PLUS: USPTO officials tell Eileen McDermott about PCT operations at the Office

See also: Survey of biggest PCT filers, The story behind China's PCT rise

If yours is one of the 4.2 million patent applications pending around the world you might agree that the global patent system is in trouble: despite the economic downturn backlogs are mounting as patent offices begin to process applications filed in the boom years. The slowdown in new applications offers little comfort to patent officials – fewer applications and lower renewal rates mean less revenue for offices, just when the backlogs are putting more pressure on resources than ever before.

The PCT was designed to offer offices and applicants a solution by eliminating unnecessary duplication of work, thereby allowing offices to work more efficiently: a PCT applicant armed with an international search report and written opinion gives examiners in one office the chance to reuse much of the work already performed by counterparts overseas. It has proved popular with applicants (see chart below), not least because of the 30-month priority period that a PCT application buys them.

Trend in PCT filings

Source: WIPO statistics database, April 2009 Note: Counts are based on the international filing date.

Yet users and WIPO, the international organisation that administers the system, agree that the PCT system is, if not in terminal decline, at the very least ailing. This is not the fault of the PCT system, say WIPO officials, but of the way that offices around the world are using it.

"The resulting PCT system has been extremely popular with applicants and achieved great success in bringing together formal and procedural requirements of States," wrote WIPO staff in a document prepared for a meeting of the PCT working group in May. "If it has not been as effective in addressing [the challenges facing the international patent system] as its founders hoped, the main difficulties do not stem from deficiencies in the international legal framework, but from the fact that many national Offices (both as International Authorities and as designated Offices) have chosen not to use it as it was intended."

What the PCT offers

The PCT allows applicants to seek patent protection in a large number of countries by filing an international patent application either with the applicant's local patent office, with WIPO's International Bureau in Geneva or with regional patent offices such as the EPO and the African Regional Industrial Property Organization. Once filed, the international application undergoes an international search, which is carried out by one of the patent offices appointed by the PCT Assembly as an international searching authority (ISA). The ISA then prepares an international search report and a written opinion on patentability. If the inventor decides to proceed with the application then it, along with the international search report, is published by the International Bureau. By using the PCT system, the applicant is given up to 18 months to decide whether to seek patent protection abroad. This gives the applicant the chance to assess the invention's commercial viability and its likelihood of being granted protection, to appoint local patent agents to process the application in each country and to prepare necessary translations.

Writing a roadmap

When Francis Gurry was elected director-general of WIPO last year, he committed the organisation to getting the PCT system back on track. WIPO staff drafted a roadmap for doing so and urged member states to do their bit. At a meeting of the PCT working group, IP offices of contracting states were given a checklist of tasks including implementing their Treaty obligations fully; eliminating duplication within their own offices, either directly or by providing better incentives for applicants to avoid dual processing; ensuring that practices and work products encourage work sharing and reduction of duplication between different offices; and taking steps to ensure the availability of high quality search and examination reports.

The USPTO comes in for particular criticism from bureaucrats in Geneva. Its decision to outsource PCT search work to private companies (see interview) affects the quality of the searches to the extent that not even USPTO's own examiners take them seriously, say critics. As a result, patent examiners often repeat the search stage from scratch once the application enters the national phase, which means that a PCT application no longer spells an opportunity to slash wasteful repetition of work. It can also result in more immediate problems for applicants, says Justin Simpson, executive director of inovia, a company that coordinates national stage filings for PCT applicants. He says he has experienced situations where relevant prior art discovered by the non-US international search authority (ISA) was disregarded by the USPTO and replaced by a far less relevant piece of prior art by the US examiner. "Aside from the duplication of effort within the USPTO, it can also leave the applicant in an awkward position. The best way to ensure good quality patents is robust prosecution based on the most relevant available prior art. That doesn't happen if the US examiner focuses on prior art that is less relevant than the ISA uncovered," Simpson says. "I suspect that there is a lack of trust between patent offices as to their relative abilities. It seems there is a 'not searched here' attitude that leads to a duplication of work." That is a view shared by Michael Brunner, a partner of Gill Jennings & Every in London and secretary-general of the International Association for the Protection of Intellectual Property (AIPPI): "National patent offices often do not respect the work done in the international phase," he says.

Political problems

Although the PCT's problems appear technical and, as such, easy to fix, at the heart of them are a range of complex, intertwined political concerns relating to work sharing, harmonisation and bilateral deals that have dogged the international IP system for a decade.

The rift between developed countries – who, in general, want a greater degree of international patent harmonisation to ease the regulatory burden on patent applicants – and developing countries – many of whom oppose what they see as an attempt by rich countries to impose inappropriate patent systems on them – has led to something of an impasse on many issues at WIPO. The PCT is no exception. When WIPO officials discussed their draft road map with the PCT working group in May, many developing countries suspected it was an attempt to introduce substantive patent law harmonisation through the back door. One official admits that the organisation had not been sensitive enough to their concerns, but says that arguments set out in a document submitted by the US delegation did little to improve the tense atmosphere. The USPTO had proposed reforming the PCT so that an international application would automatically issue as a national patent if it had received a positive international report on patentability unless a national office issued a notification of refusal within a specified period of time.

"Developing countries saw that document, and the language in the WIPO document, and the whole thing ended in a big mess," the WIPO official says.

Although the US proposal was killed off during the meeting, WIPO has had to battle scepticism from developing countries about the final destination of the PCT roadmap. In August, Claus Matthes of WIPO's PCT International Cooperation Division took part in a debate in India's Economic Times in which he denied that PCT reform was designed to remove flexibilities under the TRIPs Agreement. His opponent, Y K Hamied, managing director of Indian generic drugs company Cipla, said he strongly subscribed to the view that the reform of the PCT "is an attempt to undermine the sovereign rights of the Indian government to make laws to suit its domestic needs".

Receiving office share of total PCT filings in 2008 (%)

Source: WIPO statistics database (the figures for 2008 are provisional)

Patent filings coming via the PCT route in 2007 (%)

Source: JPO, EPO, USPTO

As developed countries lost confidence in WIPO's ability to give the lead on improving the global patent system for applicants, increasing numbers of them decided to take the initiative by negotiating bilateral and plurilateral deals. The rapid expansion of patent prosecution highways (PPH) that now stretch between IP offices including those in the US, UK, Japan, Germany, Denmark, Hungary and the EPO are one example. Work-sharing initiatives in ASEAN and South America are another. But such deals risk sidelining WIPO and the PCT, especially since PCT applications are, so far, ineligible for inclusion in the PPH process, which allows corresponding claims in the office where the application was first filed to be fast tracked in an office of second filing. Given that WIPO relies on PCT income it has a keen interest in ensuring that the system remains popular with users and is not bypassed by bilateral deals between national offices. For officials in Geneva, the growth of the PPH shows that the PCT is not working as intended: if it was, such initiatives would not be needed.

WIPO particularly dislikes the decision by national offices to exclude PCT applications from the process. "It shows that PCT work is perceived as less good than work done by national offices in direct filings," says one WIPO official. It was the trigger for Gurry to launch his PCT roadmap to see what needs to be done with the PCT to fix the perception of low quality.

On September 22, Gurry told the WIPO General Assemblies that PCT roadmap "aims to bring all these initiatives ultimately under the multilateral umbrella of the PCT". That aim may be easier to achieve after representatives of the world's three biggest offices – the JPO, EPO and USPTO – agreed in principle at a symposium in Geneva less than a week before to integrate PCT work products into their PPH projects. Pilot projects will start in early 2010. Such a move will also make it easier for the EPO to take part in PPH programmes. Given that more than half of the applications it handles originate from the PCT (see chart on the right), a policy of excluding PCT work from patent prosecution highways risked leaving it stranded on the roadside. As some of the EPC's own member states – including Hungary, Germany and the UK – had signed up to PPHs independently, thereby giving themselves a competitive advantage in the search for patent business, the EPO's potential sidelining looked particularly unfortunate.

Although the EPO is regarded by WIPO as something of a role model when it comes to implementing PCT work into its business model, the EPO has internal reservations about work sharing that could stymie efforts towards more of it at an international level. The Office's Administrative Council (made up of representatives of EPO member states) thrashed out a plan for a European Patent Network and a utilisation project more than three years ago to encourage sharing of work products between examiners in the EPO and those in its member state patent offices, but its discussions were sensitive and protracted. The Office, concerned to maintain its reputation for quality, is likely to support the PCT only if the search reports and written opinions prepared by examiners in other offices are deemed to be sufficiently reliable.

The future of the PCT

WIPO staff are now preparing a new study on the PCT to deal with some of the concerns raised at the meeting of its working group in May – particularly by developing countries. The report will outline the background to the need to improve the functioning of the PCT system, identify the challenges facing the PCT system and their causes, and consider the impact of the proposed options. This will be presented to the working group early next year. Gurry, who was previously deputy director in charge of patents at WIPO, will be succeeded by James Pooley, a US patent attorney, on December 1. The former Morrison & Foerster partner and AIPLA president is highly regarded and is expected to drive forward PCT reform.

If WIPO can find renewed vigour under Gurry's leadership and assuage the concerns of developing countries it may be able to boost the effectiveness of the PCT. This, in turn, should help offices to deal with the backlog of applications – a backlog that Gurry last month told the General Assemblies was "unsustainable".

That the USPTO is now being led by David Kappos (who, while patent counsel at IBM, last year oversaw the company's decision to file more than 600 PCT applications) should also give renewed impetus for the PCT. Kappos has already told USPTO staff that he will set up a task force to consider its role as a receiving office and international searching and preliminary examination authority (see interview). But in the long-term, even a reinvigorated system may not be enough to enable patent offices around the world to deal with growing patent pendency. "Ultimately what we really need," says the AIPPI's Michael Brunner, "is a truly international searching authority where offices search in all the major languages and contribute to the process."