Ex-IBM exec tries to reboot U.S. patent office

WASHINGTON, USA: An antiquated computer system which crashes and idles thousands of workers is "frankly embarrassing," says U.S. Patent and Trademark Office Director David Kappos, a former International Business Machines executive who estimates it would take several hundred million dollars to upgrade.

And the agency, which Kappos took over in April, has other woes, including a budget shortfall that is making it hard to hire enough examiners now that patent activity is picking up.

The patent office takes an average of 34.6 months to approve or reject a patent application -- a maddening length of time for fast-moving technology firms.

The patent office is in financial trouble in terms of day-to-day spending, facing a potential $200-million shortfall for the 2010 fiscal year.

Companies slashed their budgets in the recession by abandoning patents, depriving the office of additional payments to evaluate applications or maintain existing patents.

To address the shortfall, Kappos wants Congress to give him authority to impose a 15 percent surcharge on applications.

Kappos says the "antiquated" computer system was his biggest shock after years overseeing IBM's patent portfolio.

"I never remember (at IBM) having my IT person barge into my office to tell me that nearly 10,000 people suddenly had nothing to do because the computer system shut down," he told Reuters.

The situation frustrates patent examiners, who are required to fulfil quotas and are very aware of the backlog.

Kappos quoted an email from an examiner who was fed up with the computer crashes and was giving up for the day. "'I've now lost my second search that I was in the middle of doing. I have spent hours on trying to get this search work done and every time I get two-thirds of the way through, my computer crashes on me'." Kappos said.

BUDGET MATTERS

Kappos predicted it would take several years and "multiple hundreds of millions of dollars" to upgrade a computer system that innovative industries -- everybody from Microsoft to drugmaker GlaxoSmithKline -- depend on to help safeguard their intellectual property.

The Obama administration will send its fiscal 2011 budget plan for the patent office and the rest of the federal government to Congress on Monday.

Under complicated funding rules, the fee-funded patent office budget was set by Congress at $1.887 billion for fiscal 2010, significantly less than last year. That figure reflected estimates the patent office gave to Congress when fee inflows were at their lowest.

Normally, Congress sets the patent office budget at the same amount as the agency's expected intake, plus a cushion of $100 million. But Congress cut the cushion for fiscal 2010, which ends on Sept. 30.

Patent applications and fees have since picked up, but because of how the rules work, the patent office must process the additional applications while the collected fees go elsewhere in the federal government's budget.

Patent holders and applicants support Kappos' requested surcharge, said Q. Todd Dickinson, a former patent office director who is now head of the American Intellectual Property Law Association. "But the opportunity to divert those fees has to be closed off," he said.

Both Kappos and Dickinson hope Congress will soon take up long-stalled patent reform legislation, which would give the office fee-setting authority. Jon Dudas, who headed the patent office during the Bush administration and is now with law firm Foley and Lardner LLP, also favours the reform.

FEWER EXAMINERS

One result of the funding shortfall is that the office cannot replace the 30 to 40 patent examiners who quit each month out of an examiner corps of around 7,000.

"The budget shortfall is affecting the patent office's ability to hire new examiners which the patent office needs if they want to eat into the backlog," said Barry Bretschneider of the law firm Morrison Foerster.

Kappos, meanwhile, has pushed to change how examiners work in hopes of getting quicker decisions. U.S. examiners are urged to use research done by counterparts in other countries to help make faster decisions, and encouraged to telephone patent seekers' attorneys to iron out problems more quickly.

Kappos warned, however, that there was only so much he could do without more funding.

"The agency is going to shrink in size and there's just no possible way that any efficiencies that I can put together as the leader can overcome ... the agency shrinking like that," he said. "The backlog will grow because the agency is shrinking."

(Reporting by Diane Bartz; Editing by Tim Dobbyn)