The number of patent applications filed in the U.S. Patent and Trademark Office (USPTO) from 2000 to 2020 only experienced two prominent drops—one in 2009 when the U.S. economy tanked and one in 2020 when the Covid-19 pandemic reached the U.S.
From 2016 to 2019, the percentage of applications that were abandoned dropped from 49% to 41%. Then in 2020, the abandonment rate jumped to 62%.
Clearly the coronavirus pandemic impacted company decisions on applying for and maintaining patent applications.
The processing and examination of patent applications in the USPTO were not adversely affected by the coronavirus pandemic because the USPTO had started experimenting with telework in 1997. Just prior to the pandemic, 87% of eligible USPTO personnel, including patent and trademark examiners, were teleworking. In 2020, 91% of eligible personnel were teleworking.
One source has noted that processing of abandonments was delayed in the second quarter of 2020 due to setting up of home offices, figuring out child care, and navigating the other perils of the pandemic. None of the metrics found on the USPTO’s patent dashboard, however, reflect production delays in examination activities. Perhaps the decrease in application filings in 2020, and the increase in the number of pending applications that were abandoned, helped shore up the patent dashboard metrics.
For trademarks, first action pendency data began and continued increasing during the third quarter of 2020 due to an unexpected 10% increase in trademark filings in 2020. More than 1,500 trademark applications were filed for variations on the Covid-19 and coronavirus themes.
The similar drop in patent application filings in 2009 and 2020 suggests that economic factors influenced companies to tighten their intellectual property budgets. What is different between these two economic downturns is that there was no change in the rate at which patent applications were abandoned in 2009. However, in 2020 there was a significant increase in the number of patent applications that were abandoned.
These differences indicate that during the economic downturn in 2009, companies had faith and confidence that the economy would turn around based upon the federal government’s actions to rescue the economy with federal bailout money and job creation spending at a total cost of $498 billion.
In contrast, during the coronavirus pandemic of 2020, faith and confidence in a quick recovery was illusive. Information about the extent and severity of the pandemic kept changing weekly. How Covid-19 affected people, how to treat infections, how the virus spread and how to prevent it from spreading, and how to develop and test vaccines to prevent infections were all new endeavors.
The majority of employed workers were sent home to work remotely in 2020 with short notice. Many others were laid off. While the federal government sent out rounds of stimulus checks directly to families and provided hundreds of billions of dollars for small business payrolls, money was tight and 52% of Americans cut back on spending.
The first wave of Covid-19 infections in the U.S. was managed by local government-imposed restrictions. The second wave of infections is being managed by aggressive vaccination programs.
As we reach “herd immunity” level for those that have survived Covid-19 infections and those who have been fully vaccinated and see the rate of new infections steadily dropping, confidence within the general public including consumers and companies is increasing and providing optimism.
As workplaces are reopening and employees are being called back, consumer spending will increase and companies that have held off on developing and bringing new products to market will recharge their research and development (R&D) departments.
Applications, Consumer Spending Increasing
Patent application filings increased for five years after the 2009 economic downturn and consumer spending steadily increased all the way though 2019. Patent application filings have increased in 2020, and are expected to continue to increase.
Consumer spending started to rebound in 2020. One source estimates that it will likely take until 2022 before personal consumption expenditure recovers to 2019 levels. That time frame would suit for companies to develop and protect new products.
Companies invest in R&D when their product lines become outdated, to gain or maintain a competitive edge, or when competitors create similar or superior products. As the Covid-19 pandemic set in and peaked, companies reduced spending and cut IP budgets and, rather than develop and introduce new product lines, held back and relied upon income generated from existing products.
Covid-19 infection rates are dropping in response to aggressive vaccine programs. As we turn the corner and see the light at the end of the tunnel, companies will no doubt infuse funds into their R&D programs in anticipation of consumer spending fueled by relief from the pandemic after restrictions are lifted.
A lot has been made about the disappointing jobs report in April. It is believed that as vaccines reduce the fear of Covid-19 transmission, unemployment benefits expire in September, and schools reopen in the fall, workers are expected to return to work.
A shift in consumer demand from services to goods boosted a 6.4% annualized growth in the economy in the first quarter of 2021. Households put aside over $5 trillion in the first three quarters of 2020 and are likely to start spending in a post-pandemic boom scenario.
All this bodes well for companies that want to reinvigorate their R&D activities and develop and patent new products.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Michael Gzybowski is an attorney in Dykema’s Ann Arbor, Mich., office who concentrates his intellectual property practice in preparing and prosecuting U.S. patent applications. He is a former patent examiner at the USPTO.