Chairman Smith, Ranking Member Berman, and Members of the
Subcommittee:
Thank you for this opportunity to testify today on the
challenges facing the United States Patent and Trademark Office (USPTO). It is a special privilege, Mr. Chairman, to
appear before you this morning in your new capacity as Chairman of this
Subcommittee. You have a keen
appreciation of the importance of intellectual property protection to our
nation’s economy, and I look forward to working with you and my good friend,
Ranking Member Berman, in the months ahead on the many intellectual property
issues that will come before this body.
In April and July of last year, this Subcommittee conducted
two important oversight hearings on the operations and funding of the
USPTO. At both of those hearings, I
detailed the impending crisis confronting the Office due to our increasingly
large and complex workload. On both occasions
I testified that without fundamental changes to the way the USPTO operates, the
quality of the patents and trademarks we issue likely will deteriorate, and the
time it takes for an application to be reviewed will skyrocket. Indeed, patent pendency rates in the
There is both good news and bad news to report since those
hearings took place.
The bad news is that the quality and pendency crisis facing
our agency has not gone away. In fact,
these problems are a greater threat to the health of
All is not without hope, however.
The good news is that we have a plan – a revised,
comprehensive five-year strategic plan – supported by the Administration, including
the Office of Management and Budget, and constituency groups that will put us
on a path to meeting these challenges in the months and years to come. The 21st Century Strategic Plan is
targeted toward timeliness, e-Government, employee development and competitive
sourcing – all with a central quality focus.
Assuming the needed changes to our fee structure are passed by Congress,
the Plan will boost productivity and substantially cut the size of our
inventory. It will transform the USPTO
into an information age, e-commerce based organization, which is the
goal of President Bush's Management Agenda.
Because intellectual property-based
enterprises represent the largest single sector of the
The 21st Century
Strategic Plan is built on the premise that American innovators need to
obtain enforceable intellectual property rights here and abroad as seamlessly
and cost-effectively as possible. It
provides a roadmap for creating an agile organization worthy of the leadership
role American intellectual property plays in the global economy.
Let me take a few moments to summarize the sequence of
events that has led us to where we are today.
* * *
When I
arrived at the USPTO sixteen months ago, I initiated an aggressive
top-to-bottom review of the agency to identify new and possibly nontraditional
ways to improve quality and reduce pendency.
This review was in response to the expectations and demands of the President
and Secretary of Commerce, Congress, the owners of intellectual property, the
patent bar, and the public-at-large. All
wanted us to boldly address the challenges of improving quality, reducing
pendency, and implementing e-government.
Last year
we started to design a new plan for how the USPTO should operate. That Plan -- our 21st Century
Strategic Plan – was unveiled last June and pursued three main objectives: (1) to make the application process simpler,
faster, and more efficient; (2) to be more responsive to the needs of our customers
and to the demands of the national and global marketplaces; and (3) to be more
productive.
The original Plan was particularly bold and marked a
fundamental departure from business as usual.
Resistance to change being what it is, some of the Plan’s provisions --
particularly those concerning deferred examination, applicant-commissioned
searches, mandatory Information Disclosure Statements, and changes in some of
our fees -- was criticized.
We spent much of last summer and fall listening to those who
had suggestions for ways to improve the Plan.
I am pleased to report that these discussions were fruitful. They helped us draft a revised Strategic Plan
that (while more modest than its first incarnation) recognizes that the USPTO’s
current business model and fee structure fails to meet the realities of the 21st
century. Today, the Plan’s 37 action
initiatives and fee changes are endorsed by the American Intellectual Property
Law Association (AIPLA), the Intellectual Property Owners Association (IPO), the
American Bar Association’s Section of Intellectual Property Law, the
Biotechnology Industry Organization (BIO), the International Trademark
Association (INTA), our Patent Public Advisory Committee and our Trademark
Public Advisory Committee. In addition,
nearly one hundred of America’s largest companies and intellectual property
groups have expressed their support.
The key
features of our revised Strategic Plan, which we submitted to the House and
Senate last month in conjunction with the President’s 2004 budget request,
will:
Ø
Enhance the quality of patent and trademark examining
operations through consolidation of quality assurance activities.
Ø
Accelerate processing time by transitioning from
paper to e-government processing for trademarks by November 2, 2003 – in tandem
with implementation of the Madrid Protocol.
Ø
Deliver an operational system to process patent
applications electronically by October 1, 2004, including electronic image
capture of all incoming and outgoing paper documents.
Ø
Control patent and trademark pendency and reduce time
to first Office actions.
Ø
Competitively source patent application
classification and search functions, and concentrate Office expertise as much
as possible on the core examination functions.
Ø
Provide for the hiring of almost 3,000 new patent
examiners over the next five years.
Ø
Expand our bilateral and multilateral discussions to
strengthen intellectual property rights globally and, through work sharing,
reduce duplication of effort among offices.
Changes in
the Plan made at the behest of the user community required us to jettison our
earlier goal of reaching 18-month average pendency. This is because of the higher priority the
revised Plan places on quality and patent e-government initiatives. Nonetheless, our goal will be to produce, on
average, a “first office action” for non-provisional applications at the time
of 18-month publication. In addition, we
seek to have a patent search report for other patent applications issuing in
the same time frame.
Let me highlight some of the proposed changes in the Plan
that I think are of the greatest significance.
First, we originally called for a legislated deferral of
examination of up to 18 months from the earliest filing date. The revised Plan provides an administrative
alternative that will give applicants the option of abandoning their
applications prior to search or examination and receive a partial fee
refund. This alternative will still
achieve many of the benefits of deferred examination.
Second, the original Strategic Plan required applicants to
provide search reports obtained from commercial search organizations. Under the new Plan, the USPTO will contract
the search from commercial search organizations or foreign offices, not the
applicant.
Third, the punitive fees we originally proposed for
excessive claims and pages of complex specifications have been replaced with a
linear fee system to ensure that fees charged for excessive claims and pages of
complex specifications are proportional to the increased processing costs.
Lastly, the originally proposed four-track examination
system has been revised in favor of a multiple track of five filing options.
The
revised Plan emphasizes our commitment to testing and evaluating the
initiatives, most notably in the areas of outsourcing, quality enhancements and
e-Government. All of the initiatives in
the Plan will be subjected to thorough evaluation. The implementation plans accompanying each of
the proposed initiatives contain specific milestones for initiating pilot
projects and evaluating the data before deployment decisions are made.
Quality
must permeate every action taken by every employee of the USPTO, and this Plan
will assure quality by hiring the people who make the best patent and trademark
examiners, certifying their knowledge and competencies throughout their
careers, and focusing on quality in all aspects of the examination of patent
and trademark applications. For example,
quality will be engineered into our processing by ensuring proper training and
certification of examiners and expanding the “second-pair-of-eyes” review in
selected technology areas. We believe
these initiatives will bolster confidence in the quality of U.S. patents and
trademarks, thereby spurring our economy and reducing litigation costs.
Another
critical element of quality enhancement is
tied to competitively sourcing the search function so that we can
concentrate examiners’ expertise as much as possible on the sovereign,
core government function of patentability decision-making. When examiners are
provided with quality search results and do not need to perform a separate
search, they will be able to concentrate their efforts on what they do best:
the determination of patentability. Reducing
examiners’ prior art search responsibilities will also achieve greater examiner
productivity.
The USPTO has relied upon the European Patent Office's (EPO)
search examiners in The Hague to perform searches of applications filed under
the Patent Cooperation Treaty. These searches, which cover virtually every
technology including biotechnology and telecommunications, are one way of
managing the massive workload problem we face. The results to date on more than
75,000 searches conducted by the EPO over the past four years have been positive
and confirmed through extensive surveys of U.S. patent applicants who have
consistently expressed the view that EPO searches are high quality in nature.
By
outsourcing the search function, we can ensure that the
patent examiners of tomorrow will be like the quality review examiners of
yesterday in that they will begin with a more complete search and set of
information as their starting point. To
that end, we will be diligent in selecting and monitoring the contract
or foreign searching authorities to ensure that patent searches provided by
them are of the highest quality.
* * *
The
consensus we have achieved is due to the hard work and dedication of groups
such as the AIPLA, IPO, the ABA’s Section of Intellectual Property Law, BIO,
INTA, the Patent Public Advisory Committee and the Trademark Public Advisory
Committee. I want to express my sincere
appreciation for their partnerships.
It is
important to note that our partners recently have expressed concerns that the
new fee system will not guarantee that the USPTO have access to all of its user
fees. The Administration shares these
concerns. President Bush cut the level
of “fee diversion” by nearly fifty percent from the FY 2003 Budget level in the
Administration’s FY 2004 budget request for our agency. Last month Commerce Secretary Don Evans
addressed this topic while testifying before a subcommittee of the House
Appropriations Committee. There he said
“the Department is working to eliminate the practice of using USPTO
revenues for unrelated federal programs. Making more fees available sooner will
enable the agency to increase the quality of patents and trademarks issued.”
The
concern over “fee diversion” has led some in the patent community now to
recommend that our fee proposal be amended so that any new fee structure would
sunset after a period of two or three years.
This idea, never raised during discussions leading to our accord, is
flawed and would cast grave doubt upon the desirability of the Administration
supporting a revised fee bill containing such a provision.
As the Members of the Subcommittee know all too well,
Congress has given the USPTO clear directives to develop and implement a
five-year plan. Subjecting our fee
structure to a sunset provision would result in an unacceptable level of
uncertainty. It would cripple the USPTO
from making any long-range planning or investments in infrastructure, training,
or recruiting. For example, under a
sunset provision, exigencies could force us to lay off the approximately 3,000
patent examiners we intend to hire over the next five years. At the very least, a sunset provision would
frustrate our efforts to recruit qualified scientists and engineers for the
patent examining corps.
A sunset provision would also cast a shadow of uncertainty
on American businesses and inventors who, in return for a set fee structure,
have an expectation that services will be improved with respect to pendency,
quality, and e-government. This provision would decrease predictability and thereby raise
costs and increase pendency.
* * *
Mr.
Chairman, if we want to ensure a more vibrant, seamless, and cost-effective
American intellectual property system, our 21st Century Strategic
Plan offers a sensible and pragmatic means for achieving it. But this all hinges on passage of our revised
fee structure. Without the ability to
hire and train new examiners and also improve our infrastructure, our hands
will be tied.
The
consequences of failing to enact the fee bill and giving the USPTO access to
those fees will mean quality and pendency will continue to significantly
suffer. We will be unable to hire needed
examiners, and over 140,000 patents will not issue over the next five
years. The inventory of unexamined
patent applications will skyrocket to a backlog of over one million
applications by 2008 -- more than double the current amount -- and pendency (as
measured from the time of filing) will jump to over 40 months average in the
next few years. This would represent the
highest pendency rate in many decades.
Surely
we all agree that this scenario is unacceptable. Therefore, I am asking this Subcommittee to
give us the tools needed to avert this crisis – and to let us field a nimble,
flexible USPTO that can respond rapidly to changing market conditions. Time is not on our side, and the
ramifications for the future of innovation and our economy are great.