Introduction
Chairman Hatch, Ranking Member Leahy, and Members of the
Subcommittee:
Thank you very much for inviting me to testify today. I commend you for holding this hearing
appropriately named the “Patent System:
Today and Tomorrow.” This is
indeed a special week to reflect upon the incredible success of innovation and
of our patent system in the
The benefits of our patent system have always been obvious to
Americans. You are all familiar with
Article 1, Section 8, Clause 8 of the U.S. Constitution, granting Congress the
power “to promote the progress of science and the useful arts, by securing for
limited times to authors and inventors the exclusive right to their respective
writings and discoveries.” James Madison
wrote in one of the Federalist Papers,
“The utility of this power will scarcely be questioned.” He was right.
That clause was adopted into the Constitution without a dissenting
vote--without even any recorded debate.
The need for a statutory system to examine and grant patents
was just as obvious. President
Washington signed that first patent statute 215 years ago this week--before our
nation even had its 13th state. History
has repeatedly affirmed the wisdom of this decision of our Nation’s
founders. The tremendous ingenuity of
American inventors, coupled with an intellectual property system that
encourages and rewards innovation, has propelled the growth of our nation from
a small agrarian society to the world’s preeminent technological and economic
superpower.
The flexibility and strength of our system have helped entire
industries to flourish, rather than perish.
Everyone has benefited from the innovative products encouraged by that
system. And all of that technology finds
its way to the public domain within 20 years--freely available to any and all.
The success of this system has not been limited to the
Today, many of the nations questioning the efficacy of this
intellectual property system have become hotbeds for the manufacture and export
of counterfeit goods. Quite frankly, in
many cases, this order of events occurs in reverse: Many nations that have allowed their citizens
to counterfeit and pirate others’ intellectual property have begun to question
a system that encourages and rewards innovation, and discourages copying and
free-riding.
The USPTO Today and Prominent Issues
In the last several years, intellectual property (IP) assets
have become an increasingly essential ingredient of economic vitality. Where once raw materials and other tangible
goods were the main drivers of the economy, today economic success depends more
and more on intangible, information-based assets, such as the creativity of
employees and the knowledge gained from research. As a result, intellectual property-based
industries, such as biotechnology and entertainment, now represent the largest
single sector of the
As the clearinghouse for
development. We are proud
of our 200 year-old legacy of helping
Intellectual Property: Increasing Importance and Complexity
The growing importance of intellectual property in recent years
has directly impacted the USPTO. Patent
applications have more than doubled since 1992.
In the last five years alone, biotechnology-related patent filings
increased 46 percent and pharmaceutical and chemical-related filings climbed 42
percent. As a result, we issued more
patents just last year (173,000) than the combined total of patents that we
issued in the first 40 years of our Office's history. Worldwide at our offices and our counterparts
in Europe,
In addition to the sheer volume of these applications, the
technical complexity of patent applications is increasing rapidly. One hundred years ago more than one-third of
our patent filings were bicycle-related.
Today, we routinely examine patent applications in areas such as
nanotechnology, bio-informatics, and combinatorial chemistry. Some of these patent applications come in on
CD-roms that are literally the equivalent of millions of pages of paper.
The Patent Applications Backlog
These trends pose significant challenges for the future of the
Office. The volume and technical
complexity of patent applications has increased beyond the capacity of the
resources available for examination, resulting in a backlog of applications awaiting
examination. In short, we are burdened
by an increasingly complex and massive workload. Patent pendency (the amount of time a patent
application is pending before a patent is issued) now averages more than two
years. In more complex art such as data
processing technologies, average pendency stands at more than three years. Without fundamental changes in the way USPTO
operates, average pendency in these areas could double to six to eight years by
2008. Moreover, the backlog of
applications awaiting a first review by an examiner could grow from the current
level of approximately 500,000 to over 1,000,000 by 2010.
To put these numbers into historical perspective, back in 1981
when the
Thus, the nature of technology and the nature of the marketplace
make these processing delays unacceptable -- and unsustainable. If intellectual property protection is to
continue to serve as a catalyst for technological innovation and economic
growth, the USPTO must fundamentally break with the status quo. If we are to issue quality patents and
register quality trademarks in a timely manner, we must fundamentally reform
the way we do business. Fortunately, Mr.
Chairman, thanks to the leadership you and many of your colleagues in the House
have shown, the USPTO has been appropriated the funds we need to face these
challenges. We know, however, that
simply using appropriated resources will not alone do the job. We must be prudent in developing the
processes that will make the patent system more effectively serve its
purposes.
The Impact
of Continuations on the USPTO
Our system continues to prove its strength
through the new inventions described in patent applications we see every day,
the growth of investment, and the fact that the Office receives record numbers
of applications each year (i.e., 375,000 new patent applications last year
alone). Beyond the tremendous volume of
the workload, we find ourselves faced with the untenable situation that the
system currently allows for the reworking of cases through the continuation
process. While there may have been a
time where the system could afford duplication and redundancy; that time is not
now.
Last year, more than 100,000 applications of our newly received application workload of 355, 000 applications were some form of application that had previously been before an examiner in the examination process. This rework represents a significant obstacle to the ability of our examiners to reach new applications that have not been examined. This is not to suggest that all of these reworked applications represent game playing by the applicant, some being very appropriate uses of the current flexibilities available to applicants. However, given the ever-increasing workloads we face, it is necessary and appropriate for us all to consider whether some restrictions should be placed upon those practices. The continuing and expanding churn of rework by our examiners is a very real limitation on our ability to examine the new innovations that are filed every year and that are basic reason for our patent system.
Patent applicants include as part of their application the patent claims that define the legal metes and bounds of the protection they seek in the patent grant. Thanks to your efforts last year, the USPTO now receives additional funding to support our examination function through fees based upon the number of claims presented for examination. That allows for putting the right monetary incentives in the system. However, that does not address the quality and human capital restraints presented by the fact that a relatively small number of applications are filed with a large number of claims. These filings present our examiners with enormous challenges in ascertaining the nuances and incremental differences among the claims presented. These challenges directly affect the ability of our examiners to conduct the high quality examination process that all of us expect from our patent system. Accordingly, the burden that such applications pose can impede our ability promptly to examine applications relating to other inventions. At the same time we must recognize the legitimate need for applicants to present these claims in some applications. We need to find the right balance – to look for ways in which inventors can submit such applications when needed while making it feasible for examiners to effectively examine such a plethora of claims.
Summary
of Critical Issues
Due
to the record growth that began in the 1990s and continues today, the USPTO is
facing a record workload crisis. The
rate of growth of patent applications
has slowed, but we continue to receive record numbers of
applications every year. Unless bold new
actions are taken, progress on our quality enhancement and electronic
government initiatives will be in jeopardy, the backlog of unexamined patent
applications will skyrocket, and average patent pendency will dramatically
increase. As this Subcommittee stated
last year, "there is broad agreement that the patent process is in dire
need of reform." (House Report 108-221).
USPTO: Working to Improve our Patent System
Two recent reports by the Federal Trade Commission and the
In the interim, we are considering a variety of internal
reforms that will continue to enhance patent quality and address our increasing
pendency challenges. It is our responsibility
not only to do everything we can do to perfect the patent system in the United
States -- something you too are doing by holding this hearing -- and we must
also actively educate the world that it is fundamentally the best system.
Having the fundamentally right system, however, is not
enough. I am the first to acknowledge
that even the best system in the world can and should improve. Today, we are implementing a multitude of
improvements and are building on these initiatives. We are also working a series of legislative
improvements to the system. The future
requires that we at work both domestically and with our international
counterparts to develop the best patent system – in terms of patent quality and
performance -- for inventors both at here home and abroad.
While we have much to be proud about in our system, there is
much talk about whether our patent system should be reformed. In my capacity as the Under Secretary of
Commerce for Intellectual Property and the Director of the Office that must
examine these applications, I am pleased to work with you on patent reform on
behalf of the Administration. We are
grateful for your support and enactment of the revised fee schedule last
November that will help fund the Plan.
However, we are aware that since the bill was dramatically limited from
the Administration’s original submission to Congress, we need to work
creatively to achieve the gains in light of the record workload that patent
system faces today.
Making commitments and keeping them has led to some successes throughout the USPTO organization, including the implementation of the President’s Management Agenda and the 21st Century Strategic Plan. The USPTO is now better equipped to handle the many important challenges that face our Nation and our IP system at home and abroad.
Earlier this year, the USPTO announced additional initiatives that will improve quality and efficiency—increasing transparency, internally improving ex parte reexamination, and saving applicants tens of millions of dollars by revamping our process concerning the submission of appeal briefs by applicants during the examination process. We continue to make commitments, and we will continue to keep them.
Improving
Transparency and Enhancing Quality
As a measure to enhance quality and public confidence in our office, I have committed the USPTO to provide improved transparency in our operations. The USPTO will continue to report to the public more information, better information, and more meaningful information about our office and its performance. You will see us measure ourselves more often, more intensely, and with more useful data -- data that will not only report quality and pendency statistics at the USPTO, but will present a basis for improvement.
While implementing electronic tools to assist employees of the USPTO in doing their jobs, the USPTO has also provided Public PAIR -- the Patent Application Information Retrieval system -- to assist and benefit the public. Public PAIR allows anyone access to the entire file history of an application, including access to images of every paper of record for every published application in our database. With the click of a mouse, Public PAIR provides innovators information that is critical to understanding how a technology is evolving. This will help American industry better target its research and development investments, and be more responsive to the demands of the national and global marketplaces. Its counterpart for unpublished applications -- Private PAIR -- lets applicants access the entire file history of their applications in our Image File Wrapper (“IFW”) database, saving time for both applicants and examiners. These systems are truly milestones of achievement for the agency.
We now review more work,
and we review it in a smarter way. In
some areas, we have tripled our number of reviews. We are looking at our error rates more
deeply, and dissecting the issues causing errors. We can and are developing specialized
training for examiners based on results from in-process reviews of our
examiner’s work. And as an enhanced
quality measure, we have expanded a “second-pair-of-eyes” review in certain
technology areas. Until recently, our
pendency measures were not meaningful enough from the perspective of managing
an office. Old ways of measuring pendency did not tell you much and could be
misleading. I have directed that those
statistics be supplemented by additional measures that more fully reflect the
current state of affairs in the USPTO and can help show us specifically how we can
improve. Our users will now know more of
what we know. They can thus know better
what they can expect from us, and they can more informatively comment on our
system as well.
Many of the quality issues raised and debated today in the patent system are within our reexamination system. Without entering the debate on the limitations of inter partes reexamination, legislative improvements, or even post-grant review, there is no question that the USPTO can do much to improve the reexamination process.
As background, we are focused on improving the reexamination process because it is the public’s opportunity to say, “The Office got it wrong,” without resorting to costly litigation. An ex parte reexamination proceeding is conducted within the USPTO when any person submits a substantial new question as to the patentability of the subject matter of an issued patent. The statute authorizing reexamination proceedings requires the USPTO to conduct this process with “special dispatch.” Frequently, these proceedings require more than 100 hours of examiner time to complete. And today, a large number of reexamination proceedings have been pending before the USPTO for more than four years without resolution. We are just as dissatisfied with these results as are the stakeholders in the system.
Reexamination proceedings are important to patent owners and to the public as a means of resolving the issue of patentability without resorting to the high-cost option of litigation. In these proceedings, both timeliness and correctness of the decision are important to all parties to provide certainty of intellectual property rights. Therefore, we have an especially important duty to get it right here with special dispatch. However, many reexams are complex and time-consuming. Sometimes there is intentional delay on the part of those outside the USPTO, which can add to the time it takes us to process reexams.
To address issues of timeliness and correctness of the decision, the USPTO will implement a new process for handling reexamination proceedings. By the end of FY 2005, the USPTO will strive to eliminate all instances of ex parte reexamination proceedings that have been pending with an examiner for more than two years. Specifically, this will eliminate 420 proceedings pending over two years -- of the current 1,200 pending ex parte reexamination proceedings. If we had not undertaken this challenge, the total number pending over two years would have been 600 by the end of this year. Our commitment is that, by the end of FY 2005, the USPTO will set a defined time period for all future ex parte reexamination proceedings to be completed before the examiner, and the period will be less than the two years achieved in fiscal year 2005.
A similar clean-up effort is being conducted for all inter partes reexamination proceedings now pending before the USPTO. To address the issue of the correctness of the decision, the USPTO will require a supervisory review of all USPTO decisions in any reexamination proceeding. It is expected that this process will employ a panel of least three supervisors and senior patent examiners. Further, by the end of this fiscal year, the USPTO will establish firm processing time periods for all reexamination proceedings ordered (after the Office order for reexamination) on or after October 1, 2005, for both ex parte and inter partes reexamination proceedings.
Pre-Brief Appeal
Conferences are another area where we are implementing the President's
Management Agenda mandate that government be citizen-centered (not
bureaucracy-centered) and results-oriented, by eliminating certain patent
processing costs for citizens.
Today, when an applicant
wants to appeal a patent rejection with the Board of Patent Appeals and
Interferences (BPAI), the applicant must file a Notice of Appeal and an Appeal
Brief outlining why the examiner's position is in error. The next step is an
Appeal Conference, with applicant and examiner who decided the claims were not
patentable, (joined by the examiner's supervisor and another experienced
examiner or supervisor). Only after
this conference, the examiner then prepares an Examiner's Answer, which
explains why the application is not allowable.
Currently, after the Appeal Conference, approximately 60 percent of
cases are not forwarded
to the BPAI for a decision. A
conservative estimate of costs to applicants for preparing and filing the 60
percent of the Appeal Briefs that are never forwarded to the BPAI is $30,000,000. To save applicants at least $30,000,000
annually, the USPTO will implement a program in the third quarter of FY 2005
that allows applicants to request an Appeal Conference before preparing
an Appeal Brief.
For a Pre-Appeal Brief
Conference, it is not necessary for the members of the Appeal Conference to
review the full Appeal Brief to determine whether the examiner's action on that
particular application was proper and should proceed to appeal. If the Appeal
Conference determines that the examiner's decision was not proper, the
applicant will be notified that an appeal to the BPAI is not necessary at this
time, thereby saving the applicant the cost of preparing and filing an Appeal
Brief. If the Appeal Conference determines
that examiner's decision was proper, the applicant will be notified to file an
Appeal Brief in order for the application to go forward to the BPAI for a
judicial decision. To assist in this
evaluation, the USPTO has this month initiated a new pilot program tocreate a
corps of appeal conference specialists, who will be trained in the way that the
BPAI judges would review an appeal once it reached the Board.
Post-Grant Review
As part of our Strategic Plan, we proposed a legislative initiative – Post-Grant Review – to address patent quality, as well as the badly needed patent litigation reform that is being advocated in many quarters. Post-Grant Review has great support among all groups, including the bar, technology companies, academicians, and others seeking patent reform. Simply put, “post-grant review,” will give the public another vehicle for identifying possible problems in issued patents. We believe our proposal promotes innovation by ensuring that the patent system is fair to all. By “fairness,” we mean it promotes a patent system where flaws in issued patents can be quickly and expertly revealed, without exposing a patent holder to frivolous or even mischievous review and uncertainty. We look forward to working with the Committee in helping it design the most effective and fair post-grant review process.
We have increasingly recognized that, when the USPTO is receiving 375,000 patent applications a year, the task of maintaining and improving a sound patent system is the job not only of the USPTO, but it is also the task of patent applicants and their representatives. One aspect of the Strategic Plan that addressed that issue was its proposal for mandatory continuing legal education for registered patent practitioners on the law affecting practice before the USPTO. We are currently developing the means for making such education equally available to all practitioners via the Internet and through Continuing Legal Education (CLE) providers.
We are also considering additional rule changes that would require those applicants who place the greatest burdens on the patent application process to share some of that burden. Currently, about seven percent of applications present about a quarter of the patent claims that we examine. We are considering the possibility of requiring applicants who file such super-sized applications to help us identify the relevant issues. Our users necessarily share in the responsibility for the future of the patent system.
We have focused from our perspective as an agency, on our examiners, and on other employees on improving the operation of the USPTO. We are using a better process of training, and updating our employees’ skills throughout their careers. We have an incredibly dedicated core of patent examiners and technical support staff. I have met with hundreds of examiners individually, collectively, in tech center meetings, at union meetings, at retirement parties, and just walking the halls. Those who stay and make a career at the USPTO are dedicated, engaged, and knowledgeable. They not only know their art, but also are keenly aware of the outside pressures on our office.
The one message I hear time and again about the biggest challenges facing examiners is that they struggle to avoid being discouraged by the games that some applicants play with the patent system. These examiners deeply respect our intellectual property system and take their Constitutional oaths quite seriously. But a few applicants are gaming the system. When we have shone the light on the USPTO, we have found areas where we can improve, and we are implementing those improvements. But the number one challenge I hear from examiners is the problem of application quality. While I do not purport to have all the answers to this problem at this time, I can assure you that we are reviewing this issue within the USPTO and will welcome the opportunity to share what we learn with you and how we believe we can appropriately address the issue of application quality.
I certainly will not shy away from focusing on how we can
improve processes at the USPTO. As you
know, we have spent the last three years doing just that, and I am thankful
that you passed legislation that will give us many of the tools we need to make
the necessary improvements. Although
The USPTO and Tomorrow
The
USPTO is a team of 7,000 people, including scientists, engineers, and PhDs, many
of whom spend their time considering how we might improve our patent
system. A multitude of others outside of
the USPTO also are reflecting upon our system, and are likely to approach you
with suggested changes.
We
presently are hearing of legislative proposals in three general
categories: operational issues;
litigation reform; and convergence of international laws and best
practices. In my view, each of these
discussions must center on how the patent system encourages innovation, and how
well it serves the public at large.
Like you, we are tasked with looking at patent issues from every angle. We must look at them from the perspective of the independent inventor, who may be the next Thomas Edison, to the perspective of a large, successful company that believes its innovations are being frivolously undermined by unnecessary legal obstacles. We must look at these proposals from the perspective of an economic superpower negotiating treaties to create a better intellectual property system internationally, to the perspective of the American consumer who may not care about patents but is affected greatly by the effects of our patent system.
A strong
The USPTO has been successful in launching a
process to bring together interested international parties to establish a work
plan for progress on substantive patent law harmonization. In February 2005, we held an inaugural
meeting in the
Building on this momentum, subsequent
WIPO-sponsored consultations resulted in a general statement regarding a
suitable work plan for proceeding with patent law harmonization within WIPO.
2 Continuing work on these
parallel tracks will lead us closer to immediate benefits that will inure to
the patent community and patent offices worldwide. This dual approach will be encouraged for
other IP-related issues as well.
However, a challenge we face is the use of Patent
Cooperation Treaty (PCT) fees paid to WIPO.
At WIPO, less than $1 out of every $3 goes to the Office of the Patent
Cooperation Treaty (PCT). As a result,
the
I am happy to say we were successful in protecting against
further PCT fee increases last year at WIPO.
We staunchly opposed a proposal and then stopped a provision that would
have raised fees another 12.7 percent more than the previous year’s. This saved
But keep in mind, there are proposals to fundamentally
change the WIPO charter and philosophy from one that promotes intellectual
property and its protection to a more amorphous charter of “balancing”
intellectual property rights. We have no
quarrels with “balance,” -- in fact, we believe our current system and
international norms are properly balanced.
But simply put, this new “balancing act” is a strategy to water down
intellectual property protection, and the
The overwhelming evidence of the history of the
In this regard, the USPTO and the Administration look forward
to continuing to work with you and the Members of the Subcommittee as you
develop reform legislation to ensure that the
Thank you, Mr. Chairman.
Notes
1
Statement and Participants of the Exploratory
Meeting of Interested Parties Concerning the Future of Substantive Patent Law
Harmonization, held February 3-4, 2005, in Alexandria, Virginia
The Participants of the
Exploratory Meeting of Interested Parties Concerning the Future of Substantive
Patent Law Harmonization, held February 3-4, 2005 in
o substantive
patent law harmonization issues, notably the
Trilateral "first package," as developed by the United States Patent
and
Trademark Office, the European Patent Office and the Japan Patent Office
and set forth in WIPO Document WO/GA/31/10; and
o issues with
regard to intellectual property and
development, including proposals for a WIPO Development Agenda and
proposals relating to genetic resources, with a view to seeking a common
basis for further discussions in WIPO.
* The Participants agree that the following parties
will be invited
to participate in the future meetings: all Members of WIPO Group B,
* The Participants further agree to have regular,
intersessional
meetings of subgroups to address the issues reference in Paragraph 1.
Participants were
2
Statement and Participants of Informal Consultations in
Statement
Adopted at the End of Informal Consultations
in
1. Following the mandate given to him by the WIPO General Assembly in
September 2004, the Director General of WIPO convened informal
consultations concerning future sessions of the Standing Committee of
Patents (SCP) in
The consultations were attended by delegates
from Brazil, Chile, China,
France, Germany, India, Italy, Japan, Malaysia, Mexico, Morocco, Russian
Federation, Switzerland, United Kingdom, United States of America,
African Regional Industrial Property Organization (ARIPO), Eurasian
Patent Office (EAPO), European Patent Office (EPO), African Intellectual
Property Organization (OAPI) and the European Union. Dr. R.A. Mashelkar,
Director General of the Council of Scientific and Industrial Research
(CSIR) and Secretary of the Department of Scientific and Industrial
Research in
2. The consultations were held in a positive spirit. The delegates
strongly endorsed the importance of multilateralism, in particular, in
WIPO. The consultations resulted in the development of a proposed action
plan for the near future.
3. There was broad agreement that the objectives of the future work
program of the SCP should be to address issues with a view to improving
the quality of granted patents, thus avoiding unwarranted encroachments
on the public domain, and to reducing unnecessary duplication of work
among Patent Offices, which should produce benefits by making the patent
system more accessible and cost-effective.
4. In order to achieve these objectives, the meeting agreed that the
following six issues should be addressed in an accelerated manner within
WIPO with a view to progressive development and codification of
international intellectual property law: prior art, grace period,
novelty, inventive step, sufficiency of disclosure and genetic
resources. These issues should be addressed in parallel, accelerated
processes, the first four issues (prior art, grace period, novelty and
inventive step) in the SCP and the other two issues (sufficiency of
disclosure and genetic resources) in the Intergovernmental Committee on
Intellectual Property and Genetic Resources, Traditional Knowledge and
Folklore (IGC). Each of the SCP and the IGC should agree on a timetable
and report progress on the development of their discussions of the
issues to the other.
5. The meeting underlined the importance of the continued active pursuit
of discussions and work within WIPO on issues related to development and
intellectual property so that a robust, effective and actionable WIPO
Development Agenda could emerge.
6. The meeting recommended to the Director General of WIPO
(a) to call on Member States for proposals on the
International
Development Agenda for discussion at the April 2005 session
of the
Intersessional Intergovernmental Meeting (IIM),
(b) to convene the next session of the SCP in May 2005 to
consider
and endorse the objectives and work program set out above,
(c) to convene the next session of the IGC in June 2005 to
consider
and endorse the objectives and work program set out above,
and
(d) to transmit the decisions of the above meetings to the
General
Assembly in September 2005 for its consideration, including
a time
frame for the conclusion of these issues within WIPO.
7. The meeting expressed its warm thanks and gratitude to the
authorities of the
The delegate of