Growing recognition of the crucial role that technological innovation plays in the U.S economy has led to increased congressional activity with respect to the intellectual property laws. As evidenced by provisions within several patent reform bills pending before the 111 th Congress, the operation of the U.S. Patent and Trademark Office (USPTO) is among the subjects of legislative interest. Many knowledgeable observers have expressed concern that the USPTO does not possess the capability to process the large number of patent applications that it receives. The growing backlog of filed, but unexamined applications could potentially lead to long delays in the time the USPTO requires to grant patents. Some experts believe that the concept of "deferred examination" may assist in alleviating the growing USPTO inventory of applications that have yet to be reviewed. Under current law, a USPTO examiner reviews each patent application that is filed. In contrast, the patent offices of many foreign nations, including Canada, Germany, Japan, and the United Kingdom, do not automatically examine every application. In these offices, an examiner will not consider the application unless the applicant submits a request for examination, including an additional fee. Failure to file such a request within a specified time period—usually from three to five years—results in the abandonment of the application. Deferred examination may hold potential benefits. Some inventors who file patent applications may subsequently decide not to expend the additional resources needed to obtain patents. If, for example, an invention proves less promising than it initially appeared due to technical or marketplace developments, or government approval to market the technology cannot be obtained, a patent applicant may rationally decide not to pursue the matter further. The USPTO then does not need to review those applications, allowing others to move through the agency more quickly. On the other hand, some experts believe that deferred examination holds negative consequences, such as marketplace uncertainty. Firms may not know for many years whether their new products will infringe a patent that resulted from deferred examination. This report provides an overview of deferred patent examination. It begins by offering a brief review of patent acquisition proceedings as well as challenges faced by the USPTO. The report then introduces the concept of deferred examination. The potential positive and negative consequences of deferred examination upon the environment for innovation within the United States are then explored. The report closes by identifying salient design parameters for deferred examination systems and reviewing congressional options. The U.S. Constitution provides Congress with the power "To promote the Progress of Science and useful Arts, by securing for limited Times to ... Inventors the exclusive Right to their ... Discoveries." In accordance with the Patent Act of 1952 (the "Patent Act"), an inventor may seek the grant of a patent by preparing and submitting an application to the USPTO. Under current law, each application is then placed into queue for eventual review by officials known as examiners. The USPTO publishes most, but not all, pending patent applications "promptly after the expiration of a period of 18 months" from the filing date. Among the applications that are not published prior to grant are those that the applicant represents will not be the subject of patent protection abroad. In particular, if an applicant certifies that the invention disclosed in the U.S. application will not be the subject of a patent application in another country that requires publication of applications 18 months after filing, then the USPTO will not publish the application. USPTO officials known as examiners then determine whether the invention disclosed in the application merits the award of a patent. The USPTO examiner will consider a number of legal requirements, including whether the submitted application fully explains and distinctly claims the invention. In particular, the application must enable persons skilled in the art to make and use the invention without undue experimentation. In addition, the application must provide the "best mode," or preferred way, that the applicant knows to practice the invention. The examiner will also determine whether the invention itself fulfills certain substantive standards set by the patent statute. To be patentable, an invention must meet four primary requirements. First, the invention must fall within at least one category of patentable subject matter. According to the Patent Act, an invention which is a "process, machine, manufacture, or composition of matter" is eligible for patenting. Second, the invention must be useful, a requirement that is satisfied if the invention is operable and provides a tangible benefit. Third, the invention must be novel, or different, from subject matter disclosed by an earlier patent, publication, or other state-of-the-art knowledge. Finally, an invention is not patentable if "the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." This requirement of "nonobviousness" prevents the issuance of patents claiming subject matter that a skilled artisan would have been able to implement in view of the knowledge of the state of the art. If the USPTO allows the patent to issue, its owner obtains the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. Those who engage in those acts without the permission of the patentee during the term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined from further infringing acts. The patent statute also provides for an award of damages "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." The maximum term of patent protection is ordinarily set at 20 years from the date the application is filed. At the end of that period, others may employ that invention without regard to the expired patent. Although patent term is based upon the filing date, the patentee gains no enforceable legal rights until the USPTO allows the application to issue as a granted patent. A number of Patent Act provisions may modify the basic 20-year term, including examination delays at the USPTO and delays in obtaining marketing approval for the patented invention from other federal agencies. Like most rights, those provided by a patent are not self-enforcing. Patent owners who wish to compel others to respect their proprietary interests must commence enforcement proceedings, which most commonly consist of litigation in the federal courts. Although issued patents enjoy a presumption of validity, accused infringers may assert that a patent is invalid or unenforceable on a number of grounds. The Court of Appeals for the Federal Circuit (Federal Circuit) possesses nationwide jurisdiction over most patent appeals from the district courts. The Supreme Court enjoys discretionary authority to review cases decided by the Federal Circuit. The growing popularity of the patent system has placed strains upon the resources of the USPTO. During 2009, the USPTO received 485,500 applications—a decrease of 2.3% from the 496,886 applications it received during the 2008 fiscal year. The number of applications filed in 2009 was still greater than the 468,330 filed in 2007, however. In turn, this figure was substantially larger than the annual filings achieved just a few years ago. In 2000, for example, 293,244 applications were filed at the USPTO. The USPTO has candidly admitted that "the volume of patent applications continues to outpace our capacity to examine them." As a consequence, the USPTO reportedly holds an inventory in excess of 1.2 million patent applications that have yet to be reviewed by an examiner. In addition, a USPTO examiner in 2009 would not review a patent application until, on average, 25.8 months after it was filed. The "first action pendency" during 2000 was 13.6 months. Many observers believe that if current conditions continue, the backlog and delay are likely to grow at the USPTO in coming years. Long delays for patent approvals may negatively impact high technology industries by increasing uncertainty about the availability and scope of patent rights. For market segments that feature a rapid pace of innovation and short product cycles, such as consumer electronics, lengthy USPTO delays may also significantly devalue the patent right. Put simply, by the time a patent issues, the entire industry might have moved on to more advanced technologies. Commerce Secretary Gary Locke reportedly described the length of time the USPTO requires to issue patents as "unacceptable," explaining that "[t]his delay causes uncertainty for inventors and entrepreneurs and impedes our economic recovery." USPTO Director David Kappos recently opined that "[e]very quality patent application that sits on the shelf represents jobs not created." In addition, under current law, USPTO delays may qualify certain patents for an extension of term. For example, if the USPTO does not respond to an application within 14 months of the day it is filed, the term of a patent that results from that application is extended by one day for each day of delay. Given that the average first action pendency is now almost 26 months, this rule of "Patent Term Adjustment" may cause many U.S. patents to have a term that exceeds 20 years. A patent with a longer term may be of greater value to its proprietor, but also may impact the ability of others to develop competing products. The USPTO has developed a number of initiatives in order to address its backlog of unexamined patent applications. The agency has hired many new examiners, including 1,193 in 2006; 1,215 in 2007; and 1,211 in 2008. The significance of this hiring rate should be assessed in view of the fact that in 2009, the total size of the patent examining corps was 6,242. The recent economic downturn has caused the USPTO to limit new hiring, however.