Revolving Door Patent Examiners

The revolving door between government and private industry creates opportunities for regulatory capture. Dick Cheney’s moves between Secretary of Defense, CEO of Halliburton and Vice-President certainly raised eyebrows. Secretaries of the Treasury, Robert Rubin, Hank Paulson and Steve Mnuchin were all former bankers at Goldman Sachs. Former members of Congress who become lobbyists are common as are bureaucrats and congressional staffers who turn to lobbying on behalf of the industries they previously regulated. At the same time, it seems desirable that government should be able to draw from top notch people in the private sector and it’s not surprising that private sector firms would want to hire people with government experience. It’s unfortunate (in my view) that government is so entwined with the private sector but that is inevitable in a mixed economy. Nevertheless, it would be useful if we had more data and less anecdote when it comes to the revolving door.

In a new and impressive paper (summary here), Haris Tabakovic and Thomas Wollmann take a detailed look at this issue using patent examiners. Using data on over 1 million patent decisions they find that examiners grant significant more patents to firms that later hire them.

It’s possible that examiners want to work for firms that have high quality patents but several considerations suggest that this is not the explanation for the correlation between grant probability and firm hiring. First, the firms doing the hiring are law firms that handle patent applications. We are not talking about USPTO examiners all wanting to work for Google.

Second, in a very clever analysis the authors show that USPTO examiners who leave for the private sector tend to go to a city near their college alma mater. Moreover, examiners who leave are more likely to approve patents to firms located their alma mater (even when these firms subsequently do not hire them). In other words, it looks as if (on the margin) patent examiners are more generous to firms that they might want to subsequently work for because they are located in places desirable to them. Patent examiners who do not leave do not show a similar bias which removes a home-city boosterism effect. All of these effects are after taking into account examiner fixed effects–so it’s not that examiners who leave are different on average it’s that examiners who leave act differently when firms are located in regions that are potentially desirable to those examiners.

Finally, the authors show that patent quality, as measured by future citations, is lower for patents granted to firms that later hire the examiner or to firms in the same city who are granted patents by the examiner (i.e. to firm-patents the examiner might have given a pass to in order to curry favor). The authors also find some evidence in the patents themselves. Namely, patents that are grant to subsequent employers tend to have claims that are shorter (i.e. stronger) because fewer words were added during the claims process.

The policy implications are less clear. Waiting periods are crude–in other contexts we call these non-compete clauses and most people don’t like them. Note also that these relationships appear to be driven by norms rather than explicit bargaining. USPTO examiners are paid substantially less than their private sector substitutes and that nearly always seems like a bad idea. Paying examiners more would reduce the incentive to rotate.

Comments

Waiting periods are typically set by the Administration. I left the FCC as chairman in November 1997 and did not return to advocate for clients there until 2001, when a different party ran the Administration. Does the current Administration have any waiting periods for anyone in any agency?

Did the firm hire the examiner because the examiner did the firm a favor by granting patents to the firm's clients? Or did the firm hire the examiner because the examiner had a history of granting a patent and the firm typically represents clients seeking the grant of a patent?

My experience with patent lawyers is that they almost always have a science or engineering background, many with graduate degrees, and are highly technical in their approach to patent work as lawyers/advocates. As one might expect of someone trained in science or engineering. That's not to say that they aren't subject to the same human biases as us non-technical types, but less so.

Patent examiners don't regulate law firms or technology companies, at least not the same way that government agencies normally regulate an industry. Examiners are more like service providers--they provide "examination" of patent applications. This isn't like the EPA regulating energy companies emissions. I'll explain why I think that.

Neither a law firm nor an inventor/patent owner (usually a technology company, but sometimes an individual) wants an examiner to go soft on their patent application. They want a rigorous and thorough examination. If the examiner does a bad job and grants you a patent you shouldn't get, your patent will be more easily invalidated if you try to actually use it in court. Opposing counsel (charged with infringing the patent) will spend six figures trying to find good prior art to invalidate your patent. If the examiner "favored" your application, it means you wasted your money on drafting, prosecution, and maintenance fees.

When a law firm looks to hire an examiner into their firm, they want someone who (1) understands the technology, (2) understands the patent regulations, and (3) works hard. Showing favoritism to a law firm's applications would *not* encourage the law firm to hire that examiner. Likewise, unreasonably denying a worthy application also wouldn't encourage a firm to hire an examiner. Because in both cases, the examiner isn't doing a good job. They've shown bad judgment. If an examiner wants to move to a firm, their best move is to do a good search, understand the technology, make reasoned arguments, and be prompt in their communications. Basically, show professionalism.

The part of this that makes sense to me is hometown advantage. I could see an examiner from, say, Chicago (just an example, nothing against Chicago), unconsciously being a little more favorable to applications that come from Chicago. But again, this probably wouldn't be to curry favor with the law firm, because showing favoritism would (in my view) discourage a firm from hiring an examiner. After all, once the examiner is no longer with the patent office, they no longer have the ability to "favor" the firm. And the firm would be left with an examiner/new patent agent they know from experience does poor quality work.

It could be that firms would be less likely to hire someone who made it hard for them to get patents. If you're a law firm partner and you're looking to hire an associate who was a prior examiner, and this examiner in the past disagreed with your views of the prior art or the interpretation of the law, I imagine that you, as the partner, would have some negative feelings toward that examiner, especially now that they are coming to you in a subordinate position.

So it could be that stricter examiners get hired less often, not that lenient examiners are preferred.

Having not yet read the paper, this sounds likely. I find it incredibly unlikely that any firm would touch an examiner with a 5% allowance rate.

Revolving door? Regulatory capture? Please. The enterprise is already owned outright.

https://www.commonsenseevaluation.com/2016/11/18/obama-didnt-even-pick-cabinet-citibank/

Hank Paulson recently indicated that he wasn't forthcoming about the government's limited ability to intervene on the day Lehman failed, not because he was concerned about Goldman Sachs, but rather Morgan Stanley, which Paulson said would have collapsed immediately. https://www.brookings.edu/blog/up-front/2018/09/19/reflections-by-bernanke-geithner-and-paulson/

Alex is a typical Obama voter.

"Isn't is scary that there are people in government who once had a real job?"

Some of us come here to actually think and learn about serious issues, not just fling poop at the opposing tribe.

Alex makes a nuanced argument here, that includes acknowledging the benefits of interchange between the public and private sectors. But hey, don't let that stop you!

That is why I am all for allowing cops sell cocaine on the side, so that they can suplement their incomes and have a better knowledge of the market forces they are dealing with. I mean, what is the problem with a banker regulating his past and future friends, bosses and rivals?

There are many things Prof. Tabarrok may be, but an Obama voter is not one of them.

Here is a bit of information concerning an organization that Prof. Tabarrok belongs to - 'Prof. Tabarrok is a Senior Fellow and former Research Director for The Independent Institute https://en.wikipedia.org/wiki/Independent_Institute#Healthcare_policy

Well it's good our obsessive international internet stalker could clear that up.

What is funny is that anyone with even the most glancing knowledge of the sorts of professional and academic affiliations that Prof. Cowen and Prof. Tabarrok share would seriously suggest that either of them is a typical Obama voter.

But as bare assertion without factual backing is one of the hallmarks of some commenters, I prefer to actually provide links.

But let me, since brevity did not apparently work out, post more text from that link - 'The Independent Institute has advocated free-market reforms for American healthcare since at least the early 1990s. In 1994 it published an open letter to President Bill Clinton, urging him to reject national healthcare legislation that would have used price controls to contain costs. The letter was signed by 565 economists and 76 scholars of other disciplines.

Independent Institute scholars have criticized the Patient Protection and Affordable Care Act on economic, legal, ethical, and privacy grounds. Senior Fellow John C. Goodman has argued that the ACA’s architects could not have foreseen all of its negative consequences because healthcare is a complex system. For this reason he claimed the ACA exemplifies what Nobel laureate economist F. A. Hayek called “the fatal conceit.” Independent Institute scholars were critical of the pre-ACA system as well for problems they attributed to government policies that promoted third-party payment systems and removed market pricing from healthcare delivery. Goodman has proposed reforms replacing the ACA, most notably the adoption of a fixed-sum, refundable tax credit for the purchase of health insurance, a credit equal to the cost of new enrollees in Medicaid. Other major proposals include converting all medical savings accounts into Roth-style Health Savings Accounts that feature after-tax deposits and tax-free withdrawals; allowing anyone to buy into or exit from Medicaid; and denationalizing and deregulating health insurance exchanges but requiring exchanges to offer health-status insurance.

Independent Institute scholars have leveled several criticisms of Medicare. Senior Fellow John R. Graham has lamented the widespread indifference to the Medicare Trustees report’s warnings of Medicare’s mounting fiscal problems. He has, however, defended Medicare Advantage for giving seniors more choices than traditional Medicare. John C. Goodman has argued that healthcare inflation in the United States began with the creation of Medicare. To help curb Medicare spending, Graham has proposed incentivizing enrollees to seek less expensive medical treatment abroad. Craig Eyermann has also proposed giving Medicare enrollees a direct economic stake in lowering the costs.[39] Goodman has called for the privatization of Medicare.'

Yep, typical Obama voters, to a man (if I was all that obsessive, I would check to see if that statement, in terms of 100% male, was accurate).

Everybody, I'm sorry about insulting our esteemed hosts. I'm going to get my estrogen shots later today. Promise my comments will get better.

Hi,

My name is Mark Wilson. I am a small shop owner in Bartlett, a beautiful town in Tennessee, a state famous for its country music and passion flowers.

I belong to no political party and, as you, am deeply disgusted by the sad spectacle of today's partisan politics with its share of mean-spiritedness and divisiveness. However, as I watch my two little girls sleeping soundly at night, I think about the America we will be leaving to them soon and worry. A lot. Will America still be the best country in the world? Will it still be the sole superpower? Will it even survive?

You main think I will now launch a rant about politics, but I will just state a few little-known facts the mainstream media is hiding from you. You will be the judge.

Brazil is a few days from the most important presidential election in its history. Representative Captain Bolsonaro, the leading candidate, a free-market, anti-corruption centrist politician with a distinguished military carreer behind him, is a good friend of America's. He has recently survived an attack from a (pro-Red China?!) leftist terrorist. Mr. Haddad, a leftist candidate handpicked by corrupt (and jailed) former president Lula is gaining ground pretty fast. The vice president of Equatorial Guinea's (a Red China's pupet regime) entourage was caught in Brazil with millions of dollars in luxury goods. He said he was going to visit a doctor. Holy healthcare inflation, Batman! Do they have death panels in Brazil, too? Let us be blunt: the money surely was to support corrupt leftist candidate Mr. Haddad campaign.

Let me tell you something: Brazil is bigger than the Roman Empire at its height. If the Chinese succeed in installing their puppet in power there, it will not be the Cuban Missile Crisis, it will be Armageddon for American democracy. Brazil's Alcantara rocket launching base can be use to launch nuclear weapons against us.

You may be asking what you, as a private individual, can do. Plenty, actually. Just take a few moments to email, mail or phone your Representative and your Senators. Tell them in no uncertain terms that you want a full scale federal investigation on foreign interference in Brazil's elections. Please, do it for my children. Do it for all our children.

Tank you for your attention.
May God bless you all.
o

hahaha you are writing from an alternate universe when John Kennedy never supported the 1964 coup d'etat and the following dictatorship in Brazil.

Ps. Tiago, you're funny.

John Kennedy could not have supported a coup in 1964 because he was dead since the previous tear. The Brazilian coup was a product of specific Brazilian curcumstances plus communist interference. Lest us forget that
Chinese (see a pattern here?) agents were caught in Brasil in 1964. The president the coup overthrew visited Red China when he was vice president.

I know no Tiago. I am Mr. Wilson, from Tennessee, a state of our Union.

Nobody from Tennessee would spell the word Brazil with an "s". Nor would they say that Tennessee is famous for the passion flower.

Also, what do you know about the Ford family?

@thfmr

+1

the regulatory "Revolving Door" is well documented/proven -- we don't need more bean-counting of its prevalence.
We do need specific actions to solve the problem.

the government-regulatory-model is heavily flawed in theory and practice. Government "regulation" is essentially a socialist market intervention mechanism. Apparently socialist economic theory/practice may already have been studied & analyzed by some reputable economists in the past. What did they conclude?

Unfortunately, it does not seem that the revolving door is documented or proven enough; there is still a lot of skepticism it seems among academics and the populace at large. If nothing else, we still hear people saying that the finance sector was unregulated before and during the crisis, despite voluminous evidence that the regulations were all there but were simply not enforced.

I agree that the debate should be moving into "How do we fix the situation?" but so far it seems that the model of government acting as a counter balance to corporations instead of an ally is too prevalent to get the discussion where it should be.

Paying higher salaries would be a huge waste. Am not going to pay to read the paper, but CATO has a paper up about it that speaks only in generalizations and provides not numbers at all. USPTO examiners are unionized, have an incredible work-from-arrangement in which many do not step foot in the office for months at a time, and work on a quota basis rather than a strict hourly basis. They just knock out X number of cases per period and they are done. They start at $70,000 per year. There are currently (per latest available OPM Fedscope data) 8,571 patent examiners employed by USPTO of whom more than 7,000 have more than 5 years on the job. The most common pay band is between $130,000 and $139,999 with 1,921 and more than 2,000 in higher bands. On top of that they enjoy the federal governments' anachronistic defined benefit retirement plus a 401(k) equivalent plan with 5% matching and generous health benefits.

Since FY 2011, there have 1,696 patent examiner quits. Less than 200 quits per year in the last two fiscal years with a peak of 322 in FY2013 when there were 9,074 examiners for a 3.5% quit rate that year.

If they are leaving DC it is most likely not for money, but simply to escape DC. Examiners have technical backgrounds and are capable of independent thought. DC, on the other hand, has a toxic social environment marked by smarmy leftist conformism.

A much better solution would be to simply move the patent examiners out of the DC area. There is no reason to employ people in a high cost of living area with already low unemployment. The best engineering schools are out in the midwest so move them out to Terre Haute, Indiana and build a campus for them there. Ready access to the best grads, low cost of living, much cheaper facility costs. Win, win, win.

We don't pay surveyors based on the number of lines they draw, we pay surveyors to draw *correct* lines. Patent examiners are merely surveyors of non-real property boundaries.

Patent examiner pay incentives should be tied to the following:
The value of the patent to the patent owner (incents the examiner to pay more snd better attention to important patents)
Whether the patent is ever challenged (incents the examiner to "draw" clear bright lines around the patented technology thereby increasing regulatory certainty and decreasing expensive patent litigation)
Whether any claims in the patent are ever invalidated (incents the examiner to draw the *correct* boundary)

The compensation would be paid out when the patents granted by the examiner expire. The exact mechanics of the scheme are left to others, but a compensation arrangement based on these ideas would help solve the problem in the paper cited above and many other problems in our patent system as well.

"The compensation would be paid out when the patents granted by the examiner expire"

You wouldn't get any payout till 20 years into the process. That's a pretty bad feedback model.

This is a valid point. I neglected to mention that all of this compensation would be in addition to a "reasonable" base salary. Again, I don't know what that level would be, but I do think patent examiners should make decent wage *while* they make their determinations on whether the patent applications under their scrutiny will issue.

Yes, I assumed you weren't precluding a reasonable salary, but a 20 year feed back cycle would be a disincentive to the A players as they could get more immediate compensation in private industry.

The ideas are good, but you'd have to have a more immediate mechanism, though you could always base the "retirement" pay off of the 20 year model.

+1 to the rant by edgar. Some PTO examiners even 30 years ago only worked four days a week, having every Friday off. Some PTO examiners never left their office to search for prior art, just reusing the same old patents to give a fake rejection. Some even ran businesses out of their office.

As for the paper, you will note that given the error bars, the right-most data point at the lower bound is only just above the left most data point at the upper bound. It's probably (just) statistically significant, but not by much. Recall the way statistics work, you cannot say that the middle point in a range is more probable than the end point, hence, there's a lot of 'slop' in the data shown by the graph and it might be, if you do another sample, just coincidence that the data points seem to trend upward.

>>Some PTO examiners never left their office to search for prior art, just reusing the same old patents to give a fake rejection.

You don't need to leave your office to do a computer search.

The DC-to-Boston Corridor is lined with so many revolving doors for our effete elites to navigate . . . between reality and fantasy, between significance and prominence, between substance and pretense--between governance and entertainment, between the actual and the illusory, between public policy and political theatre--between academia and administration, between law schools and legislatures, between country clubs and courtrooms . . . a mark of modern efficiency would be the elimination of such portals so that entire herds of effete elites can swarm and range across our neglected republic at will, regardless of consequence.

The retreat of our effete elites remains incomplete.

It is not clear at all that there is anything amiss or corrupt about the relationship between hiring examiners and granting patents without also examining the quality of the applications denied or granted. Having onboard individuals with patent examiner experience would likely result in higher quality applications being filed. Applications are denied for a reason. It would be interesting to know if the paper actually addresses or separates out the applications that were denied purely on the basis of incompetent filing.

Easy (if not necessarily 100% reliable) workaround: raise the pay, as you say, and then ban examiners from working on applications filed by companies in the states where they either went to high school or to college.

“patent examiners are more generous to firms that they might want to subsequently work for because they are located in places desirable to them”

Slightly simpler explanation: it is well known people are nicer to familiar things. People with the same first or last name, people from ‘their’ city, etc. This seems like a classic case of ‘correlation is not causality’: yes, they are nicer to companies near their home town and they are more likely to work near their home town. But not because they like those companies; just because they like their home town.

The study tested for this and found no general hometown bias. Only for those who later left.

Tabarrok's very next sentence is "Patent examiners who do not leave do not show a similar bias which removes a home-city boosterism effect."

I don’t think that’s a relevant control. Patent examiners that don’t leave apparently aren’t interested in returning to their home city, so *they* don’t display that preference. That doesn’t exclude the correlation for those that do return to (a company near) their home city

Why not use some sort of double-blind peer review process? i.e. the examiner doesn't get to know who is filing the patent. All information regarding the inventor and the law firm are excised from the application. In examiner just does a purely technical review, which is handed back to someone else to send back to the applicants. And the applicants don't get to know who is reviewing their applications. There is no need to even include this information on the published patent. Keep all patent applications private and only publish granted patents.

I suppose the

Ignore the last part. I was going to say I suppose the examiner can cheat and look at the publicly available application, but then I decided that could be solved by keeping them private.

The scope of "prior art" for a patent application depends on the identity of the applicant because some references may be excluded if they originated with that applicant within particular time windows. So it would not be possible to examine a patent application without knowing the applicant's identity under present patent law.

Seems to me that you might be able to handle that by having the examiner still remain blind, but have a secondary reviewer make the final decision after the examiners review depending on what the state of the "prior art" included in the application is. The secondary person would not do a technical but an administrative review. Most applications would still end up being decided by the blind examiner.

I do not think it is accurate to say "USPTO examiners are paid substantially less than their private sector substitutes".

USPTO examiners are not required to have law degrees. The private counterpart of an examiner is somewhere between a private patent searcher (~$75k), patent agent [prosecutes patents without a law degree] (~$120k), and patent attorney (~$200k), depending on the grade and education of the examiner. The salary for examiners ranges from about $70k to $165k, and examiners have much better job security and much less customer interaction. As an examiner without a law degree, the compensation seems extremely well balanced with private industry.

In my experience, the examiners who quit fall into two categories: 1) they cannot do the job, 2) they have a law degree and dream of the increasingly unlikely event of becoming a partner at a patent firm ($400k+).

Congress can easilydiminish the value of patents, and should. This would result in far fewer patent applications, and lots more innovation.

Patents are critical to rent seekers, and rent seekers want low rates of innovation.

Shorten the term the longer the list of cited patents which indicates just plowing the same well plowed field.

How is patent quality measured by future citations? Is that citations in Information Disclosure Statements (IDS) or by Examiners in future Office Actions? Those citations are based on the subject matter relevance of the invention disclosed and have nothing at all to do with the quality of examination of the patent.
So if what you are actually approximating by citation quantity is subject matter relevance, then it makes perfect sense that law firms tend to hire former examiners who worked in areas with the greatest subject matter relevance.
This article is just more junk science noise.

The term "revolving door" is misleading, in that it evokes going from industry to "do a tour" at the PTO. PTO used to have high rates of examiners being trained up and hired away, back when agency morale was very low. Now there's more balance - for those who are choosing between being a patent attorney vs examiner it's mostly about stability/schedule flexibility (examining) vs money and, crucially, wanting to be part of the invention process. Ethics rules already state that any discussion of a job opportunity requires recusal for the examiner for applications regarding that firm or company. Also, many applicants do have in-house counsel.

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