Patent Pending... and Pending... and Pending

Such delays cause major headaches to patent applicants, especially those in fast-moving industries that depend on rapid innovation. Eric Levinson is director of intellectual property for Imation Corporation of Oakdale, which manufacturers removable data-storage products (tape cartridges, CDs, DVDs) and holds more than 350 U.S. patents related to data storage. He has watched the pendency time lag increase steadily for a decade.

“Ten years ago or so, you could get a first office action from the PTO in about nine months,” Levinson says. “I now have applications that have been sitting for two or three years with no substantive response [i.e., no first office action] from the PTO.” And even after receiving an initial action, it can take another two years to negotiate with an examiner about the claims in a patent application, he says.

“We launch products a lot faster than that, so it’s a real problem,” Levinson says. “We have launched products not knowing if we’ll get patent protection—even if we file a couple of years before the launch.”

If an examiner’s initial ruling on a new patent application is unfavorable (e.g., the examiner decides that some or all claims made in the application are too broad or not genuinely novel or overlap in some proposed uses with a patent already held by   another party), and subsequent negotiations with the examiner reach an impasse, the PTO has an appeals process. Technically, that process is a good one, Levinson says, but the time horizons make it unrealistic. Suppose, he says, that three or four years after filing an application, “you get to a point where you and an examiner fundamentally disagree” about which claims for the new product or process are valid. You can appeal to a panel of former examiners, he says, “but the backlog of appeals is about three years. Even if we win, in an industry where a product’s life cycle might be four or five years, by the time we’ve won the appeal, we may not be selling that product anymore. So we see filing an appeal as almost not an option.”

And protection of a new product is not the only concern, Levinson says. Patents also represent a form of currency, in that they can be licensed to other companies in swapping arrangements that grease the wheels of commerce. “We negotiate agreements with other companies to license each other’s patents royalty-free,” he says. The longer it takes to get patents, the fewer bargaining chips Imation has. “If my application sits in the PTO for four years, that’s an issue.”

Delays can be an even bigger issue for small start-up firms, says Timothy Keller, an attorney with Lindquist & Vennum, PLLP, of Minneapolis. “Many of my clients are start-up companies, many looking to raise capital,” he says. “If you can prove you have an intellectual-property barrier to competition, you’re a more attractive candidate for investment.”

What’s more, Keller says, small companies in the computer industry especially want to benefit from cross-licensing agreements like the ones Imation negotiates. “Small companies would have more to trade if patents were issued more quickly and were considered more likely to be upheld in disputes.”