[fpgeek]

That isn't the whole story on incentives, at least from the USPTO's perspective. While it is true that the overall budget is set externally (by Congress, for the most part), the money that the patent offices is allowed to actually spend is limited by the fees they collect [1]. So while they can't directly get themselves raises by drumming up more fees, they do protect themselves from layoffs and pay cuts by keeping the fee pipeline going.

Separately, so far as I know, there's no reason to think that the USPTO is immune from typical bureaucratic incentive misalignment. More applications do mean more work and the simplest way to deal with more work is to get more people to do it. More people would increase the bureaucratic fiefdom of USPTO decisionmakers (who are first in line in terms of deciding how to handle more work) and the increased fees coming from the increased applications are at least a good starting point when arguing for a budget increase next year. This is a weaker incentive chain than "the USPTO isa business funded by filing fees", but it is still a significant one.

[1] http://www.patentlyo.com/patent/2011/08/usptos-future-budget...