We hear a lot from our clients about how hard the last 12-18 months have been for them financially. Lower sales, tighter margins, delayed cashflow, and fewer opportunities for licensing and sale of IP (and at lower prices) have made the patents side of life more difficult for just about everyone.
Patent firms have faced their own related problems.
Now the falling number of filings with the USPTO, at least partly due to the recession, is having an impact on its ability to operate effectively. The USPTO’s annual report for fiscal year 2009 suggests a $135m shortfall in fees, representing nearly 7% of its annual budgeted income. In his message at the start of the report, Director Kappos explains that:
“The downturn in the economy showed us that the Agency is working with an outdated financial model. Due to decreased patent filings and maintenance fee payments, the Agency found itself in a financial crisis and was forced to freeze hiring, curtail mission critical programs, and cut back in key efforts relating to the Agency’s mission.”
This couldn’t come at a worse time, given the range of challenges from record backlogs to low morale already being faced by the organization. While initial impressions of the impact Director Kappos has had are cautiously positive, this financial situation is hardly an ideal basis from which to launch the bold strategies necessary for reducing pendency and improving examination quality.
One proposal that’s generated some interest is a 15% increase in USPTO fees for one year. This is designed to give the USPTO some breathing space while the economy gets back on its feet and applicants start filing again. The Intellectual Property Owners Association, for one, backs this proposal, as long as it is limited to a year and does not result in the USPTO gaining power to set its fees.
There are some risks associated with this proposal, though. Increased fees may further impact already stretched applicants, resulting in fewer filings, which would erode the aggregate effect of higher per-case fees. A double-dip recession, if it happens, will further reduce the USPTO’s income, putting it back where it started, or worse.
If nothing else, the present situation illustrates the short-sightedness of the US government skimming off fees collected in excess of operating costs during boom years. This meant the USPTO couldn’t invest in its processes, people and services, nor could it build up a buffer of funds to get it through this sort of a dry patch.
Either way, Director Kappos certainly has his work cut out for him.