By Jason Rantanen
Both practitioners and academics constantly debate the extent to which factors other than the "true" patentability of an invention affect the patent office's decision to grant or deny an applicant a patent. A recent empirical study by professors Michael Frakes of Cornell and Melissa Wasserman of Illinois explores one such potential externality: the influence of the PTO's budgetary structure on the decision whether or not to grant a patent.
In Does Agency Funding Affect Decisionmaking?: An Empirical Assessment of the PTOs' Granting Patterns (available here), Frakes & Wasserman theorize that elements of the PTO's fee schedule that are collected only in the event that patents issue create incentives for the PTO to grant additional patents, and that these incentives have their greatest effect in times of agency underfunding. If this hypothesis is correct, the current funding structure of the PTO may bias it in unintended directions, such as towards granting patents associated with large enterprises rather than individuals and small entities.
The authors then empirically test their predictions using a natural experiment approach revolving around the Omnibus Reconciliation Act of 1990, an Act that both greatly increased the fees assessed by the PTO and left the PTO essentially fully funded by user fees. After applying sophisticated statistical techniques to address a variety of complications flowing from the nature of the problem examined, they present results suggesting that the PTO's fee structure induces the agency to grant at an incrementally higher rate to high renewal rate technologies and to applicants with large entity status, and that these effects are consistent with a PTO that seeks to maximize its funds during times in which it is in greater need of funds as opposed to a PTO that acts in all instances as a self-interested budget maximizing entity.
A copy of the article can be downloaded here.