United States Patent and Trademark Office OG Notices: 30 December 2003
United States Patent and Trademark Office
Patent Public Advisory Committee
Annual Report
November 30, 2003
Table of Contents
Patent Public Advisory Committee (P-PAC) Members 3
I. Introduction 4
A. Background and Operation of the P-PAC During FY 2003 4
B. Scope and Focus of the Annual Report 6
II. Policies and Goals During FY 2003: The 21st
Century Strategic Plan 7
III. User Fees and Budget Review 10
A. The USPTO Fee Modernization Act of 2003 10
B. FY 2003 Budget and Current Expectations for FY 2004 12
IV. Performance as Measured Against the Strategic Plan 14
A. Quality 14
B. E-Government 16
C. Pendency 16
V. Conclusions and Recommendations 19
Patent Public Advisory Committee - Members
Voting Members
Rick D. Nydegger, Chair
Workman Nydegger
Salt Lake City, Utah
Andrew J. Dillon
Bracewell & Patterson, LLP
Austin, Texas
Stephen P. Fox
Hewlett-Packard Company
Palo Alto, California
Andy Gibbs
PatentCafe.Com, Inc.
Yuba City, California
Patricia Ingraham
Syracuse University
Syracuse, New York
Albert L. Jacobs, Jr.
Greenberg Traurig, LLP
New York, New York
Howard J. Klein
Klein, O'Neill & Singh, LLP
Irvine, California
William L. LaFuze
Vinson & Elkins, LLP
Houston, Texas
Gerald Mossinghoff
Oblon, Spivak, McClelland, Maier & Neustadt, P.C.
Alexandria, Virginia
Non-Voting Members
Ronald J. Stern
President Patent Office Professional Association (POPA)
Arlington, Virginia
Ollie Person
President National Treasury Employees Union (NTEU), Local 243
Arlington, Virginia
Catherine Faint
Vice President National Treasury Employees Union (NTEU), Local 245
Arlington, Virginia
Patent Public Advisory Committee
Annual Report
I. Introduction
A. Background and Operation of the Patent Public Advisory
Committee During FY 2003
Created to advise on "policies, goals, performance, budget and
user fees of the USPTO with respect to patents,"1 the
Patent Public Advisory Committee (P-PAC) is now entering its fourth
year. By statutory mandate, the P-PAC is composed of nine voting
members who represent the diverse community of users of the United
States Patent and Trademark Office (USPTO),2 including
individual inventors, universities, small entrepreneurial businesses,
large U. S. corporations, and private practitioners. P-PAC also has
three non-voting members3 who represent the three
labor organizations recognized by the USPTO and which serve the
community of USPTO employees.
Formation of the P-PAC in the year 2000 included the appointment
of voting members, with three of the members having one, two and
three-year terms to stagger the future appointment process. At the
outset, the P-PAC recognizes those members whose terms expired in July
2003. They provided a great public service, and their input has been an
important part of the activities undertaken by the P-PAC during most of
this last year. We extend our thanks and recognize the important
contributions of the following members whose terms have ended:
. Margaret Boulware, who served as Chair of the P-PAC since
its inception, and whose guidance during this formative stage has been
critical and far-reaching;
. James I. Fergason, who served as a member of the Quality
Subcommittee and whose insightful feedback as an independent inventor
has been invaluable; and
. Ronald E. Myrick, who led the E-Government Subcommittee and
whose perspectives as a large corporate user have provided much useful
feedback on many of the initiatives set out in the USPTO's
21st Century Strategic Plan.
In July of this year, the P-PAC also welcomed three new members
who replaced those whose terms had expired. Appointed by Secretary of
Commerce Donald Evans to three-year terms were:
. Rick D. Nydegger, the new Chair of the P-PAC, and President
of the American Intellectual Property Law Association, and a
shareholder and director at Workman Nydegger in Salt Lake City, Utah;
. Andrew J. Dillon, a patent attorney and partner at
Bracewell & Patterson in Austin, Texas; and
. Howard J. Klein, also a patent attorney and partner at
Klein, O'Neill & Singh in Irvine, California.
In-person meetings of the P-PAC were held during this last year
at the office of the Commissioner for Patents, in Arlington, Virginia.
Members not attending in person were provided with the option of
attending by conference call. Meetings4 of the P-PAC during
Fiscal Year (FY) 2003 were held as follows:
November 13, 2002 Executive Session5 and Public Meeting
March 25, 2003 Executive Session
August 21, 2003 New Member Orientation
August 22, 2003 Executive Session
October 28, 2003 Executive Session and Public Meeting
In addition to review of budgetary and fiscal operation of the
USPTO, and review of progress under the USPTO's 21st
Century Strategic Plan, both discussed elsewhere herein,
the P-PAC reviewed the following rulemakings during FY 2003: 1) Changes
to Implement Electronic Maintenance of Official Patent Application
Records (proposed and final rule); 2) Changes to Implement the 2002
Inter-Partes Re-Examination and other Technical Amendments to the
Patent Statute (proposed and final rule); 3) Correspondence with the
USPTO (final rule); 4) January 2004 Revision of PCT Application
Procedure (proposed and final rule); 5) Elimination of Continued
Prosecution Application Practice as to Utility and Plant Applications
(final rule); and 6) Changes to Support Implementation of the USPTO
21st Century Strategic Plan (proposed rule).
B. Scope and Focus of the Annual Report
Earlier this year, the USPTO announced an aggressive and
far-reaching five-year strategic plan. In the opening lines of the
Executive Summary of this new 21st Century Strategic
Plan (referred to hereafter as the "Strategic
Plan"), the Under Secretary of Commerce for Intellectual
Property and Director of the United States Patent and Trademark Office,
James E. Rogan, made this observation:
Today, the United States Patent and Trademark Office is under
siege. Patent application filings have increased dramatically
throughout the world. There are an estimated seven million pending
applications in the world's examination pipeline, and the annual
workload growth rate in the previous decade was in the range of 20-
30 percent. Technology has become increasingly complex, and demands
from customers for higher quality products and services have escalated.
Our applicants are concerned that the USPTO does not have access to all
of the fees they pay to have their patent and trademark applications
examined, thereby jeopardizing the benefits intellectual property
rights bring to our national economy. In the United States, these
demands have created a workload crisis. The Congress, the owners of
intellectual property, the patent bar, and public-at- large have all
told us that we must address these challenges aggressively and
promptly.
We agree. We believe that the USPTO must transform itself into
a quality-focused, highly productive, responsive organization
supporting a market-driven intellectual property system. (Emphasis
in the original.)
As members representing the diverse community of USPTO users
who see intellectual property as vital to a growing, vibrant economy,
and to maintaining competitiveness in an increasingly competitive
global economy, the P-PAC shares the vision of transforming the USPTO
into "a quality-focused, highly productive, responsive organization
supporting a market-driven intellectual property system."
The Strategic Plan has charted the course for achieving that vision.
This Annual Report first reviews and comments on the policies and
goals as reflected in the Strategic Plan. User fees and the
USPTO budget are then reviewed, followed by an evaluation of the
USPTO's performance during FY 2003 as measured against the
Strategic Plan. The Annual Report then concludes with
recommendations. Particular attention is given in the Annual Report on
focusing on the extent to which, as members of the P-PAC, we believe
the USPTO has succeeded under the first year of the Strategic
Plan in moving forward with its implementation. To the extent the
USPTO has not fully realized the goals set out for implementing the
Strategic Plan during FY 2003, the Annual Report will
discuss what the P-PAC sees as reasons for such lack of progress.
II. Policies and Goals During FY 2003:
The 21st Century Strategic Plan
During the appropriations process for FY 2002, the USPTO was
instructed by the Senate6 and the House7 to
develop a five-year strategic plan and a requirements-based budget
structure that would serve to effectively improve the quality of
granted patents, reduce patent pendency, and achieve electronic filing
and patent processing.
In response, following a rigorous review of its internal
operations and comments received from many of the major user groups,
including the ABA Intellectual Property Law Section (ABA IPL Section),
the American Intellectual Property Law Association (AIPLA), the
Intellectual Property Owners Association (IPO), the International
Trademark Association (INTA), the Biotechnology Industry Organization
(BIO) and others, the USPTO released its Strategic Plan on
February 3, 2003.
The USPTO must ensure that the United States has an intellectual
property system that is strong and vibrant. In terms of policy, this
means that the USPTO is entrusted with responsibility to develop and
maintain an intellectual property system that will 1) contribute to a
strong U.S. and global economy and 2) foster the entrepreneurial spirit
and encourage investment in innovation so as to meet the underlying
Constitutional objective of promoting "progress of . . . [the]
useful arts."8
Accomplishment of that overall mission is directly supported, in
turn, by achieving the strategic objectives set before the USPTO by
Congress, namely, enhancing patent quality, reducing patent pendency,
and developing and implementing an effective electronic system for use
by the USPTO and the public for all aspects of the patent
process.9
With the completion and adoption of its Strategic
Plan, FY 2003 marked a change of significant proportion for the
USPTO in terms of how it plans to achieve the objectives which support
and lead to fulfillment of that mission.10
Specifically, the USPTO's Strategic Plan sets out
comprehensive, aggressive goals as to how the USPTO plans to achieve
its mission and the objectives set for it by Congress. The goals
include:
. Enhancing the quality of patent and trademark examining
operations through consolidation of quality assurance activities in FY
2003;
. Achieving 27 months overall patent pendency11
by the end of FY 2008, while at the same time reducing total
patent examiner hires through FY 2008 by 2,400 as compared to the
number of new hires originally envisioned in its 2003 Business
Plan;12
. Accelerating processing time by implementing e-Government
in Patents by October 1, 2004;
. Competitively outsourcing classification and search
functions, and concentrating Office expertise as much as possible on
core government functions, in particular examination; and
. Expanding bilateral and multilateral discussions to
strengthen intellectual property rights globally and to reduce
duplication of effort among offices.
Following completion of the 21st Century Strategic Plan, Congress remarked
that "This plan calls for some of the most sweeping changes to the patent
review process in 200 years, and the Committee [e.g., the House Committee
on Appropriations] supports these recommendations."13 The Strategic
Plan also received the support of many of the major user groups
that provided comments to the USPTO during its development.14
III. User Fees and Budget Review
A. The USPTO Fee Modernization Act of 2003
Any plan, no matter how well conceived, is of little value
without adequate funding to implement it. Accordingly, in addition to
the Strategic Plan, the USPTO also devised and proposed last
year a comprehensive new fee schedule. If enabled through legislation,
the new fee schedule would provide adequate funding through user fees
to permit the Strategic Plan's implementation over the
projected five-year period, provided however, that the USPTO is
permitted to retain those user fees and use them in carrying out its
Strategic Plan. On July 9, 2003, the House Judiciary
Committee approved on a voice vote the proposed new fee schedule (the
"United States Patent and Trademark Fee Modernization Act of
2003").15 House floor action is expected later this year.
The Fee Modernization Act is premised on the concept that
applicants who choose to file applications with larger numbers of
claims and longer, more complex specifications should pay the higher
costs of processing and examining those applications, and thus
incorporates a "flexible fee schedule." The Fee Modernization Act
also includes some new fees that correspond to some of the new flexible
examination features to be implemented under the Strategic
Plan, and provides for refundable search and examination fees
depending on what an applicant may choose to do. Highlights of the Fee
Modernization Act include:
. A combined filing, search and examination fee that will be
due upon filing a utility patent application, and that will initially
total $1.000;16
. Claim fees will be $200 for each independent claim in
excess of three, and $50 for each claim in excess of 20; and
. Applications in excess of 100 pages will be charged $250
per 50 excess pages.
The following chart illustrates by way of comparison how the new
fees under the Fee Modernization Act would compare to existing fees,
for "typical" applications (e.g., those with three independent
claims or less, 20 total claims or less, and 22 pages of specification
or less), and for "moderately complex" applications (e.g., those
with seven independent claims or less, 40 total claims or less, and 150
pages of specification or less).17 Also worth noting
is that the proposed new fees have been thoughtfully designed so that
half or more of the fee increases will not fall due until after a
patent has been issued, thus avoiding barriers to filing in the first
instance, and permitting patent owners to avoid such increases unless
and until issuance occurs and thereafter during payment of maintenance
fees. In this way, only those patents that are 1) issued and 2) deemed
by their owners to be commercially useful will be subject to the full
fee increases.
Like the Strategic Plan, the proposed new fees are
widely supported as necessary to permit implementation of the USPTO's
Strategic Plan, although such support is clearly conditioned
on the understanding that the new fees are coupled with an appropriate
solution to diversion.18
B. FY 2003 Budget and Current Expectations for FY 2004
For the first four months of FY 2003, the USPTO remained under
the restrictions of a continuing resolution before an appropriations
bill was passed, thus limiting the USPTO budget to levels of spending
set for the previous year. The FY 2003 appropriation of $1.182 billion
provided $183,000,000, or 13.5% less than the expected Presidential
request of $1.365 billion.
Turning briefly to FY 2004, as of the writing of this Annual
Report, once again, the USPTO is operating under a continuing
resolution that limits it to the already much reduced funding levels
appropriated in FY 2003. On September 4, 2003, the Senate
Appropriations Committee approved S. 1585, Departments of Commerce,
Justice and State (CJS) Appropriations Bill for FY 2004. The bill would
fund USPTO at approximately $1.217 billion. The House version, H.R.
2799, passed by the full House on July 23, 2003, would fund USPTO at
approximately $1.239 billion. Thus, compared to the President's budget
request for the USPTO of $1.404 billion, these proposed appropriations
would once again significantly reduce USPTO funding levels, anywhere
from $187,000,000 (13.3%) based on the Senate's mark, to $165,000,000
(11.8%) based on the House mark. These funding levels, if adopted,
will severely challenge the USPTO to meet its basic operating
requirements, let alone move ahead with implementing the
Strategic Plan.19
The P-PAC sees this appropriation pattern as a deeply disturbing
trend. The amounts being appropriated for the USPTO budget are
dramatically below the President's budget request for each year. This
trend is exacerbated by the fact that patent application filings
continue to increase. Indeed, in FY 1990 patent filings were 163,571,
as compared to filings of 355,418 in FY 2003. This represents an
increase of over 217%, or 15.5% per year on average.20
Moreover, the effects of the trend are further worsened because
they are cumulative. For example, the reduction in the amounts
appropriated (as compared to the President's budget request) for the
USPTO in FY 2003 resulted in reducing the number of new examiners hired
to meet the increasing workload from 750 to 308.21
The President's FY 2004 budget request would fund the USPTO at
$1.203 billion without passage of the Fee Modernization Act, as
compared to $1.404 billion with passage of the Fee Modernization Act.
Passage of the Fee Modernization Act would thus result in $201 million
in additional collected patent and trademark fees that Congress could
appropriate for use by the USPTO, and that are critically needed for
implementing the Strategic Plan, particularly in view of the
setbacks already experienced in FY 2003 appropriations, and which are
looming for FY 2004.
The foregoing demonstrates two critical conclusions in the view
of the P-PAC. First, that adequate funding of the USPTO to permit
continued implementation of the Strategic Plan continues to
be critical, and second, that passage of the Fee Modernization Act is
critical to provide adequate fee collections that can be appropriated
by Congress in order to meet the required funding levels for
implementing the Strategic Plan.
The P-PAC is thus strongly supportive of 1) passage of the Fee
Modernization Act, coupled, however, with 2) adequate appropriations to
meet the USPTO's funding needs to fully implement its Strategic
Plan. Implicit, however, in this statement of support is the
P-PAC's strong support for current language in the Fee Modernization
Act that would end diversion of user fees. The P-PAC believes that the
current crisis facing the USPTO will not be satisfactorily resolved
unless and until an appropriate solution to diversion is found that
will truly permit the USPTO to realize the strategic goals and
objectives as envisioned under its Strategic Plan.
IV. Performance as Measured Against the Strategic Plan
A. Quality
The USPTO came very close to meeting its FY 2003 target in
quality (4.4% actual vs. 4.0% target error rate22 for
allowed applications). This is true even though more errors are being
identified as a result of the enhanced reviews of patent examiner work
products under the Strategic Plan. It should also be noted
that this error rate is an average taken across all
technology centers. P-PAC is pleased to report that in a number of
technologies, and particularly those in which the USPTO of late has
been criticized due to perceived quality problems, such as software and
computer related technologies, the percent of allowed applications with
a material defect was in fact substantially below the FY 2003 target of
4.0%. Technology Centers 2100, 2600 and 2800 had FY 2003 error rates
of 2.0%, 2.5% and 2.6%, respectively. This is a positive reflection
that, particularly in some of the most challenging technologies, the
USPTO's efforts to improve quality are succeeding. These efforts are,
as noted below, being expanded to other technology centers.
The P-PAC is pleased to report that the USPTO has made improving
patent quality its highest priority under the Strategic
Plan. The P-PAC believes the USPTO is working hard to improve
patent quality, and these efforts are reflected in the considerable
number of initiatives begun or completed under the Strategic Plan
during FY 2003. Included among the quality initiatives that were
implemented or under development during 2003 under the Strategic
Plan are the following:
. Improved pre-employment screening for new examiner hires by
. certifying that new hires have better communication
skills through improved oral interview processes and writing
samples; and
. completing an assessment of interim screening processes.
. Improved certification of patent examiner and supervisor
knowledge, skills and abilities (KSA) by
. developing the KSAs for patent examiners and supervisors;
. incorporating the KSAs into patent examiner training
programs to ensure that the examiners and supervisors have
the requisites needed to be successful in their positions;
. establishing Training Art Units for new examiners in
high volume technology centers;
. increasing the number of work reviews, and developing
a legal competency exam prior to promotion of patent
examiners to GS-13 level; and
. initiating several continuing legal education (CLE)
courses for examiners.
. Improved re-certification of Primary Examiners by
. increasing the number of work product reviews; and
. developing CLE courses for Primary Examiners.
. Improved process for selecting and training Supervisory
Patent Examiners to improve their effectiveness.
. Improved competitive compensation program for Supervisory
Patent Examiners.
. Improved procedures for enhancing the reviewable record for
patents (e.g., the file history) by revising interview summary
forms to require greater detail and recording of what transpired
during the interview, and revising MPEP guidelines to reflect
such changed requirements.
. Expanded program for the in-process reviews of applications
during prosecution by increasing supervisory review of
applications to ensure proper rejections were made.
. Expanded program for the "second pair of eyes" program
to include targeted areas in every technology center, since
it was successfully piloted in the business method examining
units.
. Improved transactional customer satisfaction surveys.
. Expanded end-process reviews of allowed applications.
Of particular note in respect to the above is the more extensive
in-process work product reviews for both junior and senior examiners
initiated by the Office last year. The focus of these reviews for
patent applications in FY 2003 was threefold:
1) Identify improper rejections or rejections that were not
made and should have been,
2) Assess adequacy of the field of search, and
3) Ensure proper application of examination practice and
procedures.
The USPTO reports that the information from these reviews has
already begun to help identify the necessary training to enhance
overall product quality and improve the consistency of examination, and
that these reviews are being used to assist management in determining
the root causes of problems and suggesting ways to achieve continuous
quality improvement.23 The USPTO also expects that this in
turn will begin to help provide more focused training and educational
materials as further tools for improving quality.
Overall, P-PAC is pleased with the quality initiatives undertaken
by the USPTO in FY 2003, and commends the Office for commencing the new
initiatives regarding the hiring and selection of new employees; the
certification of knowledge, skills and abilities for junior examiners;
the recertification of primary examiners; the improved selection of
supervisors; and the expansion of both in-process and end-process
reviews of patent applications undergoing prosecution. These actions
reveal a critical look at the effectiveness of past practices and
represent a serious effort to make changes intended to drive further
improvement of patent quality for the future.
B. E-Government
The P-PAC is pleased to report that the USPTO made significant
strides towards achieving some of the e-government goals of the
Strategic Plan through the implementation of the Image File
Wrapper (IFW) system. IFW is an electronic image version of the paper
patent application file wrapper, and is created by scanning all papers
in the application file wrapper using software initially developed by
the European Patent Office (EPO). IFW provides users with instant and
concurrent access to a patent application, eliminates examiner
interruption for paper entry, and eliminates lost or damaged papers as
opposed to paper patent applications. IFW will result in a patent
application system that is not only paperless, but also faster and
easier to use, and will better serve internal users, applicants and the
public.
IFW has already been deployed in the Office of Initial Patent
Examination, and in 120 patent examining art units with over 1,500
examiners now using IFW during the examination process. Beginning June
30, 2003, the Office began the process of converting all newly filed
patent applications into the IFW system. Presently, there are over
325,000 applications in IFW serving as the official files. Full
deployment of IFW is expected in October of 2004, depending on the
level of appropriations for FY 2004 by Congress.
With the Office's imminent relocation to its new headquarters,
the implementation of a paperless system is vital to ensure processes
remain at an efficient and effective level. Using IFW will also ease
the Office's burden of having the Office split between the two
locations by enabling all employees to have concurrent access to any
patent application.
The P-PAC also looks forward to the USPTO's release of the
On-line File Inspection Module of IFW for private and public on-line
viewing of the contents of applications via the Patent Application
Information Retrieval (PAIR) system, which should greatly facilitate
the ability of users and the public to access the available information
on-line.
The report on the electronic filing system (EFS) initiative is
not as positive as IFW. During FY 2003 there was only 1,188 individual
EFS filers, and a total of only 4,436 utility applications filed using
EFS, which represents only about 1.3% of all new utility applications
filed. P-PAC believes that clearly there is need for further work to
make EFS more user friendly, as well as a need for more effort to
educate and motivate the user community to use EFS. In that regard, the
P-PAC is eager to see the development of enhanced versions of software
for on-line application filing currently under development with the
various USPTO contractors on this project.
C. Pendency
The overall average patent pendency (filing to issue) for FY 2003
was 26.7 months, one month under the projected 27.7 months. First
action pendency was projected to be on average 18.4 months for FY 2003
and ended slightly below target at 18.3 months.
While FY 2003 targets for overall patent pendency were met, it
must be remembered that these are adjusted targets that were developed
once the USPTO received its actual appropriation for FY 2003 from
Congress (e.g., reduced by $183 million or 13.5% as
compared to what was requested in the President's budget) and taking
into account the four months of continuing resolution under which the
USPTO operated while waiting for an appropriations bill to be passed.
Stated another way, perhaps a more accurate way of reporting
patent pendency is to compare FY 2004 - FY 2008 projected pendency
with and without Strategic Plan funding in FY 2004.
This chart demonstrates once again the cumulative effect of
"lost" years on patent pendency in future years, and
once again underscores the critical need to reverse current trends in
appropriations, which are tending to undercut the Strategic
Plan.
In making this statement, the P-PAC recognizes that a policy
keyed to simply hiring new examiners as "the" solution to reducing
pendency is not appropriate. Indeed, Congress has made it clear that it
will not countenance such an approach.24 However, the
Strategic Plan addresses reducing pendency by not only
hiring new examiners, but also by outsourcing prior art searching,
improving work sharing among various international patent offices, and
various other initiatives intended to conserve core examiner time and
utilize USPTO resources more efficiently. These are still in the early
stages of development and piloting, and may well be stifled in the
absence of adequate funding.
Pendency continues to be a major strategic objective of concern.
Increased pendency will inevitably add to uncertainty for competitors
who would otherwise seek to avoid infringing activity, and stifle
investment opportunity for others.25
V. Conclusions and Recommendations
As stated at the beginning of this Annual Report, the USPTO must
ensure that the United States has an intellectual property system that
is strong and vibrant. This in turn means that the USPTO is entrusted
with responsibility to develop and maintain an intellectual property
system that will contribute to a strong U.S. and global economy, and
will foster the entrepreneurial spirit and encourage investment in
innovation so as to meet the underlying Constitutional objective of
promoting "progress of . . . [the] useful arts." The USPTO is
seeking to fulfill that mission by striving to achieve the strategic
objectives set before the Office by Congress, namely, enhancing patent
quality, reducing pendency, and fully implementing e-government.
The P-PAC commends the United States Patent and Trademark Office.
Its staff is continuing to work hard to not fall farther behind, and to
meet targets set by USPTO management with respect to quality,
e-government and pendency. However, inevitably, inadequate
appropriations that fail to permit full implementation of the
Strategic Plan will continue to accelerate the backlog and
problems in patent pendency, and will to varying degrees, frustrate the
other objectives set by the Strategic Plan.
We reiterate the statement made by the P-PAC in last year's
Annual Report (p. 7), which remains as true today as it was when made
last year:
The USPTO is intended to operate as a Performance-Based
Organization (PBO). However, without more autonomy, the USPTO cannot
function as a PBO. . . .
. . . Certain foundation conditions must be present for a
functioning PBO. First, there must be a clear mission and bottom line
objectives. To drive the mission of the USPTO, there must be managerial
discretion and flexibility, including personnel flexibility that would
allow the leaders [of the Office] to strategically allocate
resources, including personnel and financial resources, to the critical
objectives. In order to pursue a clear mission, the USPTO must have
stability in its resource base to link strategy and actual budgeted
allocations and expenditures. The P-PAC has not seen in its several
years of existence the level of control over basic resources to meet
USPTO goals. . . . The USPTO, which is expected to produce a high
quality product in a consistent and timely manner, simply cannot
function under the current circumstances that exist today when it does
not even have a budget during its current operational fiscal year.
The USPTO has established a Strategic Plan as mandated by Congress. That
Strategic Plan has been "whole-heartedly" endorsed26 by many of the major
user groups of the Office, and has been acknowledged as deserving of the
proposed funding levels that would be provided under the Fee
Modernization Act and the President's budget, provided the USPTO is
permitted to benefit from the fee revenue generated.27 The
P-PAC agrees. This continues to remain the single largest challenge
going forward.
The Office has set as its priorities for FY 2003, and also going
into FY 2004, as first, improving patent quality; second, achieving
e-government; and third, reducing patent pendency. P-PAC agrees with
and supports that prioritization. It is directly reflected in the
matters reported herein for each of those objectives.
There is still much that needs to be done. There are major parts
of the Strategic Plan that need to be implemented in order
to continue moving forward. Provided that adequate appropriations will
permit further implementation, in addition to following through on
those parts of the Strategic Plan that are already under
way, following are some of the more important provisions of the
Strategic Plan that are still largely not implemented and
that P-PAC recommends receive greater attention:
. Outsourcing of prior art searches. The Strategic Plan
looks to this initiative as a major means of providing the more
flexible multi-examination tracks envisioned. It is also a major means
of focusing examiner time on making determinations of patentability.
This initiative, while increasing efficiency, is also expected to
improve patent quality, and also reduce pendency while at the same time
reducing the need for new hires.
. The Office intends to implement a pilot program for
competitively outsourcing the search and/or opinion process
for a limited number of Patent Cooperation Treaty (PCT) patent
applications. This program would permit the Office to use
qualified private search contractors to carry out searches in
PCT applications. The P-PAC is aware that outsourcing the prior
art search function is a hotly debated issue. Consequently, the
P-PAC is committed to closely working with the Office to monitor
contractor quality, and to endeavoring to carefully
analyze the results of the pilot, and reporting our conclusions
to the Congress as required by statute.28
. P-PAC supports the Trilateral initiative among the
EPO, Japan Patent Office (JPO) and the USPTO to exchange search
results as a way to gain efficiencies and improve work sharing in
the examination process. In 2003, the Trilateral Offices
implemented a pilot to exchange search results for evaluation to
determine the extent an Office can exploit the search results of
another Office. The ability of the Trilateral Offices to exchange
and exploit each other's search results provides a means for
reducing the need for each Office to accomplish an independent
search in corresponding applications filed under the Paris
Convention. Preliminary data reported by the USPTO show
that, to at least some extent, the search that is done by another
Office would be beneficial in the United States examination of the
related patent application. A similar work exchange pilot is also
under way with IP Australia. The Trilateral Offices also recognize
that an examiner exchange would provide a direct means to discuss
and understand how and why each Office accomplishes a prior art
search and records the search history the way it does, and would
further assist in developing a more common search approach among
the various Offices. The USPTO intends to host an examiner exchange
in the spring of FY 2004 with the JPO and EPO.
. Further development of EFS. P-PAC believes the enhanced
versions of software for on-line application filing currently under
development with the various USPTO contractors needs to be completed
and evaluated as early as possible, and greater education and
incentives to use EFS need to be developed to increase use of EFS.
. New hires. At least to the extent called for in the
Strategic Plan, the USPTO needs to work hard to catch up on
the new hires required in order to further address and reverse the
growing problems in patent pendency.
The P-PAC looks forward to continuing its work with the USPTO to
assist it in achieving its mission and fulfilling the strategic
objectives set by Congress, as contemplated in its Strategic
Plan.
1 American Inventors Protection Act of l999 (AIPA); 35 U.S.C. 5(d).
2 AIPA, 35 U.S.C. 5(b)(2).
3 AIPA, 35 U.S.C. 5(b)(3).
4 Transcripts and agendas of the public meetings may be found at
http://www.uspto.gov/web/offices/com/advisorynotices/index/html.
5 Matters discussed during the Executive Sessions will not be included
in this report due to the restrictions on confidential information. USPTO
budget and other confidential review are conducted in these meetings. To
the extent information becomes public, it will be included in future
Annual Reports.
6 See Senate Report 107-42 ("The Committee is pleased that the Secretary
of Commerce has made a commitment to improve PTO operations and initiate
an internal review to determine what the agency needs to do its job.
Consistent with that approach, the Committee directs the Secretary of
Commerce to develop a 5-Year Strategic Plan for the PTO. . . .").
7 See the 21st Century Department of Justice Appropriations Authorization
Act, H.R. 2215 13104, 107th Congress ("The Director shall . . . develop a
strategic plan that sets forth the goals and methods by which the
United States Patent and Trademark Office will, during the 5-year
period beginning on January 1, 2003: (A) enhance patent and trademark
quality; (B) reduce patent and trademark pendency; and (C) develop and
implement an effective electronic system for use by the Patent and
Trademark Office and the public for all aspects of the patent and
trademark processes . . . .").
8 Article 1, Section 8.
9 See footnote 7 supra.
10 As the USPTO was nearing completion of the 21st Century Strategic Plan,
the Senate Committee on Appropriations observed: "While the PTO has briefed
the Committee on the outlines of a 5-year strategic plan for the agency
that is generally responsive to direction from Congress, the plan calls
for some of the most sweeping changes to the patent review process in
200 years." Senate Report 107-218. Highlights of some of the most
innovative features of the Strategic Plan include a new
multi-track examination system, which provides up to five different
options for applicants, rather than the traditional "one size fits
all" examination procedure currently used for decades; a new
accelerated examination option designed to limit overall pendency to
not more than 12 months for limited numbers of applications;
outsourcing of searches including PCT searches, more aggressive work
sharing and use of search results derived from foreign IP offices, and
use of private "certified search services" that meet quality
standards of the USPTO; and more flexible options for search and
examination, including the fees associated with those functions, all of
which is designed to save core examiner time. Additionally, a new
post-grant review procedure is proposed to permit greater public
involvement in challenging granted patents with less expense and more
timely outcomes.
11 Pendency is a measurement of USPTO's traditional examination processing
time, i.e., from filing (under 35 U.S.C. 111(a)) to ultimate disposal.
12 The 2003 Business Plan was submitted to the
Congress in February 2002 as part of the USPTO's FY 2003 submission,
and was strongly criticized by the Congress as an attempt by the USPTO
to simply "hire its way out of" the current crisis stemming from
growing pendency due to backlog, as opposed to finding ways to become
more efficient. See, e.g., Senate Report 107-42 ("PTO management has
not been sufficiently innovative. Although patent filings have
increased dramatically over the past decade, PTO management chose to
remain wedded to an archaic patent process and attempted to hire its
way out of its workload problems."). This ultimately led to a
Congressional mandate (see footnotes 6 and 7 above) to develop a
five-year strategic plan that would focus more on improved productivity
through improved retention, better hiring practices, and improved
training, among other things, as opposed to simply increasing the
number of new examiner hires each year.
13 House Report 108-221.
14 In a joint letter dated November 22, 2002, to the President's
Director, Office of Management and Budget, AIPLA,
IPO and INTA stated: "We are pleased that we can now report, in light
of proposed refinements to the Plan recently shared with us by Under
Secretary Rogan, that we whole-heartedly endorse the Plan." ABA IPL
Section submitted a separate letter to the same effect.
15 H.R. 1561 S. 1760.
16 The Director will be authorized under the
Act to refund portions of the search or examination fees upon express
abandonment of an application. These filing, search and examination
fees will be initially set by statute, but the Director will be
authorized to modify the search fee "to recover an amount not to
exceed the estimated average cost to the Office of searching
applications for patent either by acquiring a search report from a
qualified search authority, or by causing a search to be performed by
Office personnel."
17 Statistically, "typical" and "moderately complex" applications together
account for by far the majority of applications filed. Data available at
the time the Fee Modernization Act was being developed indicate that 94%
of applications filed have 40 or fewer claims, and 99% of applications
filed average 44 pages of specification.
18 In a joint letter dated Nov. 22, 2002 to the President's Director,
Office of Management and Budget, AIPLA, IPO and INTA stated, "The USPTO
will need additional resources to implement its Plan. In this regard, we
have discussed patent and trademark fee increases with the USPTO that, with
projected workload increases, would generate $1.5 billion in FY 2004. With
the proposed refinements, including testing and evaluation before
deployment where appropriate, we are fully prepared to support a statutory
fee increase of this magnitude to implement the Plan. Our support is based
upon the assumption that the Bush Administration will effectively address
the issue of diversion. Our members will insist that we strongly oppose any
proposed fee increase that does not include an appropriate solution to
diversion." The ABA IPL Section submitted a separate letter to the
same effect.
19 That is especially true since $44,000,000
in the USPTO's FY 2004 budget is required by contract to cover the
costs of the space consolidation project of the USPTO to its new campus
in Alexandria, scheduled to take place in 2004.
20 Even during the recent economic downturn (e.g., through the years
2000-2003) there has been an increase in patent filings from approximately
290,000 to 350,000, or 120% (on average, 30% per year).
21 Under expected levels of appropriation for
FY 2004, it will be difficult for the USPTO to hire enough new
examiners to keep pace with attrition in the examining corps. In other
words, FY 2003 and FY 2004 represent, in real terms, lost
years. The Strategic Plan calls for 750 new examiners
to be hired in FY 2004. Thus, taking into account the 440 new examiners
not hired in FY 2003, to make up for these two years alone, the USPTO
would have to hire in FY 2005 1,190 new examiners in addition
to the 750 new hires which are expected under the Strategic
Plan for FY 2005, or a total of 1,940 new hires. This simply is
not possible even if it could be afforded, because of the limitations
in training and assimilating of that many new hires. Hence, the reason
why these years represent lost years.
22 The USPTO defines this as any claim which
would have been invalidated by a court reviewing the patent.
23 It should be noted that P-PAC has not yet
evaluated the complete basis for the USPTO's assessment, but clearly
those art units such as the software and business method art units
where increased reviews have been used have seen a significant
reduction in the USPTO's error rate.
24 See footnote 12 supra. However, this statement should also be tempered
by the reality that in 2000, the Examining corps was 2,904 (down slightly
from 2,987 in 1999) and at the end of 2003 the corps was 3,579. This
translates into a net increase of 620 examiners during that time, or 5.2%
per year on average, as compared to an increase of 30%
per year on average in application filings (see footnote 20 supra) during
the same time period, e.g., 2000-2003.
25 Compare, e.g., the report issued by the FTC
on Oct. 28, 2003, "To Promote Innovation: The Proper Balance of
Competition and Patent Law and Policy" (hereinafter the "FTC
Report"). In one of its conclusions, the FTC Report states that
questionable patents are a significant competitive concern and can harm
innovation (p. 5, Executive Summary), and goes on to "strongly
[recommend] that the PTO receive funds sufficient to enable it to
insure quality patent review." Recommendation 4 "Provide Adequate
Funding for the PTO," p. 13, Executive Summary. The Executive Summary
and full FTC Report may be found at
http://www.ftc.gov/reports/index.htm.
26 See footnote 14 supra and accompanying text.
27 See footnote 18 supra and accompanying text.
28 H.R. 2561