Oct. 24--Declaring that the performance of the U.S. Patent and Trademark Office stifles American innovation and economic growth, the agency's new director is warning that a $200 million deficit prevents it from tackling its most urgent problems.

David Kappos, a former IBM Corp. executive who took charge of the Patent Office two months ago, has used recent speeches to break with the agency's previous administration and repudiate as "dysfunctional and backwards" policies that have triggered an unprecedented number of rejections of applications seeking patent protection for new technologies.

The agency began its fiscal year Oct. 1 with a deficit so large that it cannot hire new examiners, nor can it upgrade an antiquated computer system that routinely idles thousands of examiners at a time, Kappos said.

Worse, without congressional action to plug the budget shortfall, Kappos concedes that he doesn't expect to make progress on his most urgent problem: a backlog of 1.2 million patent applications, which nearly tripled in the past 10 years.

"It's a staggering number of applications, clearly unacceptable, clearly stifling innovation and restricting the growth of our economy," Kappos said in a speech this month in Washington.

Kappos has asked for patience as he settles into the job. His predecessors this year predicted it would take six years and mass hiring of new examiners to work through the backlog.

Yet the deficit means "no hiring in 2010," and no overtime is available, Kappos said. As examiners leave amid a hiring freeze, "the office is actually shrinking day by day," Kappos said.

A Journal Sentinel investigation published in August illustrated how the agency's inability to keep pace impedes U.S. competitiveness. Delays for patent approval last year averaged 3.5 years and often took years longer. Amid fast-moving global competition, the delays put inventors at risk of losing their ideas to competitors. And as it has struggled to keep pace with the volume and complexity of its applications, the office imposed new hurdles, costs and improper rejections that hamstrung start-ups and entrepreneurs.

President Barack Obama appointed Kappos to run an agency meant to promote and protect American innovation, with Kappos sworn in on Aug. 13. Jon Dudas, now an attorney in Washington at Foley & Lardner, ran the agency under President George W. Bush; his deputy, John Doll, resigned this month.