess the time examiners need to perform a thorough prior art search for different technologies.

USPTO Response: The USPTO concurs with this recommendation. The USPTO intends to further investigate the time examiners need to perform a thorough prior art search, including an assessment of the time examiners need to perform a thorough prior art search for different technologies. The USPTO has already completed an initial investigation of the time examiners need to perform a thorough patent examination prior art search. This initial investigation occurred as a result of feedback received during the transition from the United States Patent Classification System (US PC) to CPC. The investigation found that additional time for searching was warranted in certain technologies. Due to the findings of this initial investigation, the USPTO provided approximately 1,000 examiners with an adjustment of an additional 2.7 hours to their current GS-12 expectancy for certain classes/subclasses.

Recommendation No. 7: To ensure that examiners have the technical competence needed to complete thorough prior art searches, the USPTO should assess whether the technical competence of examiners in each technology center match those necessary, and develop strategies to address any gaps identified – such as a technical training strategy – and establish measures to monitor progress toward closing any gaps.

USPTO Response: The USPTO concurs with this recommendation and will assess whether the technical competence of examiners in each technology center matches those necessary and develop strategies to address any gaps identified.

We find Recommendation No. 6 the most telling. As a result, the USPTO patent examiners will be spending an additional 2.7 hours on prior art searches, an increase over the current average of 35 percent!

GAO Makes Seven Suggestions to Improve Patent Quality

Earlier this summer, the U.S. General Accountability Office (GAO) completed three reports related to the performance of the U.S. Patent and Trademark Office (USPTO). The three reports, that were all officially released July 20, are:

1. Patent Office Should Define Quality, Reassess Incentives, and Improve Clarity
2. Survey of U.S. Patent Examiners
3. Patent Office Should Strengthen Search Capabilities and Better Monitor Examiners' Work

This month, we will summarize and analyze for you the first of these three reports.

The report opens with a letter to Rep. Bob Goodlatte, a Republican from Texas who is the chair of the House Judiciary Committee. Rep Goodlatte has proposed and supported several anti-patent-rights bills, so it can be reasonably assumed – although it does not state this in the report – that the report was initiated through a request from Rep. Goodlatte and/or his committee.

Purpose of the Study

Beginning with the premise that going to court to resolve disputes over patent infringement and validity costs millions of dollars, the report assumes that an increase in the numbers of low quality patents – specifically those that are unclear and overly broad – is the culprit. The report begins with the undocumented assumption that an increase in patent infringement litigation may hinder innovation by blocking new ideas from entering the marketplace.

The GAO was asked to review issues related to patent quality as a means to reduce patent litigation, ignoring entirely the concept that in a rush to get a new product to market in an increasingly competitive global marketplace, many companies fail to perform sufficient due diligence to determine if the technology behind their new products is infringing a patent or patents.

The report examines recent trends in patent infringement litigation and what additional opportunities exist to improve patent quality. The GAO analyzed patent infringement litigation data from 2007 through 2015, conducted a survey of USPTO examiners, and interviewed Patent Office officials and stakeholders such as legal scholars, technology companies, and patent attorneys – but no inventors!

Page 10 of the report includes a very instructive and interactive chart showing the steps in the patent examination process, with a pop-up paragraph that explains each step. Here is the chart, but you must go to the actual Adobe version of the report to see the pop-up text.

The GAO included several charts based on research by RPX Corporation that tracked patent litigation. The GAO found that District Court filings for patent infringement lawsuits increased from about 2,000 in 2007 to more than 5,000 in 2015, while the number of defendants named in these lawsuits increased from 5,000 to 8,000 over the same period.

Additional research showed that from 2007 through 2015, patent infringement filings in the Eastern District of Texas increased from about 20 percent to almost 50 percent of all filings.

Without providing documentation to back up this claim, the GAO reported that the increased filings in the Eastern District of Texas were “likely due to recent practices in that district that are favorable to the patent owners who bring these infringement suits.” The agency also found that – not surprisingly – most patent infringement lawsuits are in the high-tech sector: Software, computers and telecommunications.

The report went on to include that according to what several stakeholders told the GAO, it is easy to unintentionally infringe on patents associated with these technologies because the patents can be unclear and overly broad, and that is the result of low patent quality. What due diligence is or is not performed by high-tech companies was not addressed.

The GAO acknowledged the Enhanced Patent Quality Initiative launched by Patent Office Director Michelle Lee in May of last year was a series of good first steps toward improving patent quality. However, the GAO concluded in its report that there are additional opportunities to improve patent quality.

1. The USPTO does not currently have a consistent definition for patent quality that is articulated in agency documents and practices, and that is in line with federal internal-control standards and best practices. The GAO reports that the stakeholders they interviewed would define a quality patent as one that meets the “statutory requirements for novelty and clarity” and one that would be upheld if challenged in a lawsuit or other proceeding. Without a consistent definition of patent quality, the GAO believes that the Patent Office is unable to truly measure progress toward meeting its patent quality goals.

2. The agency found that time pressures on patent examiners are an essential challenge to patent quality. Based on GAO's survey of patent examiners that is included in one of the three reports released in July, 70% of patent examiners say they do not have enough time to complete a thorough examination given their typical workloads. According to federal standards for internal control, agencies should provide staff with the right structure, incentives, and responsibilities to make operational success possible. Without assessing the effects of current incentives for examiners or the time allotted for examination, USPTO cannot be assured that its time allotments and incentives support the agency's patent quality goals.

3. The GAO believes that the USPTO does not currently require patent applicants to define key terms or make use of additional tools that would further ensure patent clarity. Federal statutes require that patent applications use clear, concise, and exact terms, but the GAO estimates that nearly 90% of patent examiners “always or often” encountered broadly worded patent applications, and nearly two-thirds of examiners claim that this makes it difficult to complete a thorough patent application examination. Without making use of additional tools – such as a standard glossary of key terms – to improve the clarity of patent applications, the Patent Office risks issuing patents that do not meet statutory requirements.

GAO Recommendations

The report includes seven recommendations that it believes would improve patent quality:
1. Develop a consistent definition of patent quality, and clearly articulate this definition in agency documents and other guidance.
2. Further develop measurable, quantifiable goals and performance indicators related to patent quality as part of the agency’s strategic plan.
3. Analyze the time examiners need to perform a thorough patent examination.
4. Analyze how current performance incentives affect the extent to which examiners perform thorough examinations of patent applications.
5. Establish a process to provide data on the results of the PTAB proceedings to managers and staff in the USPTO’s Technology Centers, and analyze PTAB data for trends in patent quality issues to identify whether additional training, guidance or other actions are needed to address these trends.
6. Evaluate the effects of compact prosecution and other agency application and examination policies on patent quality. In doing so, USPTO should determine if any changes are needed to ensure that the policies are not adversely affecting patent quality.
7. Consider requiring patent applicants to include claim clarity tools – such as a glossary of terms, a check box to signal functional claim language, or claim charts – in each patent application.

Conclusion

While everyone in the innovation community – from independent inventors to corporate R&D staffs, from patent attorneys to patent litigators – want quality patents, no evidence has been put forth substantiating the belief that patent infringement litigation will be reduced if we just had better quality patents. While the report is comprehensive and it includes excellent recommendations, it does not address the market dynamics that are a critical factor in why patent infringement occurs, and the patent litigation that follows as a means to enforce IP rights and provide remedies to those whose patents have been infringed.

U.S. Patent Applications Were UP in 2015, but Granted Patents Were Flat

The data for calendar 2015 are in from both the U.S. Patent and Trademark Office and the European Patent Office, and for the first time since 2007, the number of patents issued by the USPTO declined. The Patent Office granted 326,032 U.S. Patents in 2014 and 325,979 U.S. Patents in 2015 – a decrease – but a decrease of just 53 or .01625%, so granted U.S. Patents were essentially flat from calendar 2014 to 2015. As a unit of the federal agency, the USPTO operates on an October 1 to September 30 Fiscal Year, but these numbers are for January through December of 2014 and 2015.

On the input side, U.S. Patent Application filings were up. There were 629,647 U.S. Patent Applications filed in 2015, up from the 615,243 U.S. Patent Applications filed in calendar 2014. That’s an increase of 14,404 or 2.3%.

Across the pond, the European Patent Office reported significantly more growth, having granted 68,421 EU Patents in 2015, up from the 64,613 EU Patents issued in calendar 2014. That is an increase of 3,808 or 5.9%. EU Patent Applications were also up, with 61,725 direct EU Patent Applications filed in 2015, up by 1,679 or 2.8% from the 60,046 direct EU Patent Applications filed in 2014. However, direct EU Patent Applications were essentially flat from 2013 to 2014, and granted EU Patents were down by 2,099 from 2013 to 2014, a decrease of 3.1%.

International PTO patent applications have seen consistent growth over the past five years, from 182,437 in 2011 to 217,142 in 2015, and average annual growth of 3.8%.

Here are summaries of the U.S. and EU Patent Applications and Granted Patents for the past five years.

U.S. Patent Applications and Granted U.S. Patents: Calendar 2011 through 2015

2011 2012 2013 2014 2015
Total Patent Applications 535,188 576,763 609,052 615,243 629,647
Total Patents Granted 247,713 276,788 302,948 326,032 325,979


EU Patent Applications and Granted EU Patents: Calendar 2011 through 2015

2011 2012 2013 2014 2015
Direct EU Patent Applications 62,558 63,166 60,650 60,046 61,725
PCT Patent Applications 182,437 195,334 205,268 214,321 217,142
Total Granted EU Patents 62,112 65,657 66,712 64,613 68,421


The question that will not be answered until the statistics are in for the 2016 Fiscal Year is what has happened to patent pendency? One of the goals of the previous USPTO Director, David Kappos, was to reduce patent pendency. When he became Director, it was over three years. As of the 2015 Fiscal Year report (October 2014 through September 2015), total pendency was down to an average of 26.6 months, a significant decrease. With Patent Applications up, and granted U.S. Patents flat, can there have also been a decrease in pendency?

Here is a further breakdown of the U.S. Patent Office data for calendar 2015.

U.S. Utility Patent Applications from U.S. applicants: 288,335 (48.9%)
U.S. Utility Patent Applications from foreign applicants: 301,075 (51.1%)
Total U.S. Utility Patent Applications: 589,410 (93.6%)

U.S. Design Patent Applications: 39,097 (6.2%)
U.S. Plant Patent Applications: 1,140 (0.2%)
Total U.S. Patent Applications: 629,647

U.S. Granted Utility Patents from U.S. applicants: 140,969 (47.2%)
U.S. Granted Utility Patents from foreign applicants: 157,438 (52.8%)
Total U.S. Granted Utility Patents: 298,407 (91.5%)

U.S. Granted Design Patents: 25,986 (8.0%)
U.S. Granted Plant Patents: 1,074 (0.3%)
U.S. Reissue Granted Patents: 512 (0.16%)
Total Granted U.S. Patents: 325,979