oversight

Biotechnology: Processing Delays Continue for Growing Backlog of Patent Applications

Published by the Government Accountability Office on 1990-09-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                           BIOTECHNOLOGY
                                                           Processing Delays
                                                           Continue for Growing
                                                           Backlog of Patent
                                                           Applications


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                   United States
‘GAO               General Accounting Office
                   Washington, D.C. 20548

                   Resources, Community, and
                   Economic    Development       Division

                   B-234666

                   September 28,199O

                   The Honorable Ron Wyden
                   Chairman, Subcommittee on Regulation,
                     Business Opportunities, and Energy
                   Committee on Small Business
                   House of Representatives

                   Dear Mr. Chairman:

                   As requested in your April 4, 1990, letter, and subsequently agreed with
                   your office, we updated our report on the large backlog of unprocessed
                   biotechnology patent applications at the U.S. Patent and Trademark
                   Office (POD),an agency of the Department of C0mmerce.l That report
                   dealt with several issues, including: the level of scrutiny required to pro-
                   cess these applications compared to others; actions taken to streamline
                   the process for these applications; and the ability of P?Dto attract and
                   retain qualified examiners.

                   In this update, we determined (1) the extent of the current backlog, (2)
                   the current impact of m actions to accelerate decisions on biotech-
                   nology patents, and (3) the impact of continuations on reported patent
                   pendency time in 1989. We briefed your staff on the results of our work
                   on July 13, 1990, and, as requested, have summarized the information in
                   this report.


                   The swift granting of a patent encourages both investment in biotech-
Results in Brief   nology research and the commercialization of related inventions. Unfor-
                   tunately, despite p1~ actions designed to accelerate decisions on
                   biotechnology patents, processing delays continue for a growing backlog
                   of biotechnology patent applications.

                   During calendar year 1989 and the first half of 1990, the inventory of
                   unexamined biotechnology patent applications increased by about 33
                   percent, from about 6,200 to about 8,200. This increase reflects about a
                   15percent average annual increase in the number of filings during the
                   past 6 years. Over 40 percent of the about 8,200 backlogged patent
                   applications were over 12 months old.



                   ‘Biotechnology: Backlog of Patent Applications (GAO/RCED-89-12OBR, Apr. 12,1989).



                   Page 1                                                      GAO,‘RCED-go-231   Biotechnology
             E234666




             PTO’Sefforts to accelerate the award of biotechnology patents have been
             less effective than anticipated, The average waiting time for processing
             biotechnology patent applications was about 26 months in 1989 com-
             pared with the about 1Qmonth average for all other technologies.
             Because of the large growth in filings and the shortage of experienced
             senior biotechnology patent examiners, P’IDis no longer projecting that
             by 1992 it will reduce the pendency period for biotechnology patents
             from its current 26-month average to the targeted 18-month average
             goal for all patent applications. As of August 1990, PKI had not estab-
             lished a new date to replace the 1992 target date.

             The actual time required to process inventions contained in patent appli-
             cations is longer than the pendency reported by the P?Dbecause the PT~
             measures pendency of applications, not inventions. A patent granted on
             an invention may be the result of a chain of replacement applications, or
             continuing applications. For example, during 1989, about one-third of
             the 26,616 inventory of unexamined (backlogged) and in process bio-
             technology patent applications resulted from chains of continuing appli-
             cations. Factoring in the original application date for the 7,079 patent
             applications issued or abandoned in 1989 would add 9.0 months to P?D’s
             reported average patent pendency of 26.3 months.


             Patent applications are assigned to the appropriate examining group-l
Background   of 16 such groups. Each group includes a number of suborganizations,
             art units, responsible for a specific area of technology. Examiners in the
             art units review patent applications to decide whether the inventions
             described are entitled to patent protection.

             The examination process includes a search through United States pat-
             ents, prior foreign patent documents that are.available in p1~, and avail-
             able nonpatent literature, to see if the invention is new, useful and
             nonobvious (significantly different from prior inventions). The exam-
             iner decides whether to grant a patent based on a review of the applica-
             tion and search results.

             An Office “action” notifies the applicant of the examiner’s decision. It
             states reasons for any adverse decision or any objection or requirement
             and provides information that may assist the applicant in judging
             whether to pursue the application. If the invention is not considered pat-
             entable subject matter, the claims will be rejected. Some or all of the
             claims may be rejected on the first action by the examiner; relatively
             few applications result in patents as originally filed.


             Page 2                                          GAO/RCED-!XJ-231   Biotechnology
.
                           E234366




                           If the application is rejected or objected to, the applicant must request
                           reconsideration in writing, responding to every rejection in the Office
                           action. The application is then reconsidered, and the applicant is again
                           notified of the Office’s decision. If the applicant elects not to further
                           pursue the issuance of a patent under the existing application, P?Dcon-
                           siders the application as no longer pending and classifies it as aban-
                           doned. In order to control the time frame of patent applications, P?D
                           normally makes the second Office action final. The applicant is then lim-
                           ited to: (1) appeal to the P?DBoard of Patent Appeals and Interferences
                           and to the courts in the case of rejection of any claim; (2) presentation of
                           a further amendment for consideration by the examiner (although the
                           applicant does not have a right to have the amendment entered by the
                           examiner); or (3) filing a continuing application.

                           As an alternative to appeal, when applicants desire consideration of dif-
                           ferent claims or of further evidence, continuation applications are often
                           filed. Each continuing application also needs to include the claims and
                           evidence for which consideration is desired. If the continuing applica-
                           tion is filed before expiration of the appeal period and it refers specifi-
                           cally to an earlier application, the applicant is entitled under 35 U.S.C.
                           120 to the date of the earliest filed application for subject matter
                           common to both applications.

                           An earlier filing date is important because occasionally two or more
                           applications are filed by different inventors claiming substantially the
                           same patentable invention. The earlier filing date determines patent
                           rights, absent any other evidence. Furthermore, in the examining group,
                           applications are examined in the order in which they have been filed.
                           Thus, continuing applications are scheduled for examination based on
                           the date of an earlier filed application on which they rely for common
                           subject matter.


                           The number of unexamined biotechnology patent applications continues
    Backlog Continues to   to increase. Between January 81989, and July 3, 1990, the number of
    Grow                   biotechnology patent applications not yet acted upon increased from
                           6,163 to 8,213 (41.3 percent of which were over 12 months old). One
                           contributing factor is that the filing of biotechnology applications has
                           grown at a significantly higher average annual rate-14.9 percent-
                           than have all patent applications -7.6 percent-during      fiscal years
                           1984 through 1989.




                           Page 3                                           GAO/RCED-90-231   Biotechnology
                       As we reported in April 1989, PTOinstituted a 13-point plan in 1988 to
Long Delays Continue   accelerate the award of biotechnology patents. The plan includes hiring
Despite New Efforts    100 new biotechnology patent examiners over 6 years, consolidating all
                       biotechnology examining responsibilities into a new group (called -
                       “Group ISO”), which currently contains eight art units, enhancing
                       search tools by using personal computers to access PTDand commercial
                       data bases, improving training for examiners by joining with the bio-
                       technology industry to create the Biotechnology Institute, and liberal-
                       izing the procedure for requesting accelerated examination.

                       Through June 30,1990, the number of biotechnology patent examiners
                       assigned to Group 180 increased by 23 percent (from 91 to 112) from
                       October 1,1988. According to the P?D,more biotechnology patent exam-
                       iners would have been hired, but it had an insufficient number of expe-
                       rienced senior staff to train them. Only 16 of the current 112
                       biotechnology examiners (14 percent) have more than the 6 years’ expe-
                       rience required to become a senior examiner.

                       The large number of patent applications not yet acted upon, along with
                       the relatively small number of experienced senior examiners, have con-
                       tinued to cause long waiting periods for PTOfirst actions. During cal-
                       endar year 1989 and the first half of 1990, first actions in the
                       biotechnology area were made an average of 13.1 months after the filing
                       date of the application, whereas first actions in all technologies aver-
                       aged 7.1 months after the filing date of the application.

                       To avoid the wait created by the backlog, PTOhas developed accelerated
                       examination procedures, which allow applicants who can justify their
                       need for expedited processing to have their applications reviewed before
                       others, regardless of the filing date. However, very few biotechnology
                       patent applicants have taken advantage of this special status. Our anal-
                       ysis of Patent Application, Location, and Monitoring (PALM) computer-
                       ized data showed that of 26,616 biotechnology patent applications
                       pending during 1989, only 144 had petitions for accelerated examina-
                       tion. (See table 1.9.) In April 1989, we reported that applicants are reluc-
                       tant to use the accelerated procedures because of perceived legal risks.




                       Page 4                                           GAO/RCFtD-DO-231   Biotechnology
                       B-234563




                       Because of the size and age of the backlog created by the large growth in
                       filings and the shortage of experienced senior biotechnology patent
                       examiners, p1~ no longer believes it can meet its goal of reducing the
                       average biotechnology patent processing time from its 26-month
                       average to 18 months by 1992, bringing the pendency for these patents
                       in line with the pn> average for all technologies. No new target date had
                       been established as of August 1990.


                       As we previously reported, PTOmeasures pendency of each application
Extensive Use of       in a chain of replacement applications, or continuing applications. PTO
Continuations Masks    officials believe that measuring pendency of applications rather than of
Actual Pendency Time   inventions is a better management control over patent processing effi-
                       ciency because patent examiners cannot control the use of continua-
                       tions. Only the patent applicant decides whether and when to file a
                       continuing application, so long as it is filed during the pendency of the
                       prior application.

                       A continuing application is often filed in situations where an applicant
                       desires consideration of different claims or of further evidence related
                       to an application for an invention considered unpatentable and rejected
                       by a PTO examiner. With a continuing application that meets the condi-
                       tions of 35 USC. 120, the applicant is entitled to the benefits of the
                       earlier filing date of the prior application. This earlier date may be
                       important in determining patentability or who owns an invention,
                       although pendency is measured from the latest filing.

                       Using PALM data, we determined that about 32 percent of the 26,616 bio-
                       technology patent applications pending during 1989 resulted from con-
                       tinuations. (See tables I. 1 through 1.4.) We did not examine the extent of
                       the use of continuations by applicants in other technologies, but EYIDoffi-
                       cials told us that continuations for all technologies is 24 percent.

                       We used the date of the original application rather than the date of the
                       most recent continuation application for the 7,079 patents issued or
                       abandoned in 1989 and calculated pendency of 36.3 months-Q.0
                       months more than the m-reported average patent pendency of 26.3
                       months. (See tables I.5 and 1.6.) Using this same approach, we calculated
                       that the 18,634 applications pending at the end of 1989 had, on average,
                       been in process for 26.7 months since their original application date.




                       Page 5                                           GAO/BCED-9@231   Biotechnology
                                                                              I

                                                                                    rE


                                                                                         d

E234Mtl




These 18,534 applications included 7,529 unexamined (backlogged)
applications (examiners had not yet made a first Office action). (See
table 1.7.) A total of 1,627 of the patent applications pending at the end
of 1989 had been in process for more than 5 years since the date of the
original application.

The pTDpendency goal for patent applications is 18 months. Thus, if the
original application date was considered, the 18,634 patent applications
pending at year-end had already been in process, on average, about 50
percent more than the pendency goal. However, according to PRI offi-
cials, the pendency goal would be more than 18 months if P?Dmeasured
pendency of inventions rather than of applications.

Our analysis of the recorded processing steps for 926 biotechnology
patent applications (with a first Office action) abandoned and refiled as
continuation applications in calendar year 1989 showed that an average
of 2.5 Office actions and 31.2 months elapsed during the life of the orig-
inal application. About 25 percent were abandoned after the first Office
action, and an additional 50 percent received a final rejection after the
initial response from the applicant. A final rejection after the applicant’s
first response is counted as the second Office action by PID. About three-
quarters of the 595 final rejections were second Office actions. This
rejection rate is consistent with pm’s policy of normally making the
second Office action final. Only about a fifth of the 926 applications had
more than 2 Office actions. (See table 1.8.)


Our audit work was performed between April and July 1990 in accor-
dance with generally accepted government auditing standards. Our
review included an analysis of PALM data contained in m computer
tapes for all biotechnology patent applications on hand during 1989. We
also examined work load reports generated during 1989 and the first 6
months of 1990 by n’ro. Appendix I contains tables of data generated
from our analysis of PALMcomputer tapes.

We discussed this report’s contents with PTO officials, who concurred
with the facts, and their comments have been included where appro-
priate. As agreed with your office, however, we did not obtain official
agency comments on this report. As arranged with your office, unless
you publicly announce its contents earlier, we plan no further distribu-
tion of this report until 14 days from the date of this letter. At that time,
we will provide copies of this report to the Department of Commerce
and to others upon request. If you have any further questions on these


Page 6                                            GAO/RCED-go-231   Biotechnology
0234536




niatters, please contact me at (202) 276-6526. Major contributors to this
report are listed in appendix II,

Sincerely yours,




John M. Ols, Jr.
Director, Housing and
  Community Development Issues




Page 7                                          GAO/RCEJHO-231   Biotechnology
                                                                                                        c




Contents


Letter
Appendix I
GAO Analysis of
PALM Computer
Tapes
Appendix II                                                                                         14
Major Contributors to
This Report
Tables                  Table I. 1: Percent of Continuations Included in All                        10
                            Biotechnology Patents Issued During 1989
                        Table 1.2: Percent of Continuations Included in All                         10
                            Biotechnology Patent Applications Abandoned
                            During 1989
                        Table 1.3: Percent of Biotechnology Patent Applications                         10
                            Abandoned and Simultaneously Refiled as
                            Continuations During 1989
                        Table 1.4: Percent of Continuations Included in All                             11
                            Biotechnology Patent Applications Pending at the
                            End of 1989
                        Table 1.5: Average Waiting Period From Date of Original                         11
                            Application for All Biotechnology Patents Issued in
                             1989
                        Table 1.6: Average Waiting Period From Date of Original                         11
                            Application for All Biotechnology Patent
                            Applications Abandoned During 1989
                        Table 1.7: Average Waiting Period From Date of Original                         12
                            Application for All Biotechnology Patent
                            Applications Pending at the End of 1989
                        Table 1.8: Average Processing Time for Selected Steps for                       12
                            All Original Applications With a First Office Action
                             and Abandoned and Refiled as Continuation
                            Applications in 1989
                        Table 1.9: Percent of Accelerated Examinations Included                         13
                             in All Biotechnology Patent Applications Pending
                             During 1989



                        Page 8                                         GAO/RCED-B&231   Biotechnology
Abbreviations

FAOM      First Action on the Merits of the Case
PALM      Patent Application, Location, and Monitoring
Pm        Patent and Trademark Office


Pwe 8                                          GAO/RCRD-80-231   Biotechnology
                                                                                                                    \                ;;,
                                                                                                                                     /I”
                                                                                                                        ‘F           1.
Appendix I

GAO Analysis of PAL;MComputer Tapes                                                                                                  ’


Table 1.1: Percent of Continuations
included In All Biotechnology Patents                                              Total               Total
Issued During 1989                        Art unit/description           patents issued      continuations              Percent
                                          18l/equipment                             723                 219                  __ 30
                                          182Ammunoloav--                           417                 134                     32
                                          183/biochemicals                          665                 230                     35
                                          184/plants and animals                    754                  84                     11
                                          185Jgenetic engineering                   307                 124                     40
                                          186/biochemicals                          268                 106                     40
                                          187/equipment and immunology                1                   0                      0
                                          188/microbioloav
                                                         “.
                                                                                      0                   0                      0
                                          Biotechnology total                     3,135                 897                     29


Table 1.2: Percent of Continuations
Included In All Biotechnology Patent                                             Total                 Total
Applications Abandoned During 1989        Art unit/description           abandonments        continuations              Percent
                                          18l/equipment                             510                 187                    37
                                          182/immunology                            646                 213                    33
                                          183/biochemicals                          647                 206                    32
                                          184/plants and animals                    653                 218                    33
                                          185/genetic engineering                   684                 228                    33
                                          186/biochemicals                          580                 195                    34
                                          187/equipment and immunology               119                 36                    30
                                          188/microbiology                          JO6                  44                    42
                                          Biotechnology total                     3,945               1,327                    34


Table 1.3:Percent of Biotechnology
Patent Appllcatlons Abandoned and                                                Total              Refiled
Simultaneously Refiled as Continuations   Art unit/description           abandonments        continuations              Percent
During 1989                               18l/eauioment                             510                 189                    37
                                          182/immunology                            646                 255                    39
                                          183/biochemicals                          647                 234                    36
                                          184Mants and animals
                                             I   I
                                                                                    653                 272                    42
                                          185jgenetic engineering                   684                 311                    45
                                          186/biochemicals                          580                 247                    43
                                          187/equipment and immunology               119                 35                    29
                                          188/microbioloav                           106                 33                    31
                                          Biotechnology total                     3,945               1,576                    40




                                          Page 10                                          GAO/RCED-90-231     Biotechnology
          .


     51




                                          Appendix I
                                          GAO Analysis   of PALM Computer     Tapes




Table 1.4: Percent of Continuatlonr
Included In All Biotechnology Patent                                                           Total               Total
Applications Pending at the End ot 1989   Art unit/description                        applications       continuations             Percent
                                          181 /equipment                                      2,318                 660                      28
                                          182/immunology                                      2,496                 815                      33
                                          183/biochemicals                                    2,946                 915                      31
                                          184/olants and animals                              2.266                 650                      29
                                          185laenetic engineering                             2,334                 907                      39
                                          186fbiochemicals                                    2,655                 944                      36
                                          187/eauioment and immunoloav                        1.702                 547                      32
                                          188/microbioloav                                    1,8i6                 652                      36
                                          Biotechnology total                               18,535                6,090                      33


Table 1.5:Average Waltlng Period From
Date ot Orlglnsl Appllcatlon for All                                                                     Total p$rrr;;            Avera e
Biotechnology Patents lsrued in 1989      Art unit/description                                                                     mont 1 s
                                          181/equipment                                                             723               37.2
                                          182/immunoloav                                                            417               44.1
                                          183/biochemicals                                                          665               36.7
                                          184/plants and animals                                                    754               24.9
                                          185/genetic engineering                                                   307               47.4
                                          186/biochemicals                                                          268               37.7
                                          187/equipment and immunology                                                   1            33.4
                                          188/microbiology                                                               0                   0.0
                                          Biotechnoloav total                                                     3.135                 36.1'
                                          aPatent Office reported average was 27.4.


Table 1.6:Average Waiting Period From
Date of Origlnal Application for All                                                                           Total              Avera e
Biotechnology Patent Applications         Art unit/description                                         abandonments                mont a s
Abandoned During 1989                     18l/equipment                                                              510                33.1
                                          182/immunology                                                            646                 37.3
                                          183/biochemicals                                                          647                 29.2
                                          184/olants and animals                                                    653                 37.0
                                          185Jgenetic engineering                                                   684                 40.0
                                          186/biochemicals                                                           579                30.8
                                                                                                                                      _---
                                          187/eauicment and immunoloav                                               119                33.5
                                          188/microbiology                                                           106                35.8
                                          Biotechnology total                                                     3,944                 34.7'
                                          aPatent Office reported average was 25.4.




                                          Page 11                                                      GAO/RCED-30-231       Biotechnoloey
                                          Appendix I
                                          GAO Aualyeb     of PALM Computer     Tape8




Table 1.7:Average Waiting Perlod From
Date of Orlglnal Application for All                                                                                       Total          Avera e
Biotechnology Patent Applications         Art unit/description                                                    applications             mont Ii s
Pendlng at the End of 1989                181/equipment                                                                    2,318                23.4
                                          182/immunology                                                                   2,496                27.7
                                          183/biochemicals                                                                 2,946                23.2
                                          184/plants and animals                                                           2,268                25.7
                                          185Jgenetic engineering                                                          2,333                33.0
                                          186Jbiochemicals                                                                 2,655                26.9
                                          187/eauioment and immunoloav                                                     1,702               25.8
                                          1BE/microbiology                                                                 1,816               28.6
                                          Biotechnology total                                                             18,534               26.7'
                                          %cludes    elapsed months for 1,576 applications abandoned and simultaneously    refiled as continuations
                                          in 1989.


Table 1.8:Average Processing Time for
Selected Steps for All Orlginal                                                                     Total time         Total       Average time
Application8 Wlth a Flrat Office Action   Processing step                                            (months)        number            (months)
and Abandoned and Refiled as              Filing to docketing                                             4,579            923                     5.0
Contlnuatlon Applications in 1989         Docketin to first action on the merits of the
                                          case (FA8 M)                                                   10,489            907                  11.6
                                          FAOM to first response                                          3,606            680                   5.3
                                          Abandonment after first action                                  1,226            226                   5.4
                                          First response to final reiection                               1,040            446                   2.3
                                          First response to second action                                   600            228                   2.6
                                          Second action to second response                                  883            165                   5.4
                                          Abandonment after second action                                   344             63                   5.5
                                          Second resconse to final reiection                                290            108                   2.7
                                          Second response to third action                                   168             57                   3.0
                                          Third action to third response                                    216             43                   5.0
                                          Third action to abandonment                                       121             20                   6.0
                                          Third response to final rejection                                 165             39                   4.2
                                          Final rejection to abandonment                                  4,940            595                   8.3
                                          Filina to abandonment                                          28.856            925                  31.2




                    Y




                                          Page 12                                                           GAO/RCED-W-231         Biotechuology
                                    GAO Analyalu   of PALM Computer   Tapea




Table I.% Percent of Accelerated
Examinatlonn Included In All                                                           Total          Total
Biotechnology Patent Applications   Art unit/description                      applications  accelerations         Percent
Pending During 1989                 18l/equipment                                     3,551              35             1 .o
                                    182/immunoloav                                    3.559                 13          0.4
                                    183/biochemicals                                                                    0.4
                                    184/plants and animals                            3,675                 24          0.7
                                    185/genetic engineering                           3,325                 23          0.7
                                    186/biochemicals                                  3.503                  7          0.2
                                    187/equi~~ment and immunoloav                     1,822                 16          0.9
                                    188/microbiology                                  1,922               8             0.4
                                    Blotechnoloav total                             25.615              144             0.8




                                    Page 18                                              GAO/RCED-fBO-281   Biotechnology
Appendix II

Major Contributors to This Fteport


                        Paul J. O’Neill, Assistant Director
Resources,              James E. Gwinn, Evaluator-in-Charge
Community, and          Sara-Ann W. Moessbauer, Operations Research Analyst
Economic
Development Division,
Washington, DC.




(aeaalo)                Page 14                                     GAO/WED2@231   Biotechnoloey
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