03/09/00 Committee on the Judiciary

STATEMENT OF

RONALD J. STERN, PRESIDENT

PATENT OFFICE PROFESSIONAL ASSOCIATION

BEFORE THE

SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY

COMMITTEE ON THE JUDICIARY

UNITED STATES HOUSE OF REPRESENTATIVES

MARCH 9, 2000

ON THE SUBJECT OF

OVERSIGHT HEARING ON

THE UNITED STATES PATENT AND TRADEMARK OFFICE

Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to provide the views of the Patent Office Professional Association. Our organization is the exclusive bargaining agent for the approximately 3300 patent professionals at the U.S. Patent and Trademark Office. The vast majority of the employees we represent are engineers, scientists, and lawyers who work as patent examiners and patent classifiers.

There are three bargaining units at the PTO. POPA represents more than one and a half times the number of employees represented by the other two bargaining units put together. The percentage of organized employees that we represent in the PTO has continued to grow.

I have been invited here today to provide our perspective on the topics of PTO funding, the American Inventors Protection Act and agency operations, the effectiveness of PTO's search system, and the treatment of business method patents.

Frankly, there is good news and bad news to report. The good news is that business at the PTO is booming. We are experiencing double digit growth in patent filings. Our fee income has grown to record levels commensurate with the filing increases. The bad news is that we have huge unmet needs for additional staff to handle the increased workload and to increase the quality of patents, and for better search systems. The worst news is that we are not permitted to use the increased fee income to meet all of those needs.

PTO FUNDING

There is virtually universal agreement within our membership that the provision in last year's American Inventors Protection Act (AIPA) providing the PTO with the authority to retain all of its fee income was the right thing to do. Most people, when the AIPA was passed, expected the agency would get to keep all the fees it collects, since this is what the statute says. But the fees still must pass through the appropriations process, and it is in that process that our fee income is effectively siphoned off to fund other programs. It appears inherently unlikely that we will ever get this money back. We have funded other peoples' programs with this money and that money is spent!

We all recognize that charging someone a fee for a promised service and then diverting a part of the fee to other purposes undercuts the ability to actually do what was promised. Siphoning off inventor's fees constitutes a tax on innovation which undercuts incentives to invent and, thus, is wrong for the country.

What we now better understand is that the mere deferral of the use of fee income is the equivalent of siphoning off the money for other purposes. Because of the scoring process for maintaining both Administration and Congressional commitments to budget caps, inventor's money that is collected in one year and not spent that year is used to offset spending for unrelated programs in other agencies. If in later years the PTO is allowed to spend any money that would decrease the amount used to support programs in other agencies, those other programs would either have to be cut or funded from new money. The practical impact of this process is to put pressure on those in charge of appropriations to continue to siphon off at least the amount taken in the prior year and perhaps even increase it, as is currently happening. You would think that this year of surplus would be the best time to return the money that has been taken away in recent years, but in fact the opposite has occurred! Those in charge are taking even more money away.

This continuing diversion of inventor fees is directly contrary to the spirit and intent of the Act you passed to protect American inventors. We need additional legislation to correct this defect. Please, set our fees free.

As you were quoted recently, Chairman Coble, we need to tell everyone to keep their grubby paws off PTO funds.

Among budget professionals, there is a misconception that the PTO has excess fees and each year the Administration and Congress have taken a huge cut out of the PTO fee income. The PTO will always appear to have extra funds so long as we require applicants to pay the bulk of their examination fees in advance and then let the work pile up. The continual siphoning of fee income from the PTO undercuts the ability of the PTO to hire enough examiners and technical support staff to handle the ever-increasing filing of new applications.

Senior officials in the PTO predict that a corps of 6000 examiners will be necessary by the end of FY 2003 to cope with increased filings if we intend to process applications quickly enough to meet the time requirements established in the Patent Term Guaranty Act of 1999. By artificially limiting the hiring of new examiners and support staff, the new applications just keep piling up on our shelves and the creation of very valuable patent rights is delayed, adversely impacting applicants' businesses, their business investment and, indirectly, the U.S. economy.

CURRENT PTO OPERATIONS

As I have testified in years past, there is a critical need for improvement in the quality of examination. Patent examination needs to be enhanced by providing more time for examination, by improving the foreign patent and non-patent literature files, by maintaining the U. S. Classification system and by training examiners. There has been no significant improvement in any of these areas. In fact, the agency's Quality Review statistics show a small, but significant, deterioration in quality. The most notable change has been that our problems regarding the quality of issued patents are becoming more public.

More and more reporters and writers are criticizing the agency for issuing overbroad or otherwise potentially invalid patents. We are now at the stage where one internet news provider has made a business out of criticizing the quality of the PTO's work products. The attacks can only get worse when someone has a vested interest in showing the system has lots and lots of improper patents. Examiners who are living the situation know the lack of adequate time and search tools is serious.

What we don't know is how to persuasively communicate that seriousness to others. It has been reported that the EPO staff union staged a two day work stoppage in January to dramatize the seriousness of the time problems faced by the EPO examiners. That is not our style here in the States. But I assure you, PTO examiners (who get about half the time allocated per application as EPO examiners do) believe there is a dire need to allow them to spend more time per application.

The time factors we currently work under were last revised in 1976. Since that date, patent applications have become significantly more complex on average, searches have become significantly longer and more time consuming, and the number of claims per application has increased. In spite of this relentless inflation in the need for more time, the agency continues to pressure employees to work faster.

Since 1976, the minimum production level to be considered satisfactory has increased twenty percentage points from 75% of an individual's quota to 95% of that quota. In addition, the agency now requires examiners to write lengthy Office Actions with detailed explanations and motivation statements never envisioned back in the 1970's, when a one page short form with very limited size boxes for the examiner's explanation was used for communicating initial decisions on patentability.

You need go no further than looking at the new design for patent application file wrappers (the file folder that contains a single application) to appreciate the increased burden on examiners. Where the file wrappers used to be just folded card stock, they now include cloth tape reinforced accordion folds to allow for the expected multiple inch stack of paper. Search files in areas of current technology have similarly exploded in size. One examiner provided us with the following example:

Taking a search from a currently pending patent application as an example, the examiner searched the following subclasses: 264/......{subclasses redacted}. In 1976, this search contained 49 shoes of U.S. Patents. In year 2000, this search has 164 shoes. More than three times the number of shoes must be searched in the same amount of time. Interestingly, the total number of U.S. patents in the search in 1976 was 1926 while the total now is 4536. So there are 2.3 times as many patents taking up 3.3 times as many shoes. This shows that the patents issued since 1976 are longer and thicker, i.e. more complex. One would assume that it takes an examiner longer today to read and understand these longer, more complex applications and prior art documents.

In the January 2000 issue of the POPA News, we reported on an analysis of the percentage of patents containing 23 or more claims by year between 1976 and 1999. The percentage of such high claim count patents went from 6% in 1976 to 20% in 1999. This tripling of high claim count patents represents a great deal of additional work. Of course the number of issued claims is only a fraction of the total number of claims considered by the examiner during prosecution.

These details have been provided to demonstrate the substantial inflation in the amount of work required of examiners in each patent application. There is no way to automate this work away. The only appropriate cure is to provide examiners with more time per application. To pay for this improvement, we hope that the committee will help set our fees free!

Another important ingredient for achieving examination quality and efficiency is specialization. A couple of years ago, management made the biotechnology examiners examine semiconductor cases to meet somewhat artificial date goals. The biotechnology examiners protested to no avail that they were not qualified to examine these cases. This type of thing happens all too often at the PTO. We ask you to make this a focus of your oversight in order to make sure that inventors receive an examination by a qualified examiner.

Labor Relations

Commissioner Dickinson has been a fresh of breath air, but there are still squalls. Although labor relations have improved at the PTO since he took the helm, we were disappointed that we were not allowed to be a part of the transition team set up to implement the new PTO organization. It is axiomatic that if you want full buy in to an outcome, you need to get the employees involved in the process.

In the past year outside consultants were hired by the agency to develop alternative employee compensation strategies. All of the possible options for which there was a broad base of support are already authorized by Title 5 of the U.S. Code, with one exception relating to overtime. We believe it is possible to pay employees more and at the same time save money for the agency.

By statute the maximum hourly overtime pay is time and a half of grade 10, step 1. What this means is that our senior people get paid only about two thirds of their regular pay when they are working overtime. Most folks are just not willing to work for 2/3 of their normal pay. Another statute limits total pay including overtime for a biweek to the amount payable to a GS-15, step 10 employee with no overtime. This cap denies, or limits, our most experienced primary examiners the opportunity to work paid overtime. Since these people are the most productive examiners in the agency, providing them an incentive to put in extra time will have a valuable payoff.

We recommend that you provide a legislative fix for the PTO. H.R. 1770, which we understand has the blessing of the Office of Personnel Management and the Administration, has the right technical language to accomplish this. H.R. 1770 not only increases the hourly cap, but also increases the biweekly cap. The increases are limited to amounts that are already available to a few other Federal employees such as air traffic controllers and law enforcement officials. Because the bill is applicable to the entire federal government, it is unlikely to pass this year. We think it should be implemented NOW for the PTO because we are a production oriented organization in which overtime is directly linked to the examination of extra applications.

Lifting overtime caps is a win-win situation for both patent applicants - they get experienced examiners at a bargain rate - and for employees. Even though examiners will be paid at straight time rates, the agency will save money because there will be no payments for additional employee benefits (retirement, health care and life insurance), no recruitment expenses, no payments for additional office space, no payments for additional computer workstations, etc.

SEARCH SYSTEMS

To efficiently obtain the most pertinent prior art to support a patentability determination, patent examiners must have fast, reliable search tools which give them access to U.S. patents, foreign patent documents, and non-patent literature. One such tool has served examiners and inventors admirably for over 200 years: our paper search files. The paper files provide a cheap, easy to maintain, and constantly available search tool. According to a 1998 survey of examiners, 66.5% said that they usually or almost always find the most pertinent prior art from a search of U.S. patents in the paper files. However, this invaluable resource is now threatened. The PTO has failed to provide the reclassification work necessary to maintain the files and has announced plans to get rid of all the paper search files when the agency moves to its consolidated facility.

It would be a mistake of enormous proportion to abandon our paper search files. It was a mistake when our management, some fifteen years ago, envisioned the elimination of all paper search files. I told the Subcommittee then of POPA's opposition to the removal of paper search files. It is still a mistake now. There is no cheaper backup search system.

Foreign patents have not been added to the search files since March of 1995. Nor has there been any attempt to classify the electronic versions of these patents into the U.S. Classification system. Current access is only by way of a word search of what are often poorly translated abstracts. A year ago, we reported seeing many thousands of foreign patents boxed and labeled as trash. These patents have not yet been returned to the shoes and we know of no plans to do so.

In addition to paper files, examiners need advanced tools to search advancing technology. Increasingly complex applications in biotechnology and gene sequencing require searching via automated methods, while access to recent publications and other non-patent literature, vital in the examination of applications concerning young technologies, is most convenient via computerized tools and the internet.

Business method patent applications are a particular problem for the agency, because there is no substantial established body of patent art which has been classified in the U.S. classification system and available for full-text search. Examiners must rely principally on non-patent literature which is not organized into the efficient search tool provided by the U.S. classification system. An investment in gathering and classifying this information is an essential precursor to an efficient search system. We hope that you will encourage the agency to make that investment.

Unfortunately, the history of the PTO's attempts to provide automated search tools is marked by some early successes, followed by some dismal failures. The most recent "upgrade" of our hardware and software has resulted in lost functionality and features. On October 9, 1999, the PTO removed the primary text search tool used by examiners for a decade, APS Messenger, leaving two new tools, EAST and WEST, available for examiner's use. In some areas of the PTO, this change resulted in "near riot conditions" as examiners with rigid production requirements struggled to do their job. There were three major problems: lack of training in the use of these new systems; system crashes resulting in total loss of work; and excessively slow response times. Approximately 380 examiners expressed their frustration by signing a petition directed to the Senate Governmental Affairs Committee requesting an investigation.

To the credit of PTO top management, the fiasco was not swept under the rug. Instead, management moved swiftly to attempt to mitigate the disaster. A four point program was established, in which examiners were to receive emergency training, contractors were charged with making real improvements in the hardware and software, employees were permitted to shift their work times so as to reduce loads on the system at peak times, and most important of all, employees were given credit for the time lost due to system inadequacies. Almost 11,000 hours of production time were lost in the last three months of 1999 alone. We do not yet have the data for this year.

While we are pleased that Commissioner Todd Dickinson and Assistant Commissioner Nick Godici had the integrity to acknowledge the recent search system fiasco, some of our experts have told us that they believe the BRS search engine, which is at the heart of EAST and

WEST, has a fatal flaw in that it handles certain searches very inefficiently compared to our old APS Messenger system. Since there is nothing that BRS does better, their recommendation is to simply get the old system back. Luckily the agency recognizes the need for using the old search engine, and has made available the commercial version of APS Messenger on a limited basis to some examiners. But they tell us that in the long term this is not an economically viable strategy.

The jury is still out on whether or not the fixes have worked. There have been some improvements in response time and reliability. However, we still get reports that the system is excruciatingly slow when performing a search including front and rear truncation of a word (a search for only the stem of a word), and when performing a search for multiple, alternative commonly used terms. In February 2000, an average search in the computer art for, as an example, (system or bus or host) adjacent (voltage or power) in February took 2837 seconds, or approximately 48 minutes. This is not the search itself, it is merely a part of the first step of gathering documents which must then be reviewed and tagged for later analysis. This is the kind of search transaction that was expected to take less than four seconds using APS Messenger.

Patent examiners are computer savvy, dedicated to quality, and eager to embrace new tools which will improve their ability to provide the best possible products and services. They are eager to participate in the planning and development of new automated tools, at the earliest possible stages, in order to avoid repetition of the mistakes of the past. Before us lie the challenges of implementing electronic commerce and transitioning to a paperless application process.

As a result of the EAST/WEST travails, the agency appears to have changed its approach to employee involvement. We have just concluded an agreement to establish a partnership working group to treat all automation issues, and in particular to increase employee involvement in the development of automated tools. Management has agreed to provide advance notice on upcoming upgrades to the automated systems so as to permit early employee input.

TECHNICAL CORRECTIONS to the AMERICAN INVENTORS PROTECTION ACT

In subsections (a), (b), and (c) of section 134, of Title 35, U.S.C., which deals with appeals to the Board of Patent Appeals and Interferences, the 1999 amendments incorrectly state that an appeal may be taken from the decision of "the administrative patent judge" rather than the "primary examiner" as was previously set forth. An administrative patent judge is a member of the Board to which the appeal is taken.

We believe it is important to correct this section by reinsertion of the full title of "primary examiner" as the person making the decision which is to be appealed. This section has been the benchmark for the position of primary examiner. This section has been the basis for defining the position of primary examiner as one requiring an incumbent who is fully competent in both patent law and the relevant technology being examined. It would be a shame to fail to continue to support the pride and dignity that historically has been associated with the title of Primary Examiner.

Another title that is steeped in tradition is that of the Commissioner of Patents and Trademarks. We support the suggestion that this title be reserved only for the highest official in the agency.

In addition, we believe the historically significant option of appointing primary examiners to the Board of Patent Appeals and Interferences for 6 month periods so as to help keep the work of the Board current should be reinserted into 35 U.S.C. �6 (formerly �7). While this option has not been used recently, it has been used very effectively in years past. It is particularly useful for eliminating temporary backlogs quickly, when the staff that is necessary is too large to employ on a continuing basis.

CONCLUSION

We urge you to take legislative action to prevent inventor's fees from being siphoned away from the PTO. We believe those funds can be usefully invested in providing a larger staff to handle the increased workload, and to improve quality by providing more time for the examination of each application.

We also hope the committee will take legislative action to boost the overtime pay rate for our most knowledgeable and efficient examiners, so that more patent applicants can get their applications examined by an experienced examiner.

Thank you again for this opportunity to present our views.

Summary Statement of Ronald J. Stern, President

Patent Office Professional Association

March 9, 2000

Regarding Oversight of the

United States Patent and Trademark Office

Most people, when the AIPA was passed, expected the agency would get to keep all the fees it collects, since this is what the statute says. Right now fees are being siphoned off to fund other people's programs. This diversion of inventor fees is directly contrary to the spirit and intent of the Act that was passed to protect American inventors. Please set our fees free!

The PTO has huge unmet needs for additional staff to handle the increased filings, to increase the quality of patents, and to improve the quality of our search systems.

More and more reporters and writers are criticizing the PTO for issuing overbroad or otherwise potentially invalid patents. Examiners who live the situation daily know that the lack of adequate time and efficient search tools is serious. It has been reported that the EPO staff union staged a two day work stoppage to dramatize the seriousness of the similar problems faced by the EPO examiners. But, that is not our style here.

Patent examiners must have fast, reliable search tools which give them access to U.S. patents, foreign patent documents, and non-patent literature. Our paper search files provide a cheap constantly available search tool. It would be a mistake of enormous proportion to abandon our paper search files. However, they are currently in need of additional maintenance.

We need more reclassification efforts independent of whether we automate our search system or maintain our paper files. Foreign patents need to be classified into the U.S. Classification system and added to our files. Non-patent literature needs to be accessible via the U.S. Classification system, especially for young technologies such as business method patents.

Unfortunately, the history of the PTO's attempts to provide automated search tools is marked by some early successes, followed by some dismal failures. The most recent "upgrade" to EAST and WEST has resulted in lost functionality and features. There were three major problems: lack of training; system crashes; and excruciatingly slow response times. Approximately 380 examiners expressed their frustration by signing a petition directed to the Senate Governmental Affairs Committee requesting an investigation. To the credit of PTO top management, the fiasco was not swept under the rug. Instead, management moved swiftly to attempt to mitigate the disaster. The jury is still out on whether or not the fixes have worked.