Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem
David E. Boundy, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, 2018 Patently-O Patent Law Journal 20, 2018
25 Pages Posted: 26 Dec 2018
Date Written: December 6, 2018
Agency rulemaking is governed by a number of statutes, regulations issued by the Office of Management and Budget, and executive orders. Rulemaking statutes and executive orders obligate agencies to consult with the public, introspect, analyze, provide an explanation of rationale, and perform cost-benefit balancing for any rule. Statutory rulemaking procedure is designed to ensure that an agency does not raise costs on the public by $2 to reduce agency costs by $1, does not create costs on the public that can be reduced through better internal agency controls, does not impose undue burden on small entities, etc. Statutory rulemaking procedure ensures predictability and, ultimately, “reasoned decisionmaking.” When an agency bypasses any of these obligations, there’s a high risk that the agency will fail to act in the public interest. And of course the incentives and risks are even higher when an agency is funded by user fees.
The Patent and Trademark Office has never integrated these laws into its rulemaking process. The direct costs to the public are about $1.5 billion in excess costs, waste, fraud, and abuse. Indirect costs to the economy caused by PTO’s bad guidance practices -- lost patent protection, companies not formed, companies that fold because of delays and unpredictability of their patent applications, business opportunities not pursued, and similar economic effects, etc. -- are well into the billions each year.
This article looks at one facet of the problem: PTO's pattern of promulgating rules through informal guidance, when more procedure is required (or, in some cases, where the rule is entirely illegal and could not be promulgated by any procedure).
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