Letter on the PTO's strategic plan and their fee restructuring proposal

We are writing to express our support for the efforts of the United States Patent and Trademark Office (USPTO) to address the crisis situation facing the patent and trademark systems.</p>

The Honorable Mitchell E. Daniels, Jr.
Director, Office of Management and Budget
Dwight D. Eisenhower Executive Office Building, #252
17th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20503

Dear Director Daniels:

We are writing to express our support for the efforts of the United States Patent and Trademark Office (USPTO) to address the crisis situation facing the patent and trademark systems. The 21st Century Strategic Plan developed by Under Secretary Rogan represents an innovative and ambitious program to enhance the quality of patents and trademark registrations, to reduce the unacceptably long and growing times it takes to obtain them, and to achieve efficient, reliable, and user-friendly electronic filing and processing systems for patent and trademark applications. While we have reservations about certain aspects of the details of the Plan, we share fully the goals that the Plan seeks to achieve. We also are prepared to support an increase in funding sufficient to implement those portions of the Plan we embrace, provided those funds are used solely for that purpose.

The USPTO is in Crisis

Crisis is a strong word, but we believe that it aptly describes the situation at the USPTO. The reliability of patents and trademark registrations is increasingly being called into question. Not only do invalid patents and trademark registrations put at risk the investments of their owners who commercialize the protected products and services, but they also cast a cloud over the legitimate business activities of the competitors of such right holders.

The time it takes to obtain a patent, commonly referred to as "pendency," now averages over two years. It is projected to rise to an average of over three years, and to six years in some critical technologies, unless immediate, concerted action is taken. The issuance of a patent in four to six years results in an unacceptably long period of uncertainty for those desiring to avoid infringement. And in those technologies in which development is fast paced, it also significantly lessens or removes the incentives and protections of the patent system since the commercial life for such technologies often tends to be shorter.

The USPTO promised a "paperless office" in 1983. Twenty years have passed and, while the Office has made some strides in its trademark operation, the patent operation still receives, processes, and stores in paper the soon-to-exceed one million patent application files. The resources wasted in locating misplaced files and simply managing this "paper mountain" are desperately needed in the patent examining operation.

The 21st Century Strategic Plan

Under Secretary Rogan published the Strategic Plan on June 3rd following intensive internal reviews and consultations with various user groups. The Plan seeks to "(1) improve patent and trademark quality, (2) aggressively implement e-Government to handle the workload associated with the 21st Century economy, and (3) reduce patent and trademark pendency."

We cannot overemphasize the importance of achieving these goals to address the crisis facing the USPTO today. We strongly support these goals. We also support many of the initiatives proposed to achieve them.

Elements of the Strategic Plan We Support

In particular, we welcome the proposals to:
  1. Expand the "second set of eyes" review concept, successfully used with business method patent applications, to other technology areas, as well as to any substantive refusals to be issued against trademark applications;
  2. Enhance the reviewable record by increasing the amount of information included in patent application files regarding applicant/examiner interviews;
  3. Create a competitive compensation package for Supervisory Primary Examiners to attract and retain the best employees for these jobs;
  4. Develop tests to determine the suitability of candidates for the position of examiner;
  5. Establish "training art units" for new examiners in high volume hiring areas;
  6. Develop a testing process to certify examiners for promotions;
  7. Make greater use of Search Reports prepared under the Patent Cooperation Treaty and by other qualified patent offices;
  8. Allow the USPTO to use qualified private "Certified Search Contractors" (those that meet criteria equivalent to those for an International Searching Authority under the Patent Cooperation Treaty) to assist the USPTO in carrying out prior art searches, with the understanding that the quality of their performance will be initially tested and carefully monitored;
  9. Use fees reflecting actual costs to ensure that applicants who elect to file large numbers of claims and lengthy applications bear the reasonable cost of any additional work imposed on the USPTO;
  10. Expand patent application work product reviews, including work product reviews of primary examiners;
  11. Process patent applications electronically by the end of fiscal year 2004;
  12. Create an almost paperless trademark operation through use of the Trademark Information System and by various other means by the beginning of fiscal year 2004;
  13. Eliminate the requirement for signatures on trademark documents submitted to the USPTO;
  14. Establish an enterprise-wide training strategy for trademarks;
  15. Continue development of the trademark Work-at-Home program;
  16. Provide trademark applicants with an option for expedited service; and,
  17. Use an updated, uniform database of acceptable identification of goods and services for assigning trademark examination priority.

Elements of the Strategic Plan That Need a Sharper Focus

Unity of Invention

The Long-Term Agenda of the Strategic Plan provides that the USPTO will continue to explore the treatment of applications containing multiple inventions in connection with WIPO's Standing Committee on Patents and within the framework of the Trilateral Offices. Any changes to restriction practice (limiting a patent application to a single inventive concept) are to be considered within the context of this international framework.

The current restriction practices of the Office, especially in certain groups, are generating unnecessary filings, work and complications for both the Office and for applicants. A change to a unity of invention standard such as that followed under the Patent Cooperation Treaty (PCT) would significantly improve and simplify the examination process. In addition, when multiple inventive concepts have been included in a single application, the Office should permit an applicant to elect to either pay additional fees or to file divisional applications to obtain examination of related inventions that are presented in a single application.

We believe that a unity of invention standard similar to that followed under the PCT, which requires a single inventive concept to be examined in its entirety, should be an integral part of the Strategic Plan and that it, like all of the other elements we address in this letter, should be reflected in any fee legislation the Administration proposes. However, we believe that the schedule in the Plan is too indefinite and that a more aggressive timeline should be established. In our view, the Office should immediately commence, on an urgent basis, a study of the necessary changes to the patent laws and rules of practice so that it can implement a PCT unity of invention standard before the end of the 108th Congress.

We are committed to working with the Office to develop the necessary changes to the patent laws and rules of practice to achieve this goal. We understand that such a system will entail additional work for certain applications and that this will require modification of the statutory fee structure to ensure that the USPTO is able to recover its costs. As long as applicants have the option to pay additional fees to cover the additional costs of having additional inventions examined in a single application (rather than being forced to file a separate application for each inventive concept), we would support an increase being levied on such applications.

Proof of Concept

Many of the changes proposed in the USPTO's Strategic Plan are innovative, but untested. While expressing our support for these proposals, we hasten to emphasize that we believe that the USPTO should initially implement the consensus elements of the Strategic Plan through administrative action, minimizing substantive patent and trademark law changes until each proposal has been proved by suitable testing and pilot projects. A comprehensive program of such testing and pilot projects should begin as soon as possible and should target those areas of the USPTO that exhibit the problem which the change is designed to address. In addition, we believe that the USPTO should clearly state each of its major goals and establish key measurements and yearly milestones, to be used to determine the success it is making in achieving each of these goals. We believe that this approach will enable the user community and the USPTO to work harmoniously to achieve the best results.

Work-Sharing with Other Major Offices

The Strategic Plan calls for greater integration with foreign offices in the patent examination process. Some of the proposals suggest that foreign examinations from certain offices be given full or partial faith and credit -- meaning that the foreign examination result will heavily influence the U.S. examination result. As we note below, we do not believe such a practice is feasible at this time due to the significant differences that exist between the patent laws of the United States and other nations. However, we strongly support efforts to make use of as much of the search product of other offices as possible in a practical sense. We also strongly support development of agreements with other offices that will permit closer relationships and practices to be established, as well as continuing the effort to harmonize the world's patent laws.

Elements of the Strategic Plan We Oppose

We have appreciated the manner in which the USPTO has sought input and evaluation by the user community of its Strategic Plan during much of the developmental phase of the plan. While there are a number of proposals advanced in the Strategic Plan with which we do not agree, we are hopeful that many of these objectionable parts of the Plan will ultimately be eliminated or satisfactorily resolved during the continuing dialogue between the USPTO and the user community.

Many of these objectionable proposals appear to have as their common foundation a concept with which we agree: the USPTO should not seek to address the crisis it faces solely through the addition of staff. Notwithstanding our agreement with this approach, however, we believe that the pursuit of this concept by the Office has resulted in a number of proposals that would have adverse consequences for American industry and entrepreneurs. In this respect, we again emphasize that the over-arching objective should be improving the quality of the patents and trademark registrations, and that every initiative should be carefully measured against this goal. Among the proposals which appear to have their genesis in this concept and with which we disagree are the following:

  1. Permit patent applicants to defer the commencement of the examination process for up to 18 months. Proposed in the hope that some applicants will voluntarily drop out of the system and thereby eliminate work for the USPTO, such deferral will result in the publication of applications without any search report, thereby shifting the burden to the public of determining which applications will ultimately be issued as patents and what their scope will be. We do not believe this burden should be transferred to the public and, for that reason, oppose the 18-month deferred examination proposal of the USPTO;
  2. Measure patent pendency from the filing of the request for examination to the time of issue or abandonment. Patent pendency has been measured from filing to issue or abandonment for at least the last forty years and is the true and best measure of the period that the public will be uncertain as to whether a patent will issue and what its scope will be;
  3. Require applicants to select a Certified Search Contractor to perform the initial prior art search and provide the results to the USPTO. We believe that the USPTO must remain responsible for ensuring the adequacy and scope of the search results returned by the contractor;
  4. Require, for patent applications already filed, a search by applicants (or an applicant-sponsored search by Certified Search Contractor) together with a "claim-by-claim" analysis of the information contained in such a search (referred to as a "mandatory Information Disclosure Statement"). This proposal would shift to thousands of applicants the obligation to perform work for which they have already paid the USPTO and would significantly increase their exposure to inequitable conduct charges;
  5. Rely on the substantive examination results of foreign patent offices in the U.S. examination process (e.g., granting "near" full faith and credit to such substantive examination results). As noted above, while we agree that the long term goal of the major patent examining offices should be "work sharing" using the results of their respective search and examination activities, the differences between the patent laws of the United States and those of other countries are too great to permit such reliance at this time;
  6. Impose a surcharge on the filing of continuation, continuation-in-part, and divisional applications, as well as on applications that contain claims that are patentably indistinct from claims in other applications. We believe such surcharges would adversely impact applicants who are merely seeking to protect fully their inventions and would not fairly address the abusive practices the USPTO seeks to prevent. Fees should generally be set to recover actual costs and should not be punitive and penalize legitimate practices;
  7. Provide an option for trademark applicants to procure a likelihood of confusion search from a Certified Search Contractor. Such an option is not needed and will neither enhance quality nor reduce pendency or costs;
  8. Eliminate the provision that the Director may raise trademark fees only yearly, and only in response to fluctuations in the consumer price index;
  9. Eliminate requirements in the Rules of Practice and the Trademark Manual of Examining Procedure related to the examination of specimens; and,
  10. Provide the Director the ability to set response times to trademark office actions through regulation.

Proposed Fee Bill and FY 2004 Budget Request for the USPTO

We are strongly opposed to the USPTO's proposed fee bill. The fees in that bill would conform to the $1.527 billion revenue target that supported the $1.365 billion spending plan for the USPTO that was recommended in the President's FY 2003 Budget. That proposal would raise $162 million more in revenue than necessary to support USPTO operations. This additional revenue was targeted to support the operations of other government agencies. Each association joining in this letter has repeatedly made clear its strong opposition to any diversion of the user fees collected by the USPTO to other, unrelated government programs.

At the same time, we emphasize that we are among the most ardent supporters of the USPTO and we want to be part of the solution of the crisis facing the Office. While we are not able to confirm that the USPTO needs as much as the $1.365 billion it is requesting for FY 2003, we are fully prepared to support a statutory fee increase necessary to implement those portions of the Strategic Plan, outlined above, whose cost effectiveness is demonstrated through appropriate testing. This support is contingent, however, on the Executive and Legislative Branches effectively addressing the issue of diversion. We will strongly oppose any fee increase to support the Strategic Plan which is not accompanied by an appropriate solution to diversion.

Accordingly, we urge that, in developing the budget request for the USPTO for FY 2004, account be taken of our willingness to support a fee increase needed to fund the initiatives we have outlined. We also ask that the USPTO be permitted to hire the number of examiners needed in the context of its Strategic Plan to process the workload it receives and not be forced to cut corners that adversely impact the quality of patents and trademark registrations. American industry, inventors, and businesses need an efficient and effective patent and trademark office that promptly grants and registers quality patents and trademarks.

Thank you for your consideration.


Ronald E. Myrick
American Intellectual Property Law Association

Carl B. Feldbaum
Biotechnology Industry Organization

John K. Williamson
Intellectual Property Owners Association

Nils Victor Montan
International Trademark Association

Response From PTO Director Rogan (December 3, 2002)