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EPO Annual Results/Report: Revenue From Patent Applications is Apparently Down Yet Again and Work is Running Out

The inevitable effect of bad management, bad (low-quality) patents, and bad reputation

The clockwork



Summary: The latest EPO 'results' (cherry-picked numbers intended to make the management look good) reinforce expectation of Office-wide layoffs, devaluation of European Patents, decrease in patent quality, and failure to entice applicants in spite of discounts

THE EPO's annual report for 2017 is out (warning: epo.org link) and it's pretty much what we expected it to be when we wrote about it yesterday.



We are seeing many of the same themes/patterns we saw in previous EPO 'results'. Readers are encouraged to read/revisit:



The EPO habitually lies and misleads. Its claims need to be double-checked; not that it'll interest the EPO's paid "media partners". They just relay whatever claims the EPO asks them to, along with external PR agents. Expect a lot of nonsense in the media this week and next week.

One thing we have repeatedly said is that Team Battistelli gave sudden 'discounts' in order to help create an illusion, then not mention the effect of these 'discounts' on revenue at all (they even made a chart dedicated purely to distracting from that). A nearby store is having a closing down sale at the moment (starting this Monday); so obviously sales have surged (just not at the full price).

As for the supposed 'growth' in patents, remember that wrongly-granted patents would help patent trolls (SUEPO published a link to a new report about it yesterday). There are significant declines in quality (an article was published about it in Kluwer Patent Blog earlier this week) and, as expected, there's thus an increase in the number of grants (not productivity but shoddy management leading to low-quality examination).

What we can note, based on the EPO's shrewdly-constructed spin, is that in spite of big discounts the number of applications has barely grown. Revenue may be done again. If you offer a discount of 10%, for example, and 'sales' go up by only 5%, then overall it's a losing strategy. "In response to the increased workload," the EPO wrote, "the EPO further boosted its productivity and production benefiting also from internal reforms put in place in recent years to improve quality and efficiency."

What "reforms"? Like the layoffs to follow? And what "quality"? They mean timeliness, not quality.

There's a bunch of comments agreeing with Thorsten Bausch's latest complaint about quality declines. The following comment says that "timeliness has become the only quality measure at the EPO." Here's the full comment:

In my daily practice, I can only confirm the views of this blog post. For me it appears that timeliness has become the only quality measure at the EPO. And the EPO is becoming really good in providing timely examination reports. It also becomes increasingly “good” in issuing premature summons to attend O.P.. In my day-to-day work I also experience that the quality, in terms of “how accurate is the analysis and how well founded are the objections” is declining (sometimes to a ridiculous extent). I do not dare speaking of 71(3) problems and IMHO this is a minor issue (it “only” requires more caution on the attorney’s end and much of the problems really seem to have a rather technical background, which I believe can be solved).

The loss in quality occurs on a deeper level and is much more detrimental.

I can assure that this is no fuzzy belly feeling of mine, because I have observed that the same Examiners that used to provide me with a sound analysis and reasonable objections more and more tend to raise superficial objections, or object to claim sets as a whole where they previously assessed claims in groups or individually. I see more faulty objections, more alleged clarity problems, no willingness to apply a problem-and-solution approach, more ex post facto argumentation and more clearly premature invitations to O.P. that put pressure on the applicant before a reasonable exchange of arguments has been finished. My own metrics is the length of the reporting letters that I have to write to the applicants and the number of times that I am forced to complement for an insufficient analysis to provide a proper advice to the applicant. It is, to me, very apparent that Examiners do no longer get the time needed to judge each case on its true merits.

As regards the term “production” as used and implemented in the EPO’s metrics, I feel that this term is entirely unsuitable in the context of patent applications. Some applications are complex, some are not, some yield many prior art hits, some may not, but all these different applications have the product count of one (1). And the time scale to handle all these different products is all the same at the EPO.

Imposing ever increasing production targets on the Examiners will only further erode the quality of examination, will result in patents that are either unjustifiably broad or unjustifiably narrow and in the end represents a disservice for the public and applicants alike. We will experience the degradation of “deep quality” in a couple of years from now.


This is further reaffirmed by an article from 2 days ago. Hugh Dunlop and Andrew Van Den Bent-Kelly (Maucher Jenkins) said that "European Patent Office Attacks Its Examination Backlog", but at what cost? In reality, the EPO attacks its staff by draining up all the work, by rushing examiners to not do their job properly.

Last night the CCIA's Josh Landau published something to that effect too, noting that patents are "Granted In 19 Hours". A patent grant a day keeps patent quality away. How did things become this bad so quickly? The damage caused by erroneous/wrong grants can last years. It can cost millions in legal fees.

As Landau put it, "if we go all the way back to our 40 hour work week, we can figure out how many hours an examiner spends on examining each application."

It's a lot worse at the EPO, based on leaks. Here's what Landau said:

Patent examiners have an extremely hard job. They’re given a patent application—which could be anywhere from a page long up to hundreds of pages, with patent claims ranging from a couple sentences to pages of description—and expected to understand the technology behind the application, look for any possible examples of prior art, describe how the prior art anticipates or renders obvious each and every limitation of the claim, and communicate with the patent applicant about their application.

[...]

Junior Examiner Gordon spends 40 hours a week to produce 2.54 office actions. That’s 15.74 hours per office action. But Senior Examiner Allison spends 40 hours a week to produce 3.33 office actions. That’s 12.12 hours per office action. Twelve hours, to review, research, and decide if an immunotherapy patent should be granted. The average American spends 19 hours each week watching television—50% more time than a senior immunotherapy examiner is provided to determine the patentability of an application.

Experienced examiners are almost certainly better at examining patent applications than junior examiners. But can they do the same job in half the amount of time? And do they get enough time even at the start?

There’s evidence the answers are no.


So what is the EPO becoming? Just another INPI? Worse than USPTO? Thorsten Bausch previously explained that in many cases pacing down the process is desirable. He's not alone. Intellectual Property Watch published this guest post yesterday (by Michael Kahnert, legal counsel, BIO Deutschland). The EPO is failing its stakeholders and they speak out. They want applications to be dealt with properly and not in a rush:

Reducing the application process to 12 months implies that much faster work is expected from patent examiners to maintain the same quality of patent examination. In complex sectors such as biotechnology, the shortening of the patent application process would also lead to higher costs at an early stage, because of the extensive examination procedure. Especially small and medium sized enterprises (SME) in the research and development sector usually have a high need for capital to assure cashflow. Therefore, these companies will be additionally affected by a cost burden early on. To attract investors and partners, SME as well as academic institutions often cooperate to advance their research and development and share sensitive information in the process. In order to maintain the possibility of pursuing specific aspects of the patent application at a later time, more divisional applications would be necessary and cause significantly higher costs. Therefore, the proposed shortening of the patent application process leads to a disadvantage for research-driven SME.


Just remember that once patents are granted in error it muddied the well and there's no easy fix for it. This is why the legacy left by Battistelli will be a sordid mess from which the EPO will never recover. It's already running out of pending applications. This necessarily means workforce redundancies. Many senior, experienced examiners will be lost for good. What asset/s will the EPO be left with? A logo and renewal fees?

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