[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
REVIEW OF U.S. PATENT AND TRADEMARK OFFICE OPERATIONS, INCLUDING
ANALYSIS OF GOVERNMENT ACCOUNTABILITY OFFICE, INSPECTOR GENERAL, AND
NATIONAL ACADEMY OF PUBLIC ADMINISTRATION REPORTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS, THE INTERNET,
AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 8, 2005
__________
Serial No. 109-48
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
______
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23-324 WASHINGTON : 2005
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COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina HOWARD L. BERMAN, California
LAMAR SMITH, Texas RICK BOUCHER, Virginia
ELTON GALLEGLY, California JERROLD NADLER, New York
BOB GOODLATTE, Virginia ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah MAXINE WATERS, California
SPENCER BACHUS, Alabama MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana ROBERT WEXLER, Florida
MARK GREEN, Wisconsin ANTHONY D. WEINER, New York
RIC KELLER, Florida ADAM B. SCHIFF, California
DARRELL ISSA, California LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona CHRIS VAN HOLLEN, Maryland
MIKE PENCE, Indiana DEBBIE WASSERMAN SCHULTZ, Florida
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas
Philip G. Kiko, General Counsel-Chief of Staff
Perry H. Apelbaum, Minority Chief Counsel
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Subcommittee on Courts, the Internet, and Intellectual Property
LAMAR SMITH, Texas, Chairman
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
ELTON GALLEGLY, California JOHN CONYERS, Jr., Michigan
BOB GOODLATTE, Virginia RICK BOUCHER, Virginia
WILLIAM L. JENKINS, Tennessee ZOE LOFGREN, California
SPENCER BACHUS, Alabama MAXINE WATERS, California
BOB INGLIS, South Carolina MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida ROBERT WEXLER, Florida
DARRELL ISSA, California ANTHONY D. WEINER, New York
CHRIS CANNON, Utah ADAM B. SCHIFF, California
MIKE PENCE, Indiana LINDA T. SANCHEZ, California
J. RANDY FORBES, Virginia
Blaine Merritt, Chief Counsel
David Whitney, Counsel
Joe Keeley, Counsel
Ryan Visco, Counsel
Shanna Winters, Minority Counsel
C O N T E N T S
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SEPTEMBER 8, 2005
OPENING STATEMENT
Page
The Honorable Lamar Smith, a Representative in Congress from the
State of Texas, and Chairman, Subcommittee on Courts, the
Internet, and Intellectual Property............................ 1
The Honorable Howard L. Berman, a Representative in Congress from
the State of California, and Ranking Member, Subcommittee on
Courts, the Internet, and Intellectual Property................ 2
WITNESSES
The Honorable Jon W. Dudas, Undersecretary of Commerce for
Intellectual Property and Director, U.S. Patent and Trademark
Office (PTO)
Oral Testimony................................................. 5
Prepared Statement............................................. 8
Ms. Anu K. Mittal, Director, Science and Technology Issues, U.S.
General Accountability Office (GAO)
Oral Testimony................................................. 26
Prepared Statement............................................. 28
Mr. Ronald J. Stern, President, Patent Office Professional
Association (POPA)
Oral Testimony................................................. 149
Prepared Statement............................................. 150
Mr. Charles Van Horn, Finnegan, Henderson, Farabow, Garrett, and
Dunner, LLP
Oral Testimony................................................. 159
Prepared Statement............................................. 161
APPENDIX
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Howard L. Berman, a
Representative in Congress from the State of California, and
Ranking Member, Subcommittee on Courts, the Internet, and
Intellectual Property.......................................... 175
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, and
Member, Subcommittee on Courts, the Internet, and Intellectual
Property....................................................... 176
Response from Anu K. Mittal, Director, Science and Technology
Issues, U.S. General Accountability Office (GAO), to questions
submitted by the Honorable Zoe Lofgren, a Representative in
Congress from the State of California, and Member, Subcommittee
on Courts, the Internet, and Intellectual Property............. 177
Executive Summary, U.S. Patent and Trademark Office: Transforming
To Meet the Challenges of the 21st Century, a Report by a Panel
of the National Academy of Public Administration for the U.S.
Congress and the U.S. Patent and Trademark Office, 2005,
submitted by the Honorable Lamar Smith......................... 178
REVIEW OF U.S. PATENT AND TRADEMARK OFFICE OPERATIONS, INCLUDING
ANALYSIS OF GOVERNMENT ACCOUNTABILITY OFFICE, INSPECTOR GENERAL, AND
NATIONAL ACADEMY OF PUBLIC ADMINISTRATION REPORTS
----------
THURSDAY, SEPEMBER 8, 2005
House of Representatives,
Subcommittee on Courts, the Internet,
and Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1 p.m., in
Room 2141, Rayburn House Office Building, the Honorable Lamar
Smith (Chair of the Subcommittee) presiding.
Mr. Smith. The Subcommittee on Courts, the Internet, and
Intellectual Property will come to order. As is usually the
case, I am going to recognize myself for an opening statement,
then recognize the Ranking Member, then we will get to our
witnesses as soon as possible.
Today the Subcommittee will conduct a hearing on the
operations of the U.S. Patent and Trademark Office. This
hearing responds to our obligation under House rules to conduct
oversight of those entities that fall within our Committee's
jurisdiction.
The PTO is the one of the most important agencies of the
Federal Government, but it is often not regarded as such. It
directly affects the producitvity and economic growth of our
Nation as well as the standard of living for all Americans.
For over 200 years the PTO has been responsible for issuing
U.S. Patents. The PTO advises the Secretary of Commerce and the
President on patent, trademark and copyright protection, as
well as on trade-related aspects of intellectual property.
The Subcommittee has conducted oversight hearings on PTO
operations during the last two Congresses, but they have mainly
dealt with fees and fee diversion. The scope of this hearing
today will be much broader.
Recent reports by the GAO, the Patent Public Advisory
Committee, the Inspector General's Office and the National
Academy of Public Administration have all focused on day-to-day
operations of the PTO. Among them are the patent application
backlog, the implementation of the PTO's electronic application
system, hiring and retention of patent examiners, the
relationship between management and examiners, and the amount
of time examiners require to process patents.
In addition, the PTO continues to implement its 21st
Century Strategic Plan. The plan lays out a set of commitments
aimed at improving quality and enhancing productivity for the
PTO. Among other provisions, the plan promotes electronic
processing of all patents and greater protection of American
intellectual property internationally.
The PTO has long sought to improve its patent process
through the use of electronic filing, and has spent over $1
billion in its efforts to provide an electronic patent filing
system between 1983 and 2004. The GAO has made several
recommendations to helpfully integrate an electronic system.
This hearing will allow Members to acquire a status report on
planned and ongoing efforts to modernize the office's
operations, especially those that will lessen its reliance upon
paper files and documents.
The Judiciary Committee proposes to authorize that the PTO
collect and spend over $1.7 billion, subject to appropriation
acts, from fee collections in fiscal year 2006 to cover
operating expenses, including the payment of retirement
benefits for employees.
In its submission, the Judicary Committee Members
emphasized that they strongly support full funding of the PTO
and the elimination of any incentive to use agency revenues for
non-PTO purposes.
We look forward to discussing these and other issues of
concern to the Members today. And before I recognize the
Ranking Member, without objection I would like unanimous
consent to put into our record the executive summaries of the
reports that we have gotten, including the U.S. Patent and
Trademark Office, Transforming to Meet the Challenges of the
21st Century, and that has been submitted by the National
Academy of Public Administration, as well as the other reports
we have as well.
I would like to put them all in the record, but when each
report runs 300 pages, I think we better just focus on the
executive summary.
And, once again, let me just say in conclusion, and,
Director Dudas, this is directed toward you as much as anybody
else, that I would be hard pressed to point to another
Government agency that is as important as yours, that has as
much responsibility as yours does, and has as much impact on
the American people. But I hope that after today's hearing and
in coming months, we will make sure that more people are aware
of just how much the PTO contributes to our well-being.
[The information referred to is printed in the Appendix.]
Mr. Smith. Now the gentleman from California Mr. Berman is
recognized for his opening statement.
Mr. Berman. Thank you very much, Mr. Chairman, for
recognizing me and for scheduling this oversight hearing.
The U.S. patent system is the cornerstone of innovation in
our society. Throughout its more than 200-year history, the
Patent Office provided incentives for inventors to innovate by
providing them with protection for their ideas in the form of
patents and trademarks. Intellectual property-based industries
today represent the largest single sector of the U.S. Economy,
and the USPTO is at the core.
As the Chairman said, it is probably not highly recognized
among the public, and maybe even many of our colleagues, of the
critical role that the USPTO plays in our economic progress,
and in the advancement and benefits to quality of life that
come from invention. There has been over the recent years
criticism, charges of poor-quality patents and ever-increasing
pendency of applications, both of which diminish the stature of
the patent system and reflect poorly on the office's product.
I commend the Patent Office for implementing many of the
initiatives cited in its 21st Century Strategic Plan, but
nevertheless, challenges remain.
The first challenge is to us, not to the PTO. Everyone
agrees, all of the witnesses agree, that we must stop fee
diversion. Between fiscal year 1992 and 2004, the office lost
access to $741 million of the fees it collected. A lack of
funding is cited in multiple reports as the primary reason for
increased pendency and for not implementing vital quality
initiatives.
We can't continue to allow a perverse situation where we
kneecap U.S. technology and economic leadership by diverting
user fees to wholly unrelated uses. That is why many of us here
today are original cosponsors of the Patent and Trademark Fee
Modernization Act of 2005, to put an end once and for all to
this tax on innovation.
However, the fee bill is only the starting point. In order
to improve the operations of the Patent Office, we must make a
number of fundamental reforms to the system. Patent pendency,
the amount of time a patent is pending, now stands on average
more than 2 years; backlog of applications awaiting a first
review, 600,000. Without a change in the system, current levels
are expected to grow to over 1,000,000 backlog by the year
2010. If you look solely at the most complex cutting-edge
technologies where patent protection may be the most critical,
average pendency is more than 3 years, not much higher than the
average.
The light-speed pace of innovation makes this simply
unacceptable. Many cutting-edge technologies will be long
obsolete by the time the patent is granted. The troubling
factor leading to the ever-increasing backlog of patent
applications is the USPTO simply does not have enough
experienced examiners to handle the demand.
I applaud USPTO for taking steps to increase the size of
its patent examining corps, but attrition remains a serious
problem. Only 45 percent of the Patent Office workforce has 5
or more years of service, and in an agency where it takes
roughly 5 of 6 years before an employee becomes fully
productive, this is a troubling statistic.
Another major issue in which the office struggles is the
quality of patents. The current production quota system, known
as the count system, has not been reevaluated since it was
first introduced in 1976. The amount of information through
which examiners must search to find relevant patent literature
has exponentionally increased. Applications are growing
evermore complicated, yet examiners still work under the 1976
assumptions.
Even with advances in the deployment of information
technology, a number of studies have indicated that examiners
today simply do not have enough time to do their job properly
and have been encouraged to take a number of shortcuts. So the
natural result? Quality of patents suffers.
Although USPTO has instituted some quality initiatives in
recent years, I think there is still a long way to go. There
are additional quality measures and changes to the patent
system as a whole that we hope to address in the Patent Reform
Act of 2005. I won't get into those now, they may come up in
the context of questions, but they are a crucial part of the
answer, I think, as well.
Thank you, Mr. Chairman. I yield back.
Mr. Smith. Thank you, Mr. Berman.
Without objection, other Members' opening statements will
be made a part of the record.
I would like to ask the witnesses to stand, if you would,
so I can swear you in.
[Witnesses sworn.]
Mr. Smith. Our first witness is Jon Dudas, Under Secretary
of Commerce For Intellectual Property and Director of the the
U.S. Patent and Trademark Office. In a previous life, Director
Dudas worked for this Subcommittee, so we welcome him back. He
earned a bachelor's degree in finance summa cum laude from the
University of Illinois and a law degree with honors from the
University of Chicago.
Our next witness is Ann Mittal, a Director with the
National Resources and Environmental Team of the U.S.
Government Accountability Office, or GAO. She is responsible
for leading GAO's work in the areas of science and technology,
water resources, and DOD's environmental compliance and clean-
up activities. Ms. Mittal received a master's in business
administration from the University of Massachusetts and
recently completed the senior executive fellow program at the
JFK School of Government at Harvard University.
The next witness is Mr. Ronald J. Stern, who is president
of the Patent Office Professional Association. Mr. Stern holds
a bachelor's degree from the City College of New York, and a
law degree from George Washington University. He has worked as
a primary examiner at PTO since 1964.
Finally, our last witness is Mr. Charles Van Horn. Mr. Van
Horn is a partner at Finnegan, Henderson. He joined the firm
after a 31-year career in the U.S. Patent and Trademark Office.
During his tenure, he served in a variety of leadership
positions relating to patent policy and practice. Mr. Van Horn
holds a law degree from American University and a B.S. From
Lehigh University.
Welcome to you all. As you know, we have a 5-minute limit
on your testimony.
And going--just looking at this introduction, though, let
me ask sort of out of turn a question. It looks like to me, Mr.
Stern and Mr. Van Horn, did you both begin at PTO the same
year, or close to the same year?
Mr. Stern. Exactly the same year.
Mr. Smith. Now, that's not going to shade your testimony
today, is it, because you were former colleagues?
Mr. Stern. We probably should consider ourselves as
colleagues today.
Mr. Smith. Good. Welcome you both and the other witnesses
as well.
Now, Director Dudas, if you will begin.
TESTIMONY OF THE HONORABLE JON W. DUDAS, UNDERSECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY, AND DIRECTOR, U.S. PATENT
AND TRADEMARK OFFICE (PTO)
Mr. Dudas. Thank you very much, Chairman Smith, Ranking
Member Berman, Congresswoman Lofgren and Congressman Inglis,
for inviting me to testify on the state of the U.S. Patent and
Trademark Office.
I first want to note very briefly that while so many eyes
are on the southern part of the United States as we watch the
horrible aftermath of Hurricane Katrina, while our core mission
is not related to disaster relief, we at the USPTO are doing
everything we can as part of the massive Federal effort to help
those affected, and my office will work to assist anyone who is
not able to meet required deadlines for filing, identifying
attorneys and registered agents, identifying folks who can't
receive mail and who need replacement files.
I want to note that our employees are coordinating
charitable events and donating to relief organizations through
the Combined Federal Campaign; we had over 1,000 people
participate recently.
And that leads really to a second overall point that I feel
is critical to make. I think everyone on this panel would agree
our agency is heavily dependent on our people. And I cannot
stress how highly I regard the employees at the USPTO. Their
professionalism, their dedication, their effectiveness is
unparalleled, and this is something that is acknowledged, I
have seen, domestically and abroad by folks who work in other
offices, and folks who work before other offices.
So I appreciate the opportunity to discuss the agency and
the advancement of our IP system with you. You, the Members of
this Subcommittee, have always been part of the solution, and
we recognize that it is not always easy given the challenges
that you face as Members of Congress.
That is why one of my proudest achievements, being part of
a team at the USPTO, and with folks on this Subcommittee, is
that we have dramatically improved the way the rest of Congress
views the USPTO.
Mr. Chairman and Ranking Member Berman, you talked about
making certain people understand how important this system is.
A little over 4 years ago, there was a report that stated that
the PTO had not been sufficiently innovative, a congressional
report, one that said there wasn't full confidence in the
information provided by PTO management regarding its needs and
performance, and we needed to improve upon that. And under the
leadership of President Bush and the guidance and efforts of
the Members of this Committee, the last Congress voted 379 to
28 to affirm the USPTO strategic initiatives. So for your
leadership, for the leadership of all of the Members of the
Committee, I want to say thank you.
Let me use the first few moments to present what I think is
a big oversight picture as I see it. And I am happy to go into
whatever detail you want on any particular issue.
Our intellectual property system, as you noted, is
fantastically successful, but it still faces great challenges
internationally and domestically.
I have testified before that my job as director is not to
identify problems and give excuses, but to identify
opportunities and to deliver results, and I hope to live up to
that and intend to live up to that.
With that in mind, let me tell you what I think we have all
accomplished, what has been accomplished for the system in the
last 3\1/2\ years, what still remains to be accomplished, and
my thoughts on how we can achieve further success and address
further challenges.
With respect to quality, our most important goal, we have
moved, I believe, from an agency that had insufficient measures
to one that constantly reviews the process and measures quality
throughout the process. Moving forward, the challenge is to
learn from all of the information we are collecting on quality.
How can we improve training to prevent weak points? We must
consider throughout all of our quality initiatives which are in
place which are the most effective and which are less
effective. We need to learn from them, and we need to learn
about them.
We must constantly evaluate whether some initiatives need
to be relaxed or adjusted for maximum effectiveness. And one
thing I know for sure is that the examiners at the USPTO are
objectively the most efficient and effective in the world. We
must always be considering how to help them maintain their
high, incredibly high, standards.
Our electronic processing. After more than 20 years of
promises to have full electronic processing within the Office
of Patents, the agency achieved that goal in 2 years, trained
6,000 people, and scanned hundreds of millions of pages of
data. But there is a long way to go. We need to move to a text-
based system that encourages high levels of electronic filing.
We need to look at the electronic system overall. While
Trademarks has been tremendously successful with over 90
percent of trademark applications filed and processed
electronically, we are still only at about 2 percent electronic
filing in Patents.
Furthermore, upon meeting our initial goal of full
electronic processing in Patents in a tight timeframe, we are
moving forward more cautiously and more meticulously, putting
in place all of the procedural safeguards to ensure that we get
the most for our money on systems for the least cost. GAO's
report has been of great help to us in that regard as we
implement that report as well.
Finally, we must not ignore pendency. The volume of patent
applications continues to outpace our current capacity to
examine them, and that means backlogs are growing. We are still
faster, less expensive and more efficient than the other major
patent and trademark offices in the world, and without
fundamental changes, changes I believe that must go beyond just
hiring, though hiring is an incredibly important element of any
way to address this issue, the pendency and backlogs will grow
dramatically.
We appreciate that Congress passed legislation supporting
many of the USPTO strategic initiatives, and since then we have
accomplished a great deal in implementing some of the 21st
Century Strategic Plan goals, but we still have more to do.
Let me use a few pictures to explain. Graphs are boring,
but pictures are worth a thousand words. I think my time might
be running out. The first graph I will show you is where
pendency would be going. The red line you see is where pendency
would be going if we had followed status quo, attrition hiring
only, what we had to do over the last 3 years because of our
budget and budget situation.
The green line is what we had under our strategic plan,
which had two major initiatives, dramatic increases in hiring
and competitive outsourcing. In the bill that passed in
Congress, competitive outsourcing has been delayed, or at least
an extensive and important pilot project that will delay
outsourcing for 3to 5 years.
So what we have in the case if we follow the strategic plan
without competitive sourcing, you see the blue. Pendency has
been reduced, but it is still on the rise. So we have to do
more when it comes to pendency. So as I show you chart 2, it
shows you what we can do with dramatically more hiring.
I cannot show you chart 2. There we go. Chart 2 shows the
original red line. That is status quo. If we go to a situation
where we are, instead of hiring 860 to 750 a year, if we hire
1,000 new examiners per year, and work on reducing attrition,
we can get to the yellow line, which is we are able to turn the
pendency corner. This is without competitive sourcing, but with
dramatically increased hiring. What I will tell you is that
yellow line assumes a 6 percent increase. We used to assume a
5.5 percent increase. We changed it to 6 percent because we saw
growth, and this year we are showing so far 7.7 percent
increase in patent applications, so even higher than our
expectations.
Mr. Smith. Thank you, Director Dudas.
[The prepared statement of Mr. Dudas follows:]
Prepared Statement of the Honorable Jon W. Dudas, Under Secretary of
Commerce for Intellectual Property and Director, United States Patent
and Trademark Office (PTO)
ATTACHMENT
Mr. Smith. Ms. Mittal.
TESTIMONY OF ANU K. MITTAL, DIRECTOR, SCIENCE AND TECHNOLOGY
ISSUES, U.S. GENERAL ACCOUNTABILITY OFFICE (GAO)
Ms. Mittal. Mr. Chairman and Members of the Committee, we
are pleased to be here today to participate in your oversight
hearing of the Patent and Trademark Office.
My testimony today summarizes the results of two GAO
reports that were issued in June of this year. The first report
addressed PTO's ongoing efforts to achieve a paperless
electronic patent process, and the second report addressed
steps that PTO has taken to attract and retain a qualified
patent examination workforce.
As you know, over the last 10 years, there has been a
significant increase in the volume, complexity and backlog of
patent applications that PTO has to process. This has
lengthened the time that PTO takes to process patents, and it
has also raised concerns about the quality of the patents that
are issued.
Further complicating this picture is the fact that the
agency has had difficulty competing with the private sector in
attracting and retaining a highly qualified patent examination
workforce.
Over the last two decades, and in particular during the
last 5 years, PTO has undertaken various efforts to improve its
patent-processing capabilities. However, our two reviews found
that the agency continues to face major challenges in these
efforts. Specifically, we found that after two decades, and
after having spent over $1 billion, PTO has made some progress,
but has not yet achieved its goal of implementing an
integrated, paperless, fully automated patent-processing
environment.
More importantly, when and how PTO will actually be able to
achieve this capability remains uncertain. This is largely
because PTO has not yet fully instituted disciplined processes
and practices for managing its investments in information
technology. We found that some of the primary systems that the
agency is relying on to enhance its capability, like the
electronic filing system and image file wrapper, have not
yielded the level of processing improvements that PTO had hoped
for. For example, PTO had hoped that by 2004, 30 percent of all
patent applications would be filed electronically. But as of
April 2005, fewer than 2 percent of all applications were
submitted in this format.
Because of ineffective planning and management of its
automation initiatives, PTO is at risk of implementing
additional information technology that does not support its
needs. It is also at risk of not achieving its goal of
implementing a fully electronic patent application process.
What is particularly troubling to us is that this is not a
new issue for PTO. In 1993, we raised similar concerns about
the agency's ability to adequately plan and manage its
automated patent system. And we pointed out weaknesses in its
specific management controls.
As our report--recent report documents, many of the
concerns that we had 12 years ago with PTO's processes have not
diminished. Improvements are still needed if the agency hopes
to successfully implement a paperless electronic patent
process.
With regard to PTO's efforts to attract and retain a
qualified patent examiner workforce, the story is slightly
better. PTO has taken several steps to enhance its recruiting
efforts, and has used many of the human capital flexibilities
available under Federal personnel regulations to hire over
2,300 examiners in the last 5 years. However, for several
reasons we are concerned about PTO's ability to retain these
examiners in the future. First, PTO's recruiting efforts and
benefits have only been available for a short time, and during
this time, because of budgetary constraints, they have not been
consistently sustained. Second, the impact of the economy is
still unknown. In the past when the economy was doing well, the
agency had more difficulty recruiting and retaining staff. And
finally, and maybe most importantly, PTO lacks an open,
transparent and collaborative work environment, which has
created an atmosphere of distrust and a significant divide
between managers and examiners on important issues that we
believe could affect retention.
Both of our reports made a number of recommendations to
PTO, and agency officials have stated that they plan to take
actions that will address the recommendations we made. We look
forward to monitoring PTO's progress as it implements actions
to respond to our recommendations.
Mr. Chairman, this concludes my statement. Thank you.
Mr. Smith. Thank you, Ms. Mittal.
[The prepared statement of Ms. Mittal follows:]
Prepared Statement of Anu K. Mittal, Director, Science and Technology
Issues, U.S. General Accounting Office (GAO)
ATTACHMENT 1
ATTACHMENT 2
Mr. Smith. Mr. Stern.
TESTIMONY OF RONALD J. STERN, PRESIDENT,
PATENT OFFICE PROFESSIONAL ASSOCIATION (POPA)
Mr. Stern. Thank you, Mr. Chairman, Ranking Member Berman
and Members of the Subcommittee. As many of you know, POPA
represents the engineers, scientists and attorneys who, as
patent examiners, determine the patentability of hundreds of
thousands of patent applications each year.
The agency has come under serious criticism lately. The
principal problems deal with quality and timeliness. In
addition, there is a problem with hiring and retaining our
workforce.
The agency manufactures patents, but it does so in the
high-stress environment of a legal sweatshop. When it comes to
patent examination, you can take steps to get the job done
faster or cheaper, but those steps will inevitably decrease the
quality of the work.
You cannot increase the quality of examination without
providing examiners the time necessary to do the job. Examiner
quotas, measured in 6-minute increments, currently provide as
little as 11.2 hours to primary examiners in low-complexity
arts, and only 22.1 hours in the most complex arts.
Quotas established in 1976 are still in use today. In the
meantime, technology is more complex, specifications are
bigger, applications have more claims, and the amount of
literature to be searched has ballooned. Electronic file
wrappers cost examiners 1 to 3 hours of extra work per case.
Examiners need a 20 percent increase in time per case.
Applicants pay substantial fees for excess claims, large
specifications and information disclosure statements. Examiners
must be given time proportional to these fees to ensure that
applicants will get what they have paid for.
The most common criticism is that examiners do not find the
best prior art. Text searching works in some arts, but not for
all. Speedy searches require updating the U.S. Classification
system regularly, which has not happened.
In the automated databases the wisdom and experience of
prior examiners is lost. Old paper search files were regularly
augmented by examiners' explanatory notes and by ``feeding the
shoes'' newly discovered references.
There is no problem hiring examiners. The problem is
keeping them. Approximately half leave within their first 3
years on the job. More important are the midcareer employees
who leave the agency. In fiscal 2005, approximately 40 percent
of all of those expected to leave will be employees with
between 3 and 15 years of experience. Some of these employees
are leaving without even having another job to go to.
The USPTO has implemented employee benefits such as special
pay rates, flexible work schedules, family-friendly policies
and transit subsidies. Benefits, however, are not by themselves
sufficient to overcome many employees' dissatisfaction with the
production-oriented nature of patent examining. The appeal of
the USPTO's benefits is in constant opposition with the stress
of the day-to-day legal sweatshop environment.
The agency is ruthlessly effective in removing and
disciplining employees. Almost 10 percent of all removals from
the nondefense Federal workforce in fiscal 2001 were removed
from the examining corps. So far this year, in a workforce of
fewer than 7,000, the agency has taken 928 official actions
against employees. Sadly, for every employee who was fired in
2001, there were more than 13 others who left voluntarily;
later years are even worse.
The 21st Century Strategic Plan has converted the prior
Administration's culture of collaboration into a culture of
conflict. Employees bristle with anger over relentless
criticism of their work, especially because 40 percent of that
criticism turns out to be incorrect.
The USPTO needs to go back to the basics of examining. It
needs to emphasize training and mentoring instead of
disciplinary actions. It needs to provide adequate time for
doing a quality job. This will improve examiner retention.
This Subcommittee can help ensure that the agency uses
examination fees for examination. We recommend that you amend
35 U.S.C. section 42 to require the agency to use all of the
excess claims fees, excess specification fees, and information
disclosure fees to fund additional examining time for examiners
to do the work for which applicants are paying those fees.
In section 42, Congress has already put a fence around
trademark fees. It is time to expand that precedent to patent
fees. If the USPTO truly desires to reduce attrition, it must
effectively address the reason that most examiners leave: job
dissatisfaction. It must recognize that examiners are skilled
professionals and deserve to be treated as such. It must give
them the time, the tools, and the space to do that job. Unless
and until the USPTO addresses these problems, the revolving
door of attrition will continue to spin.
Thank you very much, Mr. Chairman.
Mr. Smith. Thank you, Mr. Stern.
[The prepared statement of Mr. Stern follows:]
Prepared Statement of Ronald J. Stern
Mr. Chairman, Ranking Member Berman and Members of the
Subcommittee:
Thank you for the opportunity to present the views of the Patent
Office Professional Association (POPA) on operations at the U.S. Patent
and Trademark Office (USPTO) and, in particular, on the recent reports
of the Dept. of Commerce Office of Inspector General,\1\ General
Accountability Office \2\ and National Academy of Public
Administration.\3\
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\1\ ``USPTO should Reassess How Examiner Goals, Performance
Appraisal Plans, and The Award System Stimulate and Reward Examiner
Production,'' U.S. Dept. of Commerce Office of Inspector General Final
Inspection Report No. IPE-15722, September 2004.
\2\ ``USPTO Has Made Progress in Hiring Examiners, but Challenges
to Retention Remain,'' U.S. Government Accountability Office Report No.
GAO-05-720, June 2005.
\3\ ``U.S. Patent and Trademark Office: Transforming to Meet the
Challenges of the 21st Century,'' Report of the National Academy of
Public Administration for the United States Patent and Trademark
Office, August 2005.
---------------------------------------------------------------------------
POPA represents more than 4,300 skilled patent professionals at the
USPTO. The vast majority of our members are engineers, scientists and
attorneys who, as patent examiners, determine the patentability of the
hundreds of thousands of patent applications the USPTO receives each
year. The patent professionals of POPA are diligent, highly skilled,
hard working individuals firmly committed to maintaining the quality
and integrity of the U.S. patent system.
The vital role of patents to the U.S. and global economies is
without question. Their value is evidenced by the rapidly expanding
efforts of inventors and companies to protect intellectual property
throughout the world. The U.S. patent system is the engine that has
driven innovation in America and helped produce the most powerful and
robust economy in history.
Unfortunately, the USPTO has come under considerable criticism
lately for failing to allow high-quality patents in a timely manner.
This criticism has resulted in increased scrutiny of the day-to-day
operations of the USPTO as well as review of the laws governing the
patent system. Recently, several government studies and at least one
book have been published that attempt to identify problems facing the
USPTO today while proposing a variety of solutions for those problems.
Among the problems virtually all studies agree on are: the need to hire
and retain a highly skilled workforce; improving the quality and
timeliness of issued patents; and the ability for the USPTO to keep and
use all its fees for its operations.
While POPA agrees that these are important issues facing the USPTO,
it does not agree with many of the solutions proposed by some of these
studies. Many proposed solutions represent radical changes to the
patent system and go far beyond what is necessary to improve
performance at the USPTO. Rather than a massive overhaul of the agency
or a rewrite of the patent statutes, POPA believes that what is
necessary is for the USPTO to go back to the basics of its mission--
examining patent applications and issuing valid patents.
To improve the operations of the USPTO, Congress, USPTO management
and its employees need to work together to provide sufficient time for
examiners to examine patent applications, improve the tools that
examiners use to identify relevant references (``prior art''), hire and
retain a highly skilled workforce and improve labor-management
relations.
A GOOD JOB TAKES TIME
``Faster, Better, Cheaper. Which two would you like?'' This
economic axiom is as applicable to patent examination as it is to any
manufacturing process. The USPTO manufactures patents. But right now,
it manufactures those patents in the high-stress environment of a
``legal sweatshop.'' When it comes to patent examination you can take
steps to get the job done faster or cheaper, but those steps will
inevitably decrease the quality of the work. You cannot increase the
quality of examination without providing examiners the necessary time
to do the job.
The USPTO controls its throughput of patent applications using a
rigorous goal-oriented production and workflow system that measures
examiners' work output (production) in 6-minute increments. On average,
a patent examiner has approximately twenty hours to complete the
examination of a utility-type patent application. The agency has long
recognized that technologies differ in complexity and that some
examiners are more experienced than others. Primary examiners, those at
GS grades 14 and 15 with authority to act independently, are expected
to be much more productive than junior examiners requiring various
levels of supervision. The current production system only allows some
primary examiners in low complexity technologies as little as 11.2
hours per application. Even primary examiners in the most complex
technologies are only allowed a maximum of 22.1 hours.\4\ Examiners
working on design-type applications or plant applications have even
less time than those working on utility-type applications. On average,
these examiners have about five to seven hours per application.
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\4\ National Academy of Public Administration Report, August 2005,
Appendix D, Table D-2.
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These agency production goals have remained essentially unchanged
since they were put in place in 1976. Since that time, however, the
nature of the work has changed considerably. Indeed, some technologies
such as biotechnology, nanotechnology, bioinformatics, and business
methods either were not patentable or did not even exist when these
goals were put in place. Since 1976, patent applications have become
more complex. Applications today often have larger specifications and
higher numbers of claims than applications filed in 1976. Applicant-
submitted information disclosure statements are often so large that
they require storage in boxes. The increased complexity of patent
applications has been recognized by both the USPTO and Congress as
evidenced by the recent dramatic increases in fees for large
specifications and excess claims.
Equally problematic is the massive explosion of information that
patent examiners have to search through to identify relevant prior art.
Almost two million new U.S. patents have issued just within the last
fifteen years. The agency's database of issued patents grows by
thousands every week. The USPTO will soon issue its 7,000,000th patent.
Foreign patent literature is also growing at a comparable rate. The
growth of these two sources of prior art pale by comparison to the
explosion of information published in non-patent literature such as
scientific and technical journals, trade magazines, catalogs, internet
web pages and other publications that examiners search to determine the
patentability of a claimed invention.
If these problems aren't enough for examiners, the agency's
deployment of the Image File Wrapper System (IFW) has transferred a
considerable amount of clerical work from the agency's technical
support staff to the examining corps. Prior to IFW, patent applications
were legal-size three-fold paper files that examiners worked on at
their desks. All of the relevant papers were readily identifiable and
readable. Now, with IFW, virtually all files are scanned copies of
originally filed applications and only available electronically. Many
examiners find these scanned files difficult to navigate through since
individual papers are often difficult to identify. Thus, examiners now
spend more time just trying to figure out what papers are in the
application. More importantly, most examiners find the scanned images
difficult to read on even the USPTO's high-quality computer monitors.
They now spend their precious examining time printing out and collating
documents on their desktop printers. Examiners repeatedly tell POPA
that the IFW system alone is causing them from one to three hours of
additional work on each application. Since the advent of the IFW
``paperless office,'' paper usage has doubled at the USPTO.
Continuing problems with USPTO automation tools and the dramatic
increase in paper usage were the impetus behind another Government
Accountability Office report issued simultaneously with their report on
USPTO hiring and retention problems cited above.\5\ During focus group
sessions held in conjunction with this investigation, examiners made
the same complaints to Government Accountability Office investigators
as they were making to POPA concerning USPTO automation. Most
interesting is the fact that first line supervisors made similar
complaints in their own focus group sessions. Since examiner goals have
not changed since 1976, these additional hours must come from examiners
taking shortcuts, cutting corners on searching and examination and
putting in significant amounts of their own time (unpaid voluntary
overtime) to get the job done. This results in a highly stressful
``legal sweatshop'' environment that ultimately leads to many examiners
leaving the agency.
---------------------------------------------------------------------------
\5\ ``Key Processes for Managing Patent Automation Strategy Need
Strengthening,'' U.S. Government Accountability Office Report No. GAO-
05-336, June 2005, pages 14-15.
---------------------------------------------------------------------------
For years now, the USPTO has alleged that increased reliance on
automation will help it do a better job of examining. When it comes to
searching, the agency has placed all its eggs in the automation basket.
It has all but abandoned support for the U.S. Classification System, a
much-needed tool for adequately searching many technologies that are
not readily searched by text searching automated tools. It has
continuously refused to expend the necessary resources to properly
integrate all issued patents into its text and image searchable patent
database. It repeatedly fails to seek adequate input from examiners in
the design and testing of hardware and software before deployment. The
agency has spent well over a billion dollars on automated tools to
assist examiners and yet the agency is being criticized for poor
quality patents and an ever-increasing backlog of unexamined
applications. This comes as no surprise to examiners.
No amount of automation can help an examiner read and understand a
patent application and the prior art faster. This is not to say that
the agency's efforts have been a waste of time and money. While many
improvements are needed in the USPTO's automated tools as well as the
U.S. Classification System, these tools do often allow examiners to
identify relevant prior art. The problem is that there is so much more
prior art to search, read and understand. This is what takes time. And
this is what has not been addressed by the agency since 1976. Add to
this explosion of prior art, the drains on examiners' time by the Image
File Wrapper system and other added job duties, and it quickly becomes
apparent how amazing a job the examiners of the USPTO really do under
the circumstances.
Examiners are not asking for extravagant increases in their goals.
A twenty percent increase in time will compensate examiners for the
many duties that have been added to their jobs since 1976 and offset
the increasing complexity of the entire examination process. It would
help to relieve the stressful USPTO workplace and help reverse
attrition. Most importantly, it will provide examiners with the time
they need to do a better search and examination of patent applications.
For years, the agency has been collecting fees for excess claims
and information disclosure statements, recognizing that these extra
items will make examination of the application more labor intensive.
But the agency has never passed those extra fees on to examiners in the
form of additional time to examine the application. Simply insuring
that the USPTO provide the additional time to examiners that patent
applicants have already paid for will go a long way towards providing
examiners with the time necessary to do the quality job that everyone
desires.
It is important to recognize that providing extra time for
examiners to do their job does not inherently translate into increased
application pendency. Better searching and examination will increase
the certainty of rejection of old or obvious ideas. As patent
applicants realize this, they will be less likely to expend effort and
resources on patent applications of questionable innovative or economic
importance. Thus, better search and examination by USPTO examiners may
actually limit application pendency over time.
Providing examiners with additional time should also benefit the
entire nation by reducing the costs of patent litigation. In a recent
study by the National Research Council of the National Academy of
Sciences, John L. King calculated that providing examiners with a one-
hour increase in time would cost the agency about $11.3 million. King
calculated, however, that a one-hour increase in examiner time would
reduce patent litigation expenses by over $17 million.\6\
---------------------------------------------------------------------------
\6\ King, John L., ``Patent Examination Procedures and Patent
Quality,'' Patents in the Knowledge-based Economy, National Research
Council of the National Academies, National Academies Press, 2003,
pages 54-73 at pages 68-70.
---------------------------------------------------------------------------
Increasing the quality of patent examination, reducing patent
application pendency and stimulating the nation's economy by reducing
the costs of patent litigation thereby freeing up resources for other
purposes, are clearly worthy goals of the intellectual property
community. It should be equally as clear that providing examiners the
time needed to do a good job is the most cost-effective means to
accomplish these goals.
A GOOD JOB TAKES GOOD TOOLS
The major criticism on the quality of the USPTO's work revolves
around the failure of examiners to find the most relevant prior art.
But examiners only have a very few hours to search the prior art and
identify relevant references. They need search tools that allow them to
search and find the most relevant prior art in the shortest possible
time. Here again, the USPTO's heavy reliance on text searching has
proven very shortsighted.
While planning the agency's new complex in Alexandria, Virginia,
the USPTO made a conscious decision to eliminate support for the vast
amount of examiner paper search files. These paper search files, known
as ``shoe files'' or ``the shoes'' from early days when copies of
issued patents were kept in shoeboxes, contained copies of the U.S.
patents classified according to the U.S. Classification System. The
paper search files also contained foreign and non-patent literature
classified and placed in the shoes over the years by examiners in the
various technologies. Many references in the shoes contained additional
information such as examiner notes and/or color drawings placed there
by experienced examiners to assist other examiners working in that
technology. For many years prior to the advent of automated search
tools, the paper search files represented the best and most
comprehensive search tool for locating relevant prior art. They
contained a remarkable wealth of information found nowhere else in the
world.
The paper search files allowed examiners to draw from the
experience of those examiners who had gone before. For many years,
examiners were trained to ``feed the shoes.'' Every pay period,
examiners were given a stack of references such as technical and
scholarly journals, trade publications, catalogs and other literature.
An examiner would be provided time to peruse these references, identify
those relevant to his/her technology, and place them in the appropriate
paper search files according to the U.S. Classification System, i.e.,
``feed the shoes.'' In addition, examiners would often add notes and
other helpful information to these references to aid themselves and
others searching in a particular technology. This continuous process
resulted in a comprehensive database of prior art only available to
those at the USPTO. In addition, the very act of feeding the shoes
helped examiners to keep current on developments within their
respective technologies. When new examiners searched the paper search
files, they were receiving the benefit of the knowledge and experience
of all those examiners who had preceded them in the technology. This
helped new examiners develop familiarity with the prior art and helped
all examiners in quickly and efficiently finding the relevant prior art
for each patent application.
Regrettably, as far back as the mid-1980s, the USPTO began
transferring classification duties from examiners to technicians. As
time went on, management ordered that foreign patents and non-patent
literature would no longer be included in reclassification projects.
This rendered these documents all but useless for searching. By the
mid-1990s, as planning for a new headquarters facility began in
earnest, support for the U.S. Classification System and maintenance of
the paper search files had virtually ended.
Today, the paper search files have all but disappeared at the
USPTO. The agency removed all the copies of issued U.S. patents in
preparation for its move to its new Alexandria, Virginia headquarters.
While the remaining foreign and non-patent literature paper search
files were moved to the new headquarters, no new references are being
classified and placed in those files and their ultimate fate remains
uncertain. At present, those files are stored in the basement of the
new facilities but the agency is contemplating the removal of at least
some of those files to free up critically needed space. Sadly, new
examiners are not even formally trained to use the paper search files.
The only formal agency training new examiners receive is in the use of
the automated search tools.
The end result of the agency's failure to maintain the U.S.
Classification System and the paper search files is that examiners can
no longer benefit from the wisdom and experience of prior examiners.
Today, each search in a patent application is performed essentially
from scratch. The agency's emphasis on text searching is resulting in a
new generation of patent examiners inexperienced in the use of the U.S.
Classification System.
Another major perennial frustration for examiners is the agency's
continued unwillingness to expend the resources to complete the process
of getting all issued patents into a single text searchable database.
With the advent of the Automated Patent System in the mid-1980s, the
USPTO began entering all new issued patents in both text and image
searchable form into its issued patent database. Unfortunately, while
all issued patents were entered in image format, the text-searchable
database only goes back to about 1970. Issued patents prior to 1970
have not been entered in the database in a readily text searchable
form. The agency did submit these older patents to optical character
recognition but did not correct errors and did not index this database
in the same manner as the Automated Patent System database. Thus, this
database, referred to by examiners as the ``dirty OCR file'' because of
its numerous errors, cannot be readily and reliably searched
simultaneously with the Automated Patent System database. Examiners
working in older technologies have to perform two searches of the
issued patents to determine patentability of an applicant's claimed
invention. This is one more uncompensated drain on examiners' time.
The current Administration has relied heavily on outsourcing many
government duties. Indeed, many duties at the USPTO have been
outsourced to private sector contractors. Rescanning and indexing the
``dirty OCR file'' so that all issued patents can be searched in one
database is a duty begging for outsourcing. The agency has proposed a
major initiative to outsource the entire search duties of examiners, an
initiative of dubious merit, while not expending the resources to
perform a one-time duty that would have clear positive results. POPA
believes the USPTO needs to reverse its virtual abandonment of the U.S.
Classification System. It needs to improve its automated search tools
to allow examiners to ``feed the shoes'' in an electronic environment,
i.e., provide the means for classifying and adding relevant prior art
to the USPTO's automated databases, and provide examiners the time to
do so. This would once again allow examiners to benefit from the
knowledge and experience of other examiners. The agency needs to
actively seek the input of employees in the development and testing of
automated tools to increase the likelihood of successfully deploying
functional and efficient products. Finally, POPA believes the agency
needs to do a better job of prioritizing all its automation
expenditures to insure that the agency and the American people receive
the maximum benefit from those expenditures.
A GOOD JOB TAKES A GOOD WORKFORCE
An agency can provide all the time and all the best tools available
to do a top-notch job, but without a well-trained and dedicated
workforce, those tools and that time will not be enough to get the job
done. The need to hire, train and retain a highly skilled workforce has
been a perennial problem for the USPTO. In their book, Innovation and
Its Discontents, Adam B. Jaffe and Josh Lerner provide a brief history
of hiring and retention problems at the USPTO dating all the way back
to 1829.\7\ As the authors recognize, however, this problem has become
much more acute recently in view of the increasing importance of
intellectual property in a global economy. A lack of adequate funding
coupled with the feelings of some in the Senate that the USPTO should
not try to hire its way out of its pendency problems resulted in
sporadic and insufficient hiring of new examiners over the last ten
years. Indeed, in FY 2003, the agency suspended patent corps expansion
altogether, choosing to hire only to compensate for attrition. This
sporadic hiring process has left the agency with a significant
shortfall of trained examiners and a burgeoning backlog of over 550,000
unexamined patent applications.
---------------------------------------------------------------------------
\7\ Jaffe, A. B. & Lerner, J., Innovation and Its Discontents,
Princeton University Press, 2004, pp. 133-138.
---------------------------------------------------------------------------
The USPTO's need to hire and retain new examiners has been the
subject of several recent government studies. In 2002, the Dept. of
Commerce Inspector General issued an illuminating report on needed
improvements in the USPTO hiring process.\8\ The Inspector General
identified several challenges facing the USPTO in hiring new examiners:
a shortage of potential examiners with the necessary technical
training, competition for jobs by the private sector, compensation
packages smaller than private sector compensation, and competition from
other federal agencies.
---------------------------------------------------------------------------
\8\ ``Patent Examiner Hiring Process Should Be Improved,'' U.S.
Dept. of Commerce Office of Inspector General Final Inspection Report
No. BTD-14432-2-0001, March 2002.
---------------------------------------------------------------------------
The Inspector General also identified several significant reasons
why examiners leave the USPTO. Seventy two percent of all examiners
left the USPTO for one of the following reasons: dissatisfaction with
the production-oriented nature and inflexibility of the job (26%);
unsatisfactory performance or conduct (23%) and higher pay (23%). In
POPA's experience, the vast majority of disciplinary actions at the
USPTO are the result of unsatisfactory production or quality, i.e.,
performance issues. This has been confirmed by the National Academy of
Public Administration Report of August 2005.\9\ Therefore, most of the
23% of examiners in the second category are likely analogous to those
who left because of the nature of the job. Thus, almost half of all
examiners who leave the agency do so because of their dissatisfaction
with the production-oriented culture of the USPTO.
---------------------------------------------------------------------------
\9\ NAPA Report, August 2005, pages 110-111.
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Of all examiners who leave the agency, approximately half leave
within their first three years on the job, with thirty percent having
less than one year's experience. POPA is aware of instances this year
where new examiners have left the USPTO within the first several weeks
in the agency. Of potentially greater impact, however, is that more and
more mid-career employees are leaving the agency. In FY 2005,
approximately forty percent of all those expected to leave will be
employees with between three and fifteen years experience. Some of
these employees are leaving without even having another job to go to.
The agency's most serious problem is not hiring new examiners--it is
keeping them.
Over the years, the USPTO has implemented a number of employee
benefits such as special pay rates, alternative and flexible work
schedules, a family friendly workplace and transit subsidies. While
employees appreciate the many benefits offered by the USPTO, these
benefits are not, by themselves, sufficient to overcome many employees'
overriding dissatisfaction with the production-oriented nature of
patent examining. The appeal of the USPTO's many benefits is in
constant opposition with the unrelenting stress of the day-to-day
``legal sweatshop'' environment of the agency. As retention statistics
show, the unrelenting stress of the job often trumps all the benefits
of the agency and takes its toll on employees causing them to leave the
agency voluntarily or, on many occasions, involuntarily.
The USPTO must constructively and effectively address this issue of
job dissatisfaction or retention of examiners will remain a serious
problem for the foreseeable future. The agency must accept the fact
that examiners need more time to do the job or they will ultimately
seek employment elsewhere. Training new examiners is both resource and
time intensive. It takes about five to six years for an examiner to
reach primary examiner status and act independently. It is primary
examiners who are the most productive employees in the agency. It is
primary examiners who train and mentor new examiners. It is primary
examiners who go on to become supervisory patent examiners and other
management officials at the USPTO. POPA believes that it is cost
effective to provide examiners more time to do their work so that the
agency can retain those employees and benefit from their experience for
years to come.
POPA is particularly concerned with the involuntary departure of
employees through disciplinary actions by the agency. As the exclusive
representative of patent professionals at the USPTO, POPA is often
called upon to defend employees against agency allegations of poor
performance or misconduct. And the USPTO keeps POPA very busy.
At a time when everyone is expressing serious concern about the
USPTO's problems retaining examiners, the agency may well be the most
ruthlessly effective single agency in the entire Federal government in
removing its employees from the Federal workforce. In its August 2005
report, the National Academy of Public Administration published some
very disturbing statistics on the agency's increasing number of
performance-based disciplinary actions against employees.\10\ In FY
2001, a total of 210 non-defense Federal employees were removed for
poor performance in the entire Federal government. Eighteen of those
210 came from the USPTO. Almost ten percent of all employees fired for
performance in the Federal government were fired by the USPTO! While
the Federal government as a whole only fired 1in 5,000 employees, the
USPTO was busy firing 18 in 3,000 patent examiners. The USPTO fired
three times more employees in one year than the U.S. State Department
did in seventeen years from 1984 to 2001 (six employees). This is a
remarkable number of firings for a relatively small government agency.
---------------------------------------------------------------------------
\10\ NAPA Report, pages 108-111.
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The National Academy of Public Administration report had other
equally troublesome statistics that demonstrate an alarming increase in
performance-based disciplinary actions at the USPTO. The report shows
that between fiscal years 2000 and 2005, the USPTO workforce grew from
6,367 to 6,763 employees, an increase of 396 employees. At the same
time, the number of employee relations cases grew from 585 to 928.
Incredibly, for those fiscal years, the USPTO took more than twice as
many employee relations actions as the number of employees it had
hired. For the USPTO patent corps, oral warnings, a form of
disciplinary action immediately preceding a written warning, have gone
from 70 in FY 1999 to 329 in FY 2004. Written warnings, a form of
disciplinary action immediately preceding removal from Federal service,
have risen from 19 in FY 2000 to 48 in FY 2004. As of February 2005,
the USPTO had already issued 31 written warnings. From FY 1999 to the
beginning of FY 2005, the USPTO fired 183 probationary employees--5.7
percent of the 3,216 people hired. By comparison, for fiscal years 2001
and 2002, the Federal government as a whole only fired about three
percent of new hires.
The USPTO's aggressive approach to employee relations is not lost
on examiners. Rather than being beneficial to the agency, this approach
further demoralizes its employees and heightens the stress in an
already stress-filled workplace. The agency's willingness to terminate
employees hangs like a sword of Damocles over the examining corps every
day.
In their report, Academy investigators state that USPTO management
attributes this astounding increase in personnel actions to liberalized
time scheduling such as the Increased Flexitime Program that allows
examiners considerable flexibility in their work schedules.\11\ POPA
finds this assertion laughable. Nothing in the Increased Flexitime
Program changed one iota of examiners' production requirements. It does
not matter when examiners are physically in the office. What matters is
that, when they are in the office, they have to produce. Management's
assertion is simply reflective of its outdated perception that it must
have more control over examiners lives.
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\11\ NAPA Report, August 2005, page 108.
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This need for control is the same pervasive mentality that has
significantly delayed the introduction of telework programs in the
USPTO and throughout the Federal government. Contrary to the USPTO's
assertion, the Increased Flexitime Program is one employee benefit that
is actually doing what it needs to do--providing examiners a reason to
stay at the USPTO. Sadly, at a time when the USPTO needs its employees
the most, agency management has already signaled its intent to curtail
this immensely popular program in upcoming contract negotiations.
If the Increased Flexitime Program is not the reason for so many
personnel actions, what is? A brief review of recent USPTO history
reveals several major events that have severely impacted examiners'
ability to do their job in the allotted time: a change of USPTO
administration; the implementation of the Image File Wrapper System;
loss of the paper search files; disruption associated with the move to
new headquarters; and the introduction of Quality Initiatives arising
from the 21st Century Strategic Plan.
The USPTO's top-level management changed in 2001 concurrent with
the change of the Presidency. The new management team under Director
James Rogan took a decidedly more negative slant towards employee and
labor relations. This new direction is clearly apparent in the linear
increase in employee relations actions from FY 2001 to the present
shown in Figure 4-3 of the Academy's report.\12\ The ``culture of
collaboration'' found in the previous USPTO administration quickly
degenerated into a ``culture of conflict'' under Director Rogan. This,
dramatic change in USPTO culture resulted in a serious decrease in
morale among USPTO employees.
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\12\ NAPA Report, August 2005, page 109.
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In addition to the change of administration, the deployment of the
Image File Wrapper system had considerable impact on examiners. As
already discussed above, the Image File Wrapper system added
significant time drains for examiners. Especially hard hit are
examiners who have found the continuous use of computers necessary with
the Image File Wrapper System to be very hard on them physically.
Unfortunately, many of these examiners are among the most senior
primary examiners and highest producers in the agency. The production
of many of these senior examiners has suffered significantly using the
Image File Wrapper system.
The loss of the paper search files also impacted many examiners.
Some primary examiners were so familiar with the paper search files
that they had memorized virtually every patent in their technology.
This even included knowing in which shoe, i.e., file drawer, a
particular patent was located. This enabled them to quickly search an
application and rapidly determine the patentability of a claimed
invention. With the loss of the paper search files, examiners now have
to rely on the automated search tools to identify relevant prior art.
The automated tools, however, do not readily lend themselves to the
kind of familiarity with the art that many examiners had previously.
Again, this has negatively impacted the ability of many examiners to
get the job done in the time they are given.
Another significant impact on examiners has been the disruption in
their daily lives associated with the USPTO's move to its new
headquarters in Alexandria, Virginia. This move began in December 2003
and was finally completed in July 2005. During this time, examiners
have experienced numerous power outages, computer network failures,
complete shutdowns of the headquarters facility often preventing
employees from doing additional work on weekends, and the loss of many
of the benefits and amenities present at the previous location in
Arlington, Virginia. Doing a mentally intensive job such as patent
examining does not lend itself well to such day-to-day disruptions in
routines. Unfortunately, the USPTO is already outgrowing its new
headquarters facility--something POPA had warned for years before the
new facility was even built in Alexandria. Virtually all junior
examiners are being doubled up in offices. The agency is actually
contemplating training new examiners at an ``undisclosed location''
away from the headquarters facility for their first six to eight months
because it does not have adequate space to house them nor does it have
sufficient numbers of primary examiners in critical technologies to
train them. Once again, patent examiners are being expected to
continuously pay for the shortsighted decisions of USPTO management.
Finally and, arguably, most significant has been the profoundly
negative effect on examiners due to the implementation of the Quality
Initiatives of the USPTO 21st Century Strategic Plan. The Quality
Initiatives represent a number of initiatives such as ``recertification
of primary examiners,'' ``in-process reviews'' and ``second pair of
eyes'' intended to improve the quality of examination. The Quality
Initiatives have taken the ``culture of conflict'' at the USPTO to new
extremes and seriously impacted examiner morale. Indeed, a number of
examiners have resigned or retired from the agency rather than put up
with this management assault on their integrity and professionalism.
For many years, agency management made it clear to employees that
production was ``Job One'' at the USPTO (apologies to Ford Motor Co.).
Quality was a distant second. Supervisors made sure examiners
understood that as long as their production was high enough, they could
be fairly certain that their jobs were secure. At the USPTO, quantity
far exceeded quality in importance. Examiners knew that, to maintain a
healthy production level, that shortcuts would have to be taken and
corners cut. This was not a problem so long as production remained
``Job One.''
With the introduction of the 21st Century Strategic Plan, however,
management suddenly reversed direction and promised Congress and the
entire intellectual property community that quality was now going to be
``Job One'' at the USPTO. Suddenly, all the shortcuts examiners had
learned and all the corners they had cut in order to get the job done
had all but evaporated. Management implemented the Quality Initiatives
but, once again, made no adjustments to examiners' goals to allow for
this sudden change in emphasis.
Today, examiners at every level of experience are finding
themselves angry, frustrated, insulted, bitter and fearful for their
jobs. They are looking over their shoulder constantly for fear that
reviewers will allege an error in their work. If all the other stresses
in the USPTO workplace weren't enough, the Quality Initiatives may well
be the proverbial straw that broke the camel's back.
It is no secret that patent examining is an inherently subjective
undertaking. If it weren't, there would be little need for applicants
and courts to expend so many resources on patent litigation. Two highly
skilled and experienced examiners can look at the same patent
application and reasonably come to different conclusions on the merits
of the case. A patentee and a potential infringer will very likely
interpret the issued patent differently.
Just because two reasonable people disagree on something does not
make one wrong and the other right. Unfortunately, this fact is often
overlooked by USPTO management during the numerous review processes
currently in place. Today, an examiner's decisions are being constantly
criticized by reviewers who, as often as not, have little familiarity
with the examiner's particular technology. If the examiner does not
want to be charged with an error, the examiner must spend a great deal
of time defending the action. Many alleged errors of examiners are
actually nothing more than a subjective difference of opinion between
two patent professionals. At mid-year of FY 2005, forty percent of
reviewers' alleged errors were being reversed by the USPTO once the
examiner defended the action. Unfortunately, by the time the error is
reversed, both the examiner and the agency have lost the production
time and the agency now has an angry demoralized examiner on its hands.
While POPA certainly supports improving the quality of patent
examination, examiners believe the agency's implementation of the
Quality Initiatives is not the best way to achieve it. POPA believes
the Quality Initiatives are doing far more harm than good.
All the issues discussed above are adversely affecting examiners
ability and desire to do the job. Any one of these events would impinge
on examiners' time to do the work, but each one by itself might not be
sufficient to convince an examiner to leave the agency. Unfortunately,
all of these events are occurring relatively concurrently and, taken
together, have left the examining corps angry and stressed. The effects
of these events are being manifest by rising attrition and alarming
increases in personnel actions at the USPTO. If the agency does not
take steps quickly to reverse these effects, POPA believes that the
situation will only get worse.
WHAT DOES AND DOESN'T NEED TO BE DONE
Everyone in the intellectual property community agrees that there
are significant problems at the USPTO that need to be fixed.
Unfortunately, many of the proposed solutions will have no effect on
those problems and may well fall victim to the law of unintended
consequences.
To a great extent, the USPTO is a victim of its own success. As the
importance of intellectual property has grown, so has the work of the
USPTO. When Ford Motor Company released the Mustang in 1964, the new
car was an overnight hit. Did Ford sit back and tell potential buyers
that they would have to wait two or more years for a new Mustang. No!
The company ramped up production as fast as it could, built additional
facilities where necessary and did whatever was needed to sell as many
Mustangs as it could as fast as it could. Today, the USPTO finds itself
in the same position as Ford did in 1964. It has a hit product, the
patent, but a shortage of manufacturing capacity to meet demand.
Despite an ever-increasing backlog of unexamined applications and
continuous urging from POPA, agency management did not see fit to
expend its resources where they would do the most good--expanding the
workforce to meet demand. Fortunately, after years of inadequate hiring
this is changing. Recognizing the need for more examiners, Congress has
mandated minimum staffing levels in FY 2005 and is on the verge of
approving further increases for FY 2006. After years of dispute over
the diversion of USPTO fees, the agency has finally been allowed to
retain its fees for its own needs. POPA applauds these positive actions
and hopes that they will continue in the future.
Having the necessary resources and using them effectively are two
very different things. This is one area where POPA takes issue with
some solutions proposed by the Dept. of Commerce Inspector General and
the National Academy of Public Administration.
Contrary to the findings of the Inspector General, the agency does
not need to rethink examiners performance plans. If examiners' jobs
were as easy as the Inspector General's report implies, the USPTO would
not have the attrition problems we are discussing today. It does not
need to replace its current awards system with one that is either
unattainable by a majority of employees or would reduce examiners' time
per application even more. It needs an award system that will encourage
even more examiners to strive for an award. Examiner awards are easily
one of the most cost effective means at the agency's disposal for
increasing production and reducing pendency.
Contrary to the National Academy of Public Administration, the
USPTO does not need more flexibility in managing its workforce. The
USPTO is very effectively managing many examiners right out the door.
It is already bypassing employees' civil service rights and extending
its ability to summarily remove new employees to two or three years by
using the Federal Career Intern Program as a subterfuge for standard
Federal hiring practices. Instead, it should be using its creative
energies to make sure that new employees are well trained and engaged
in the workplace.
The USPTO does not need to gain more power to limit the activities
of its labor unions. It needs to work with its unions to empower
employees and tap into the wealth of knowledge, skills and experience
of its workforce. When POPA and the USPTO work together as a team
instead of fight each other as adversaries, we increase the likelihood
of improving employee morale and solving retention problems.
The USPTO does not need to isolate its new examiners in some off-
site facility where they have little interaction with other examiners
in their technology. Examining has a very steep learning curve and new
examiners need exposure to many examiners to learn and understand that
there can be many right ways to approach the job. Instead, the USPTO
should be immediately acquiring more space to allow expansion of the
agency to meet its hiring needs. It is possible that much of the
agency's old space in Arlington is still available and could be rented.
This space is already wired and configured for USPTO use.
The USPTO does not need to spend countless resources negotiating a
new collective bargaining agreement that reduces or eliminates many of
the benefits and protections employees currently enjoy. This will only
serve to antagonize employees and make even more of them explore other
employment options. When you need every employee you can get, angering
and demoralizing your workforce is not effective management. Instead,
the USPTO should respect its employees and honor both the spirit and
the letter of its existing collective bargaining agreements.
This Subcommittee can also help to insure that the USPTO targets
its resources to its basic mission of examining. POPA recommends that
you amend 35 U.S.C. Sec. 42 by including in H.R. 2791 a provision that
requires the agency to use all of the excess claims fees, excess
specification fees and information disclosure fees to fund additional
examining time for examiners to do the extra work for which applicants
are paying the fees. In Section 42, Congress has instructed the USPTO
to limit the use of trademark fees for the examination of trademark
registrations. It is time to expand that precedent to patent fees.
Mr. Chairman, Members of the Subcommittee, the USPTO has one of the
most highly skilled and dedicated workforces in the Federal government.
Every examiner is a college graduate trained as an engineer or
scientist. Many have postgraduate degrees and/or law degrees. They have
other employment options if they choose.
If the USPTO truly desires to reduce attrition, it must effectively
address the reasons that most examiners leave--job dissatisfaction and
higher pay. It must recognize that examiners are skilled professionals
and deserve to be treated as such. It must realize that, as
professionals, examiners want to do a good job they can be proud of. It
must give them the time, the tools and the space to do that job. It
must pay them a reasonable and competitive salary that, coupled with
the many other benefits at the agency, will make the USPTO a much more
desirable workplace. It must reestablish its credibility with employees
by honoring its collective bargaining agreements. It must return to a
culture of collaboration, not a culture of conflict.
Unless and until the USPTO addresses these problems, the revolving
door of attrition will continue to spin.
Mr. Smith. Mr. Van Horn.
TESTIMONY OF CHARLES VAN HORN, FINNEGAN, HENDERSON, FARABOW,
GARRETT, AND DUNNER, LLP
Mr. Van Horn. Thank you, Mr. Chairman. I am pleased to have
this opportunity to express my views on U.S. Patent and
Trademark Office operations and the subject reports. I am here
today representing myself as a private practitioner, and the
views I express today are my own. I will note that I had the
pleasure and honor to serve as a panel member on the report of
the National Academy of Public Administration.
The PTO faces significantand unprecedented challenges to
meet expectations of issuing valid patents in a timely manner.
It needs and deserves continued support of Congress and the
patent community to enable it to accomplish these important
missions.
Ever since I joined the Patent Office in 1964 as a patent
examiner, it has always been concerned with both the number of
applications processed in a timely manner, and the quality of
work associated with the examination of each application.
Given the growing number of applications being filed, the
existing inventory of unexamined applications, and the
examining resources available to it, the PTO is struggling to
accomplish acceptable results in both the quantity and quality
of its work products.
Despite the best efforts of the PTO, which includes the
recent hiring of a huge number of new patent examiners,
pendency has been, is, and will continue to increase in the
near term. As the NAPA report points out, at least one
contributing factor to this increase has been the diversion of
funds paid by users of the patent system to activities other
than the support of the PTO.
The PTO should be commended for its efforts to identify
unnecessary and avoidable work or rework. However, before it
seeks to limit the number and availability of continuing
applications, it should conduct a study of these applications,
when, why and in what technologies they are being filed, to
determine the most responsible way to reduce their numbers.
At least one key to building a competent examining staff is
the ability to hire, train, and, most importantly, retain
competent people who are dedicated to doing a quality job in a
reasonable amount of time. The NAPA and GAO reports acknowledge
recent steps taken by the PTO and have made additional
suggestions that may assist in attracting and retaining larger
numbers of outstanding examiners.
The PTO should be commended for the steps it has taken in
addressing at least the perception in the decline of the
quality of its work. It has initiated unprecedented reviews of
the competency of patent examiners and reviews at all phases in
the patent examining process. These reviews can be justified to
the extent that they add to the quality of the work product and
to the education of examining staff.
There is at least some evidence, however, that the PTO has
overreacted in many instances and is now denying patents
without technical or legal justification. In many of these
cases, appeal is not available, because the PTO keeps changing
its position to avoid a review of its action.
The PTO has taken appropriate steps to improve both the
quality and timeliness of actions in reexamination proceedings,
and to eliminate or substantially reduce the cost of
unnecessary appeals in a timely manner. Unfortunately these
steps will divert scarce experienced examining resources from
the job of training and supervising the growing number of
inexperienced examining staff.
We should continue to support efforts of the PTO to provide
a quality examination of all applications in a timely manner,
but recognize the process is not and will not be perfect. That
reality is at least one reason that the patent system must have
postgrant processes such as reissue and reexamination, and
possibly opposition, to provide an opportunity for the PTO to
reevaluate its decisions on a new and perhaps more robust
record.
In closing, Mr. Chairman, I want to thank you and Members
of your Subcommittee for the continuing efforts to improve the
patent system and support the PTO. I thank you for the
opportunity to present my views.
Mr. Smith. Thank you, Mr. Van Horn.
[The prepared statement of Mr. Van Horn follows:]
Prepared Statement of Charles Van Horn
Dear Mr. Chairman:
I am pleased to have this opportunity to express my views on U.S.
Patent and Trademark Office (PTO) operations and the subject reports. I
served for 31 years in various capacities in the PTO until my
retirement in February 1995. I am currently a partner in the
intellectual property law firm of Finnegan, Henderson, Farabow, Garrett
& Dunner, LLP in its Washington, D.C. office and have had the pleasure
to serve as a panel member on the Report of the National Academy of
Public Administration (NAPA): U.S. Patent and Trademark Office:
Transforming to Meet the Challenges of the 21st Century (August 2005).
As a 31-year employee of the PTO and a member of the Patent Bar, I have
a keen interest in and concern for operations of the PTO. The views I
express today are my own, and do not necessarily represent those of any
member of our firm , its clients, or any of the organizations with
which I am associated. As my background and experience focuses on the
patent side of the PTO, I will confine my remarks to the patent
operations.
It is significant that the background of this oversight hearing
includes several reports from the General Accounting Office, Inspector
General, and National Academy of Public Administration. The fact that
these organizations have a significant interest in the operation of the
PTO and have provided recommendations for the improvement of PTO
operations is a good thing. The PTO plays a critical role in the
maintenance of a robust economy. It both needs and deserves the long
term and consistent support of Congress to enable it to accomplish this
role.
The PTO faces significant challenges in its patent operations.
While several of the reports focus on problems in PTO operations, we
should acknowledge and do appreciate its accomplishments and the
efforts being made to improve the patent process.
Ever since I joined the Patent Office in 1964 as a patent examiner,
the Office has always sought to maintain and improve both the quality
and quantity of work produced by its examining staff. Arguably, the
emphasis may shift from time to time, but the interest in both the
number of patent applications processed in a timely manner and the
quality of work associated with the examination of each application,
have remained focal points for patent operations for at least my
association with the patent system for over 40 years. Today, the PTO is
facing unprecedented challenges in accomplishing acceptable results on
both of these critical goals.
Pendency is one key measure that the PTO uses to assess the
timeliness of examination of patent applications and it is on the rise.
First action pendency now exceeds 20 months--the average time period
from the filing of a patent application to the mailing of a
communication from the examiner after consideration of the patent
application. This pendency to first Office action actually exceeds the
total pendency (i.e., the time between the filing of the patent
application and the final disposition of that application typically by
the granting of a patent or abandonment by the applicant) that was
achieved in 1989 when the average pendency to final disposition was
less than 19 months. Pendency is highly dependent on the patent
examiner resources available in the PTO to address the inventory of
unexamined applications, including new applications that are filed
every week. Despite the best efforts of the PTO, which includes the
recent hiring of a very large number of individuals as new patent
examiners, pendency is on the increase and will continue to increase in
the near term.
Experience has shown that when the PTO pendency increases, coupled
with an increased volume of filing of new applications, it is more
difficult to reverse the trend of increased pendency than to maintain
it at a particular level. One of the principal reasons for this
difficulty is that it typically takes several years to train an
individual to be a primary examiner--an examiner who is granted
independent authority to make a final decision on whether or not to
grant or deny a patent. As noted in the NAPA Report, hiring a large
number of inexperienced examining staff in selective years is not as
efficient or effective as consistent hiring. The influx of a large
number of new individuals as patent examiners requires that the
activities of experienced examiners be diverted to educate the new
examiners, both formally and through on-the-job training. Since these
large numbers of new hires are rarely distributed evenly throughout the
patent examining corps, the burden typically falls in those areas
having the greatest need for additional examining resources, and
typically suffering from the least number of experienced examiners.
While it is probably no surprise to members of this Subcommittee,
the continued diversion of PTO fees to other than PTO operations over
the years has contributed, at least in part, to the unfortunate
predicament of the PTO. As noted in the NAPA Report, if the PTO had
been given access to the fees paid by users for PTO operations, and
assuming that most of these diverted fees would have been used for
patent staffing, the current uncontrolled rise in pendency would not
have occurred to the extent we experience today, and the pendency to
first action would have remained at an average of 12.6 months achieved
in the 1992 time frame.
It is encouraging that the PTO has been permitted to use most of
its fee income in 2005 for PTO operations. However, we cannot expect
the PTO to turn this pendency ship around based on funding in a single
year. Nor do I expect that the PTO is able to absorb 700 to 800 new
examiner hires each year without risking an overall decrease in the
quality of examination. There are simply not enough really good
examiners who can educate, train and supervise the activities of that
number of new hires. The PTO has excellent people; there are just not
enough of them to handle such an increase in examining staff each year,
even if qualified candidates were available.
The NAPA Report contains several recommendations that can be used
to address the long-term challenges of the PTO in hiring, training, and
retaining its skilled examining staff. The PTO should be encouraged to
consider and at least evaluate pilot projects of outsourcing searching
of prior art used in determining the patentability of an invention. On
the other hand, it must be noted that other offices, such as the
European Patent Office, that have experience in separating the search
and examination function have found that it is not an efficient way to
examine a patent application. Accordingly, it may not be realistic to
hope for any real gains from this initiative.
Eliminating unnecessary ``rework'' also offers another opportunity
to increase the efficiency of the patent examination process. Based on
the number of continuation applications filed and the number of times
an applicant requests continued examination of a patent application,
the PTO has suggested that 25% of the examiners' work in 2004 could be
described as ``rework.'' While there is no doubt some unnecessary
rework is contained in the 25% of the applications identified by the
PTO, it would be a serious mistake to attribute the entire 25% as
constituting unnecessary ``rework.'' There are many reasons for filing
a continuation application or requesting continued examination. Some
are associated with a strategic decision by the patent applicant to
obtain a certain level of protection for the invention described in the
first application. Some may be attributed to reasonable differences
between the patent examiner and an applicant as to the scope of
protection, and applicant elects to file a continuation application to
provide more relevant evidence to the PTO. Some continuations are
caused by the Office in failing to fully appreciate or understand the
claimed invention, or not finding the best available prior art until
late in the examination process or perhaps from a search report from
another office in a counterpart application. Before any action is taken
by Congress or the PTO to limit the number or circumstances in which a
continuation application can be filed, a study should be conducted to
determine why applicants elect to proceed in this manner and the
technologies in which this procedural expedient is most often employed.
While the quantity of work produced by patent examiners and the
average pendency in any PTO work unit or technology can be easily
determined, the measurement of the quality of examination is more
difficult. Responding to a growing concern about a decline in the
quality of examination, the PTO has taken several important steps to
address at least the perception of a decline. Some of these steps are
unprecedented in my experience, such as the recertification of
experienced examiners. Collectively, these steps seek to identify and
address training needs, evaluate the quality of examination during the
examination process, enhance the reviewable record, and expand reviews
of the work of all examiners, regardless of their authority to act
independently. These initiatives, both individually and collectively,
should assist the PTO in identifying training needs and improving the
overall quality of examination.
One concern that has surfaced on a rather frequent basis is that
the PTO is over-reacting in its implementation of these initiatives and
is motivating examiners to issue rejections that are not supported in
law or fact simply to avoid making a decision to grant a patent. One
gets the impression sometimes that valuable resources are being wasted
as the checkers are checking the checkers where there has been no
identifiable concern for the quality of examination.
Nonetheless, the PTO has recently adopted several initiatives that
address long-standing problems in patent processing. Specifically, a
new reexamination unit has been created that would focus the activities
of the PTO in reexamination proceedings with a selected group of
examiners, rather than having these unique proceedings distributed
throughout the patent examining corps. This initiative should lead to
better management of these proceedings and result in more reliable
patentability decisions. A second example of significant PTO
responsiveness is the adoption of a pre-appeal brief conference to
review final rejections of an examiner before the filing of an appeal
brief becomes necessary. Statistics showed that for every 100 appeal
briefs that had been filed, only 38% of those appeals were followed by
the examiner filing an Examiner's Answer, the next step in the appeal
process. In 62% of these cases, the prosecution was either reopened by
the examiner or the application was allowed. The concept of a pre-
appeal brief conference should save applicants significant resources in
time and money in the appeal process.
While the PTO should be applauded for these initiatives, they
unfortunately demonstrate a loss of faith in the ability of the average
primary examiner or supervisor to make a correct patentability decision
in a timely manner. While these initiatives are regarded as good news
for those using the reexam and appeal procedures, they will divert
scarce experienced examining resources from the job of training and
supervising the growing numbers of inexperienced examining staff. Until
the PTO can find ways to build its experienced staff, it may well be
forced to make decisions as to its priority in addressing the quality
of examination in unique situations as opposed to improving the overall
quality of examination by examiners in general.
Ever since the PTO adopted the initiative to achieve patent
processing improvements through the use of information technology in
1981, it has fallen short of some of its goals. Specifically, and
probably most visible to the patent community is the absence of a user-
friendly electronic filing and processing system. In spite of this
failure, however, the PTO has come a long way and made significant
contributions to patent applicants, practitioners, and the public in
many patent automation initiatives. The access to full text of patents
and published applications and prosecution histories of recent
applications has been a tremendous service to the user community. The
PTO website contains a wealth of information on all aspects of its
operations that is accessible and a significant benefit to all users of
the patent system.
In general, the PTO staff is very responsive to members of the
public and the patent community. Responsiveness is the rule, rather
than the exception, and the PTO should be commended for its efforts in
maintaining the climate and culture of service to the public.
I want to thank the members of this Subcommittee for their
continuing efforts to improve the patent system and to support the PTO
in its important mission. Thank you for the opportunity to present my
views.
Mr. Smith. Director Dudas, let me direct my first couple of
questions to you. You know what Members of Congress want, you
know what inventors and creators and artists across America
want, and that is better patents sooner.
When you look at the past 10 years, we see that the number
of patents approved has increased almost 100 percent, say, at
an average of 9 or 10 percent a year. In your testimony you say
for the next few years you're going to be increasing the number
of patent examiners by about 25 percent a year.
That being the case, and getting away from future
projections, but getting just sort of past history, it seems to
me that the number of patent examiners is probably going to
increase faster, the rate, the percentage, will increase faster
than the percentage increase in patent applications or patents
approved. Therefore, why wouldn't we expect pendency to
decrease and quality to increase?
Mr. Dudas. You would expect pendency----
Mr. Smith. And also, also rolling in the improvements and
efficiencies recommended by the GAO, if they are implemented,
why wouldn't all of that argue for some improvement in those
tiers?
Mr. Dudas. It does argue for improvement. There is a
constant tension between pendency and quality. I think you will
hear that from a number of witnesses. You can double the amount
of time, you can cut the amount of time in half. No one would
ever, I think, suggest you cut the amount of time in half to--
you will decrease pendency dramatically. You would have no
quality.
But when I showed you the curve, the red line going up,
that would have happened with status quo. With the kind of
dramatic hiring that we are now proposing----
Mr. Smith. That's true, except the status quo was just
based on the last 2 or 3 years. I am not sure that I agree with
that accurate projection of the number of patents. If you look
at the longer trend, it's not going to go up quite that fast.
That was my basis for hoping for some improvement.
Mr. Dudas. Well, that's--I think that what we are looking
at right there--I'm sorry, if I point to the screen, it is me.
But if I can go to that chart there, the red line is really the
best efforts you can have right now. I mean, that is a 6
percent growth rate on the red line. Again, that is status quo.
I'm not coming here telling you that is what we intend to
deliver. What we plan to deliver is the yellow line.
Mr. Smith. I saw your chart. I was quibbling with your
chart a little bit on the basis of the percentage increase in
patent examiners versus the projected increase in patent
applications.
Mr. Dudas. Well, that's--I will try to hit that directly.
The red line that you saw, we are not--in that line we would
only be doing attrition hiring. We would not be seeing a
decrease in pendency for that reason.
The yellow line is giving you the dramatic new hiring
increases, 1,000 a year. Again, if we have a 6 percent, you see
pendency does start to turn the corner and then begin to come
down.
Now, why does it not happen instantly? That is really
because of the way pendency is measured. Pendency is measuring
retroactively. When we say there is 30 months' pendency, you're
saying that the patent that is issued today came in our office
30 months ago.
So I can show you--next chart. The third chart shows you
what the hiring increases will be. The red line is the hiring
increases at 1,000 a year.
I think what--you want to measure progress today. Let me
take you to the fourth chart. You see under the red line? That
is what our production would be, the red bar charts, if we
didn't hire. The yellow shows how much more we will produce,
how much we will increase.
Mr. Smith. I think I'm more optimistic than you are. If you
go back to that red line again, you are projecting out that red
line for years to come on the basis of 1 year's increase. And
if you look at the increases that I am talking about over
several years for your time, that red line would come down. So
I am more hopeful perhaps than you are.
Regardless, you know the standard by which you're going to
be judged, which is pendency going to increase or decrease, and
is quality going to increase or decrease? I simply hope you can
produce like you think you can. Good.
Ms. Mittal, let me--you've made a number of recommendations
to PTO. I think they have implemented about half, and yet you
have said that you, in a number of areas, consider PTO to be at
risk. Those are your words. How much confidence do you have
that PTO will implement the other recommendations that they
have not to date?
Ms. Mittal. Based on the work that we done over the last 10
years at PTO, we know they take our recommendations seriously.
But the fact is that after 12 years, some of the same problems
that we identified with their IT implementation strategy are
still in existence today.
Mr. Smith. Do you think the new management is going to
improve things?
Ms. Mittal. Director Dudas has made it very clear that he
takes our recommendations very seriously, that he is very aware
of the weaknesses in the management controls that PTO has over
its IT investments. We are hopeful that he will actually be
able to take these recommendation that we've made and actually
implement them. We will continue to monitor their progress.
Mr. Smith. Director Dudas, that reminds me of another
question I had for you. Speaking of quality, explain to me why
it is--I worry about the nonobvious standard being sort of
watered down, to say the least. And you have a situation where
the PTO has approved patents for a peanut butter and jelly
sandwich, they approved a patent for the swing. You have got
the controversy with BlackBerry where perhaps a patent that may
or may not--should have been issued is going to cost some
company hundreds of billions--well, billions of dollars. How do
you guard against that in the future?
Mr. Dudas. Well, I think one thing I can tell you, and it's
in many of the examples you mentioned there, there are--the
system works. There are efforts for reexamination. There are
areas where we can go where you look into these.
There are efforts within the office where you can appeal
cases, and outside of the office. But I think the heart of your
question is what are we doing about quality? We have had a
number of initiatives put in place. I think the problem in the
way we were measuring quality before was we told you how many
errors there were, but we didn't understand completely why or
how to dissect that.
The quality initiatives we have in place now are in process
reviews. We measure more. Some people say we measure too much
now. But we measure much deeper. We want to institute what we
learned from that and put it into training.
So those quality initiatives have been put in place, and we
are evaluating them now. Particularly when you are hiring at
the rate we will be hiring, we need to be able to have good
measurements, be able to understand how that comes back to
support examiners, and learn from the training, learn from the
measurements we have, not just report out how many errors there
are, but they have them so we can correct them.
Mr. Smith. Thank you, Director Dudas.
My time has expired. The gentleman from California is
recognized for his questions.
Mr. Berman. It sounds like leave no patent behind.
Mr. Dudas. It takes a village.
Mr. Berman. Touche.
I do appreciate your efforts sincerely to enhance quality
and improve the reexamination process.
I have a question about interparties reexam. When Congress
originally enacted this process, our goal was to provide a more
comprehensive quality check than ex parte reexam, but something
that would serve as an alternative to litigation, which is why
we inserted estoppel provisions. As you aptly put it, we need
to provide a way to say the office got it wrong without
resorting to costly litigation.
The following situation has come to my attention, and as to
which, in the very legitimate and understandable search to
increase quality of patents, could the office have gone
overboard? An interparties reexam is instituted after a
district court decision, very costly litigation to both sides.
It seems like that contravenes Congress's intent of preventing
a second bite at the apple by allowing that to happen, someone
to file for interparties reexam. Are we creating additional
disincentives for those that question the validity of a patent
to ever use the inteparties process in the first instance; that
is, before resorting to costly and lengthy litigation?
And in order to maintain a check on quality, you would
still have the ability, even if you didn't allow that to
happen, to institute an ex parte reexam after litigation, which
could be filed at any time. In other words, the person who is
challenging the validity of a patent has a choice: interparties
reexam.
We don't like the present situation with inteparties reexam
because we think the unintended consequences of the estoppel
provisions and the limitations on discovery mean there is
already some disincentives to utilize that process. But the
person who is challenging validity had a choice to go in there
and, based upon a review, a preponderence of the evidence
standard, get a determination of whether or not that patent
was, in fact, really valid.
They decide not to do it. They are sued for infringement.
They defend in court. During that whole time they could file an
inteparties reexam to stop the litigation and have it stayed
while they pursue that alternative. They don't do that. They
attempt to prove the patent is invalid by a clear and
convincing standard, a tougher standard, and fail. And so the
patent is found to be valid, and the individual is found to
have infringed.
Now they come in after the district court has decided this
issue, after the litigation is over, and say, well, what the
heck, now we don't risk anything more in estoppel, and we have
already had the benefits of discovery in litigation, we're
going back to the Patent Office for inteparties reexam.
It seems to me like that is a case where in the abstract
effort, to always be able to look at quality, you are
undermining the concept of finality of decisions, and I am
wondering if the office is really striking the balance when
they allow that to happen.
Mr. Dudas. Well, you raise a very important point when it
comes to the balance, and particularly on interparties
reexamination. I can look to a time when I was very happy
working on this Subcommittee and working on that. I remember it
was a very delicate compromise. But I think you hit the core of
this issue, and any other issue, when you talk about finality
of decisions and clarity of decisions, what estoppel provisions
apply. There are different standards under reexamination versus
what they are in court.
But I guess I will make a more general point, which is this
is an area of concern in our office. I look to continuation
practice as another example of where--I think your question
might be at what point do you have finality, what point do you
have certainty?
Options are good. There are good reasons for many of the
different actions that are taken, postgrant actions that are
taken, and continuations practice. But the options may be so
open at this point, there are so many options, that we have a
question in our office are there too much options, are there
too many bites of the apple?
Mr. Berman. But you're the one who is--by allowing people
to proceed with inteparties reexam after a decision, you are
the one who is creating an option that I'm not sure was ever
intended by Congress.
Mr. Dudas. I was assuming--and this is what I will have to
do--I will actually try to get some more examples. There are
estoppel provisions, and I was assuming that our office was
doing what it was legally bound to do.
There are many cases--there are times when the court will
stay its proceedings until a reexamination.
Mr. Berman. This is after--this is after--at no point did
the party who was challenging the validity of the patent ever
pursue the interparies reexam, either before the litigation or
during the litigation, any of which that----
Mr. Dudas. Once a reexamination is filed in our office, we
feel that we are legally bound to follow through on that
reexamination, on every reexamination.
Mr. Berman. Even after a district court decision?
Mr. Dudas. Yes, even after a district court decision.
Mr. Berman. Because?
Mr. Dudas. Because we find that is where the law has taken
us. I can come back, and we----
Mr. Berman. You accept that there is never any finality?
Mr. Dudas. Well, there is a--any time a reexamination is
filed, ex parte or inteparties, we follow it to its conclusion
in our office.
Mr. Smith. The gentleman's time has expired. Maybe we can
revisit this in a few minutes.
The gentleman from California Mr. Issa is recognized for
his questions.
Mr. Issa. Thank you, Chairman.
Director, I will be the opposite side. Congratulations on
always looking to the burden that a--that you have, which is
that you should never have a patent on your books that is
invalid. And if five different ways, five different people
bring you five different arguments for why a patent shouldn't
have been granted, I would hope that five times you will look
at it open and for the first time.
I don't share with--I mean, I do share with Mr. Berman that
it may not have been the intent of Congress, but I would like
to congratulate your office for assuming, whenever possible,
that, you know, the patents can do harm, not just that every
inventor is entitled to one. So this may be an example where
I'm not going to be saying: How could do you this?
Switching subjects slightly, I am particularly concerned
that you don't seem to have tools to bring down biotechnology
patent applications to a level that would be acceptable for
this new art. At the present time, I understand it is about 27
months, but it can be as much as 8 years. For all practical
purposes, you are better off keeping a trade secret than
applying for a patent if you can't bring that down, considering
the speed with which the technology is moving forward.
Do you have an affirmative program to bring down, to
address specifically biotechnology where these are complex,
they require a completely different group of examiners, and, as
of right now, the numbers are not encouraging, they are
discouraging?
Mr. Dudas. We do have a plan that gets specifically to
biotechnology, but it is just a part of the greater plan. As
you mentioned, examiners have to have specific skills in the
art, and so as we look at particularly hiring, which is the
primary way, and the most important way and the most logical
way now to bring down pendency, we target hiring, and we target
for the particular areas.
The electrical arts are where we are having the biggest
problems with pendency, but we are following very closely the
biotechnology areas as well.
So the answer is yes, we do that, how we are hiring in the
biotech areas.
Mr. Issa. And along a similar line, but a different pet
subject, if you will, plant patents. You have a stated policy
that you're trying to reach, as much as possible, possible
worldwide uniformity. Our trade agreements are trying to do
that. And yet at the present time, you have gone with an
existing standard to the present standard, you have gone
against the rest of the world on plant patents and interpreting
their validity.
My understanding now 3 years ago under your predecessor
was, look, Congress has to act. You guys will have to fix this.
But then, at least my piece of legislation put forward,
everybody said, well, we're not sure. We're going to remain
silent on it.
This Committee, I think, is looking to you to say either,
yes, you need this piece of legislation, and, yes, it will
make--because my particular bill very much simply says we're
going to adopt the same standard as the Europeans for plant
patents.
My question is, if you want to make it the same, can you
look at that bill, and can your office stop sitting on the
fence post, and say, yes, this is exactly--this bill will
enable us to do what our stated mission is, which is to find
uniformity? And if not, if there is something wrong with it, if
your office could come back to us and say, hey, look, we want
to change the rest of the world, so here is how we would like
the law written, and then we will go try to change the rest of
the world. I don't object to that. I just find it hard to
reconcile.
Mr. Dudas. Well, on the one hand--no, I am kidding.
Mr. Issa. By the way, you had this while you were here, so
this is not new. You used to be on my side.
Mr. Dudas. What I can tell you is, when you say can we come
back and give you an answer, can we tell you what the Patent
and Trademark Office believes is the right thing to do, yes, we
can and we will. And I pledge to you we will do that.
Mr. Issa. I think I may actually get done early.
Mr. Chairman, I will yield back.
Mr. Hostettler. We will be happy to take the time. Thank
you, Mr. Issa.
The gentlewoman from California, Ms. Lofgren, is recognized
for her questions.
Ms. Lofgren. Thank you, Mr. Chairman; and thank you for
holding this important hearing.
I am intensely interested in the Patent Office. As the
Chairman mentioned in his opening remarks, I consider your work
to be among the most important to competitiveness in our
country; and while we all have questions and concerns, I don't
want it to detract from the intense value I assign to the work
that you do. I am probably one of the few Members of Congress
that, when I go home and have town hall meetings, I actually
get questions about the Patent Office from my constituents.
We do have concerns, and the other Members have mentioned
it, about the rework issue. At 26 percent, that is, you know, a
quarter of the Office's work. I am concerned about what
percentage of this rework is continuation applications and what
might be done about that or whether something should, in fact,
be done about the continuation of a role in the rework issue.
Could you address that?
Mr. Dudas. Absolutely. Thank you.
Right now, we are at--this year, we project about 27
percent--27.8 percent of our applications are continuing
applications; and, as Mr. Van Horn pointed out in his
testimony, there are legitimate reasons for continuing
applications. There is no question.
But there are two reasons for continuing applications.
There are illegitimate reasons for continuing applications, or
at least concerns that people file continuing applications so
they can find out how the market develops and then they can
develop around that product or somehow block others. So the
illegitimate uses or potential uses are very important.
From the Office's perspective--I show you those charts--
even legitimate uses of continuations, I think the question
that we have is, essentially, the legitimate uses, as I
interpret them, are do-overs. There may be a mistake. There may
be something else that occurred. We need to do this again. But
there is priority in getting those applications processed; and,
as far as application date, that is a concern.
How many do-overs can you have? Right now, there are an
unlimited number of do-overs. And where else in our legal
system--where else in any system--do you have the opportunity
for unlimited do-overs? So is the burden of proof wrong now
that unlimited do-overs is the right place to start and do
something to the other side, or should there be some level of
how you look at this where there might be some barrier or some
level of where you might have to make a threshold showing for a
level of continuation?
So that is something we think is worthy of study, and I--
again, I offer the USPTO view because it is so much of our
work. I don't believe anyone ever says to one client, yes, I am
having your continuing application and someone else says, why
is it taking so long for my application to get done? I doubt
that people ever say, because we are busy doing all these other
applications.
Ms. Lofgren. Do you think you need additional authority
from the Congress to deal with this?
Mr. Dudas. It depends on--quite honestly, it depends on
what actions are taken. Certainly it is a realm for
policymakers and Congress to be looking at. But there are
actions that PTO can take with continuations under the
authority it has now.
Ms. Lofgren. I want to touch on the issue raised by the
Chairman which has to do with the obviousness standard.
I guess many of us have suffered from going to
www.sillypatents.com and seen some things that are shocking. I
personally believe, though, that we do have a problem on the
obviousness standard. If you compare the application for patent
load with the publication of truly innovative scientific
workloads, there is a mismatch. I think the phenomena that we
are seeing is that when the obvious standard is not met then
individuals and more likely companies defensively go to patent
things that really shouldn't be patented because, otherwise,
they have an infringement exposure. So the workload goes up,
and the ability to actually give the scrutiny is further
deteriorated, and we need to interrupt that cycle in some
fashion.
Earlier this year--and I am not suggesting that the ideas
were the right ones, but I am wondering if we need to take a
look at the obviousness standard itself or the criteria or
something of that nature to help with that interruption. Do you
have an opinion on that?
Mr. Dudas. I think it is worthy--I think it is something
your Subcommittee has been looking at, and it is worthy of
looking at.
I think--again, when I think of the job that our examiners
face, it is incredibly difficult; and I can tell from your
question how well you understand the obviousness--and this is a
term of art. It is not just someone feels something is obvious.
So in talking to many folks from Silicon Valley and elsewhere,
they recognize that our examiners are getting it right under
the law. But they think that perhaps the law might have it
wrong, and that is where I think it is worthy of discussion. It
is worthy of--our examiners have found situations where they
feel that perhaps there should be some prior art out there, but
there is not, and I think that is what people are looking at.
So I think it is appropriately before the Subcommittee and much
can be done.
I just want to note that, as you point that out, that there
are elements where I think our examiners do a fantastic job
following the law. I think your question is do we need to look
at how that is applied and how the law is applied. I think that
is worthy of your consideration.
Ms. Lofgren. Thank you.
Mr. Smith. Thank you, Ms. Lofgren; and, actually, you
anticipated a couple of questions I was going to ask. One is on
the amount of rework, which I think we just addressed.
But, Mr. Van Horn, I wanted to ask you a question on
another subject, given your three decades of experience at PTO;
and in fact I think Mr. Stern mentioned it. But the problem, if
that is the word for it, is the turnover and what you would
recommend for a higher retention rate within the PTO?
Mr. Van Horn. I think at least a NAPA report and perhaps
even a GA report mentioned a number of items you could do to
enhance the status of an examiner, enhance their salary
compensation. I think they have, one, a good job to start with;
and more money is not going to make a bad job but a good job.
They have good working conditions, and I think they need the
supervision and training commensurate with the talents that
each individual brings to the office.
I think many of the hires these days are very talented
people, but, basically, they are not getting the kind of
training and supervision that would permit them to advance and
indeed make a valuable contribution in a short period of time.
Mr. Smith. Okay, Director Dudas, I want to give you the
last word or at least a legitimate word when it comes to
treatment of employees. You have heard what Mr. Van Horn said a
few minutes ago. Mr. Stern, in my judgment, actually was more
critical in his verbal testimony than he was in his written
testimony. Do you want to respond to some of those observations
about the way the employees are treated.
Mr. Dudas. Absolutely.
I think--first off, I do think we have the greatest
employees in the world. I have had the opportunity to talk to
folks that have been before other patent and trademark offices
and have said that we do have the greatest employees in the
world.
The job is very difficult. They are highly professional
folks. And we have been asking for more. Congress has been
asking for more, and we have been asking more as well. I will
say I think, when we talk about the attrition, the data that we
have looked at, we want to solve that problem. But I want to
put it in context of the fact that when we look at the
corporate leadership councils, looking at private sector, first
year attrition is 42 percent; second year attrition is
something like is 20.8 percent.
So putting that in context in this area, what we want to
do, though, is we want to make certain that we make the
environment in our office the right environment for examiners.
So we are looking at better ways to communicate, better working
with examiners.
I will also say that 57 percent of our examiners work above
their goals. Over 57 percent produce more than 110 percent of
their goal. Of those examiners, more than 95 percent of them
get a commendable or outstanding rating. I think maybe we are
making it sound as though our examiners are not producing at
the level; they are having difficulty producing at the level.
But when you see goals of 110, 120 and 130 percent and having
57 percent reach it, it shows the professionalism of those
employees.
Mr. Smith. One last question. This goes to fee diversion, a
subject that we all care about. We passed a bill last year that
I introduced that actually got through the House but not the
Senate try to eliminate fee diversion. I, frankly, think just
about everybody supports eliminating fee diversion except for a
few appropriators in the Senate. But be that as it may, this
year the amount the Administration has requested for the PTO
budget I think comes pretty close to equalizing the amount that
would be generated by fees. That is not to say we shouldn't
continue to try to end fee diversion, but would you say that
you are getting an adequate budget for your purposes this year?
Mr. Dudas. Short answer is yes. The slightly longer answer
is, you are right. The President's budget didn't have
diversion. This year's doesn't have--gives us our full funding.
It looks as though so far in the process next year--and
that is the difference between status quo hiring, which is
attrition replacement, and being able to turn that corner if we
can keep applications at 6 percent--not that we are trying to
keep them down--but if they stay at 6 percent. So yes is the
short answer.
Mr. Smith. Thank you, Director Dudas. I know the gentleman
from California has some more questions as well, and he is
recognized.
Mr. Berman. Thank you very much. I am tempted to ask, would
you be allowed to say no?
Mr. Dudas. I would be allowed, but you just wouldn't see me
again. I would be allowed. Yes.
Mr. Berman. I will pursue with you personally this inter
partes reexamination issue. It is important, but it is narrow.
Your saying 57 percent of the people exceed the quotas
doesn't totally answer the question. It--at least for me it
doesn't. It doesn't necessarily prove the quotas that have
existed since 1976 are the right approach because there are
three alternatives one can draw from that as to the group that
exceeded their quotas. One is they worked a great deal of
uncompensated overtime. The second is they cut corners and
thereby jeopardized--faced with the notion of meeting their
quota or doing a good job, they chose--I don't want to be
harsh, but it is a terrible pressure you are under--but they
chose to pursue the quota as the highest priority and perhaps
didn't get to pursue some of the things they would have liked
to have pursued to raise quality; and the third is they are
really quite impressive, incredible people who did a great job
and understand real quickly and came to these decisions.
I just detect--my own--from my knowledge of you from here
in the office, you are not Simon Legree, I don't think; and I
am just wondering if there could be a little more communication
between you and the employees in the context of what is life
really like under this quota system? Because you have got--it
just--I understand the abilities to search better and all of
this and--by the way, the reforms we want, which we think will
improve quality, will also create new procedures and post grant
oppositions and third-party reviews which maybe cut down on
search. Because if you can get third-party submissions of prior
art, maybe that things come to an examiner quicker than they
would if you guys go out and search for it.
But I am just wondering if there--it seems to me like there
is a bit of a problem festering here that we should--we want to
be sensitive to, and I just encourage you to take a look at it.
Mr. Dudas. The answer to your question is absolutely yes.
There is much room for more communication. There is much room
to be talking more.
Ron and I had the opportunity to meet recently. I go to
union meetings, and I have actually asked our commissioners to
make certain that they are having monthly meetings with the
unions and also weekly meetings, at least once a week outreach,
myself included, making certain there is outreach.
Probably one of the best places I get the best information
to help me manage that office is in the gym, talking to
examiners, finding out how they feel, what is going on. But we
are instituting a number of ways that we can more normalize
that and make sure that message gets down not from the 10th
floor where our senior level managers are----
Mr. Berman. Is the gym in Crystal City?
Mr. Dudas. The gym is in Alexandria.
Mr. Berman. That is not the new leased space there.
Very good. Mr. Chairman, thank you.
Mr. Smith. Thank you, Mr. Berman.
The gentlewoman from California, Ms. Lofgren, is recognized
for questions.
Ms. Lofgren. Thank you, Mr. Chairman.
I just want to touch again on the obviousness issue, and
ask--actually, request Mr. Dudas to take a look at two
suggestions that were made to me by some academics, some law
professors on the obviousness issue. I got a critique from the
American Intellectual Property Law Association that was
negative, and they may well be right. But what I am looking
for--if it is not this, and maybe this isn't it, what would be
a good idea? And if you have--I will be happy to send both the
suggestions sent to me by the law professors and AIPLA's
analysis. But if you have some comments and some alternatives
that you think we ought to look at, I would very much value
that. Actually, I will send it to all the witnesses, if they
would look at that.
Finally, I want to talk about user fees. In a rare show of
unanimity on the House Judiciary Committee I think we voted
unanimously on several occasions to oppose the diversion of
fees. The Chairman is right. This year we are not diverting the
money that outmatches the fees, but I have no real confidence
that that will always be the case. And in fact, historically,
it hasn't been the case. I just can't think how long that is to
do. It is a special tax on inventiveness. It is just completely
the wrong thing to do.
So one of the things I am thinking about is how--we had a
bill that would have worked. It actually didn't make it all the
way through the legislative process. The National Academy of
Public Administration recently suggested another alternative,
which is that PTO be reorganized as a wholly-owned Government
corporation under the Department of Commerce to allow it to
borrow its own money, set its own user fees, and keep them
without diversion, issue its own regulations. What do the
witnesses think of this suggestion as an alternative to the
measure passed by the House to end diversion? Mr. Van Horn?
Mr. Van Horn. Well, certainly, as a member of the NAPA
panel I would support the suggestion. I think it is a good idea
as one way of sort of putting in the hands of the PTO its own
destiny, more control over the management of its resources.
Mr. Stern. The employees have always been concerned about
remaining inside the civil service system so that there are
opportunities to appeal adverse decisions against you.
In the past, taking us out of title 5 has been a major
concern for folks; and, as a consequence, my organization has
been opposed to the establishment of a corporation. But of
course we are very much in favor of the agency getting to spend
all its fees. That is an unfortunate tax on inventors when fees
are diverted. They are paying for a service, and they deserve
to get what they are paying for.
Ms. Lofgren. Let me ask you this. The Post Office used to
be part of the Government. Now it is a corporation, and yet
there is this whole civil service structure that was imposed on
that. If there was something of that nature--I don't want to
get too specific--that addressed the civil service nature, how
would the employees feel then is your best guess?
Mr. Stern. I think they would be very comfortable.
Remaining inside the civil service system is very possible even
if the agency has a corporate structure or a somewhat
independent structure, and that would reassure folks that they
will be dealt with fairly and equitably.
Ms. Mittal. While the issue of lack of fees has come up in
various audits that we have done of PTO, we haven't really
looked at the whole structure of the organization so I think we
would be unable to answer that question right now.
Ms. Lofgren. Are you allowed to answer, Mr. Dudas?
Mr. Dudas. I can't give you an official Administration
position. What I can tell you is we would welcome a debate on
that. It is an idea that has been around since the Taft
administration. It came up in the Johnson administration. And
this Subcommittee has----
Mr. Smith. It is probably lost.
Mr. Dudas. --and this Subcommittee has looked at that.
I will just point out it is considered by some
internationally a best practice. Canada has a situation closer
to that. Mexico has a similar--and while we are asked to
operate like a business and should operate like a business, we
have to be cognizant that we are Government as well. But keep
in mind all the fees we collect today--when I show you those
pendencies, all the fees we collect today will likely go for
examinations that occur in the future. So managing money would
be--there are a lot of areas where that could be helpful.
And it might sound like Ron and I have switched seats here,
but when I look at title 5, one of the issues is making certain
that there are protections and appropriate protections in place
but also making sure we can pay market value for examiners,
possibly paying higher than what title V has.
Ms. Lofgren. There would bean opportunity then. We are
competing in a very tough economic market for very important
skill sets, and that would give an opportunity to really
compensate. Thank you.
Mr. Smith. Thank you, Ms. Lofgren, and thank all of our
witnesses today as well. This has been very informative and
instructive. We appreciate all the work that is being done at
the PTO and know that it will continue and improve.
We stand adjourned.
[Whereupon, at 2:20 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Prepared Statement of the Honorable Howard L. Berman, a Representative
in Congress from the State of California, and Ranking Member,
Subcommittee on Courts, the Internet, and Intellectual Property
Mr. Chairman, thank you for scheduling this oversight hearing of
the Patent and Trademark Office operations and analysis of the GAO and
NAPA reports. It is especially appropriate that we do this now, as we
move forward with the patent reform bill next week, which will likely
effect the Office.
The U.S. patent system is the cornerstone of innovation in our
society. Throughout its more than 200-year history, the Patent Office
has provided incentive for inventors to innovate by providing them with
the protection for their ideas in the form of patents and trademarks.
Today, intellectual property-based industries represent the largest
single sector of the U.S. economy and the USPTO is at the core.
In recent years, however, the USPTO's patent operation has come
under criticism. Charges of poor quality patents and ever-increasing
pendency of applications diminish the stature of the patent system and
reflect poorly on the Office's product. I commend the Patent Office for
implementing many of the initiatives cited in its 21st Century
Strategic Plan. Nevertheless, challenges remain.
The first challenge, unfortunately, is one that the USPTO cannot
influence--but instead is our job, here in Congress. All the witnesses
agree that we must stop fee diversion. Between FY 1992-2004, the Office
lost access to $741 million of the fees it collected. A lack of funding
is cited in multiple reports as the primary reason for increased
pendency and for not implementing vital quality initiatives. We cannot
continue to allow a perverse situation where we kneecap U.S. technology
and economic leadership by diverting user fees to wholly unrelated
products. That is why many of us here today are original co-sponsors of
the ``Patent and Trademark Fee Modernization Act of 2005,'' to once and
for all put an end to this true tax on innovation.
However, the fee bill is only the starting point. In order to
improve the operations of the Patent Office, we must make a number of
fundamental reforms to the system.
Patent pendency, the amount of time a patent is pending, now stands
on average at more than two years. Currently, the backlog of
applications awaiting a first review numbers 600,000. Without change to
the system, this current level is expected to grow to over 1,000,000 by
the year 2010.
If you look solely at the most complex, cutting-edge technologies,
where patent protection may be the most critical, average pendency is
more than three years. The light-speed pace of innovation makes this
simply unacceptable--many cutting-edge technologies will be long
obsolete by the time the patent is granted.
Part of this backlog is due to growing demand for the Patent
Office's product--the Patent Office receives record numbers of
applications each year. The more troubling factor leading to the ever-
increasing backlog of patent applications is that USPTO simply does not
have enough experienced examiners to handle the demand.
I applaud USPTO for taking steps to increase the size of its patent
examining corps. However, attrition remains a serious problem. Only 45%
of the Patent Office workforce has five or more years of service. In an
agency where it takes roughly 5 or 6 years before an employee becomes
fully productive, this is a very troubling statistic.
One other major issue with which the Office struggles is the
quality of patents. The current production quota system, known as the
``count system,'' has not been reevaluated since it was first
introduced in 1976. The amount of information through which examiners
must search to find relevant patent literature has exponentially
increased and applications are growing ever more complicated, yet
examiners still work under 1976 assumptions. Even with advances in the
deployment of information technology, a number of studies have
indicated that examiners today simply do not have enough time to do
their job properly, and have been encouraged to take a number of
shortcuts. Not surprisingly, then, the quality of patents suffers.
Although USPTO has instituted some quality initiatives in recent years,
it seems there is still a long way to go.
There are additional quality measures and changes to the patent
system as a whole that we hope to address in the ``Patent Reform Act of
2005.'' Through allowing submissions by third-parties, harmonization
with international practice, amending the inter-partes reexamination
system, and creation of a post-grant opposition procedure, it is our
hope that the bill will further enhance the quality of patents and
increase confidence in their integrity. I look forward to the testimony
here today, as it will undoubtedly impact the important legislation
next week. I also look forward to working further with the USPTO and
patent stakeholders to arrive at a truly innovative reform to the
patent system as we know it.
Thank you Mr. Chairman. I yield back the balance of my time.
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Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, and Member, Subcommittee on
Courts, the Internet, and Intellectual Property
According to a March 2005 PEW Internet & American Life Project
survey, young adults continue to be the largest group of Internet users
who share files with others online. File sharing among students can
provide many beneficial uses in education, research, and professional
development. Unfortunately, college students have exploited the
intended use of the peer-to-peer network by trafficking in music,
movies, software, video games, and other copyrighted material without
permission. While the Supreme Court unanimously held this past summer
in the Grokster case that the file trading companies can be liable for
their misconduct, we cannot turn a blind eye to the users of such
software.
Aside from the issue of copyright infringement, this illegal use of
peer-to-peer networks can lead to invasions of student privacy,
viruses, and other potential security threats to the university's
network.
The content industry is stepping up its battle against digital
copyright piracy on college campuses, encouraging higher education
leaders to monitor their students and impose restrictions on violators.
On the other hand, monitoring raises privacy concerns and could chill
the use of peer-to-peer technology that can otherwise have valuable
academic rewards. I also would be concerned that monitoring could turn
university officials into spies, thus creating an atmosphere in which
the First Amendment and privacy rights of students are significantly
devalued.
Because piracy has proven to be a lethal threat to the content
industries, we must address the legitimate concerns of creators. One
approach to reducing peer-to-peer piracy on university campuses that
does not require monitoring seems to be working: providing a legal
alternative for students to access music, films, and other media while
educating students about the importance of copyright issues. Two major
universities in my home state, the University of Michigan and Michigan
State University, have taken the lead in this approach.
After the University of Michigan inked an agreement with Cdigix,
students were able to choose from a wide variety of media and
entertainment services for only a nominal monthly fee. Because of the
University's agreement with Cdigix, its acceptable use policy, and its
education campaigns on copyright infringement, the Recording Industry
Association of America cited the University as a model for how
universities should combat illegal file sharing.
At Michigan State University, the University has implemented the
multi-tiered approach of information campaigns, an acceptable use
policy, and technical measures to prevent illegal file sharing. These
measures have led to a 75% reduction in the monthly rate of Digital
Millennium Copyright Act violations on campus. In addition, MSU is
conducting advanced discussions with venders such as Cdigix to provide
a legal avenue for students to access digital entertainment. MSU's
strategy strikes the appropriate balance between preventing illegal
sharing of copyrighted files and respecting the privacy of personal
communications over the University network.
By providing legal alternatives to file sharing and through
education, universities can and will continue to teach students to make
good decisions regarding online entertainment. Furthermore, by becoming
familiar with services like Cdigix, students will develop the habit of
paying for music that will extend beyond the university setting.
Response from Anu K. Mittal, Director, Science and Technology Issues,
U.S. General Accounting Office (GAO), to questions submitted by the
Honorable Zoe Lofgren, a Representative in Congress from the State of
California, and Member, Subcommittee on Courts, the Internet, and
Intellectual Property
Executive Summary, U.S. Patent and Trademark Office: Transforming To
Meet the Challenges of the 21st Century, a Report by a Panel of the
National Academy of Public Administration for the U.S. Congress and the
U.S. Patent and Trademark Office, 2005, submitted by the Honorable
Lamar Smith