STATEMENT OF

RONALD J. STERN

PRESIDENT

PATENT OFFICE PROFESSIONAL ASSOCIATION

Submitted to the

SUBCOMMITTEE ON COURTS, THE INTERNET

AND INTELLECTUAL PROPERTY

COMMITTEE ON THE JUDICIARY

U.S. HOUSE OF REPRESENTATIVES

On

“The U.S. Patent and Trademark Office:

Fee Schedule Adjustment and Agency Reform”

July 2002

Mr. Chairman and Members of the Subcommittee:

            POPA represents the more than 3,400 patent examiners, classifiers and other patent professionals who form the backbone of the U.S. Patent and Trademark Office (USPTO). Patent examiners comprise the vast majority of our membership. The patent professionals of POPA are diligent, hard-working individuals firmly committed to maintaining the quality and integrity of the U.S. Patent System.

            Today, however, the patent professionals of POPA believe that the very foundations of the U.S. Patent System are in danger of being so substantially and negatively altered by the USPTO 21^st Century Strategic Plan, that the integrity of the patent system may be seriously and irreversibly damaged.

For the many reasons set forth below, POPA opposes the proposed USPTO fee structure and proposed Agency reforms.

BACKGROUND

In H.R. 2047, as passed by the House, the Director of the USPTO was going to be required to develop a five-year strategic plan to: (1) enhance patent and trademark quality; (2) reduce patent and trademark pendency; and (3) develop and implement an effective electronic system for use by the Office and the public for all aspects of the patent and trademark processes. In his testimony before this subcommittee on April 11, 2002, USPTO Director James E. Rogan indicated that he had “begun an aggressive review of the USPTO to identify new and possibly nontraditional ways to improve quality and reduce pendency.” Director Rogan released a summary of that review on June 3, 2002 entitled the “21^st Century Strategic Plan.” Just recently, on July 5, 2002, a significantly more detailed version of the Strategic Plan was made available on the USPTO web site (www.uspto.gov). This plan does not achieve the goals set forth in H.R. 2047.

Director Rogan, in his Message accompanying the 21^st Century Strategic Plan, stated “[D]eveloping the strategic plan was an open and participative process.” This has not happened. While POPA represents all the patent examiners at the USPTO, not once has POPA been approached by Director Rogan or the strategic plan working group to provide input into development of the strategic plan. Nor, to our knowledge, were any working examiners consulted. We believe that developing such a far-reaching and unconventional strategic plan without any input from examiners, the very individuals who are most familiar with- and essential to- the examination process, is shortsighted and ill-advised. Further, in conversations with many USPTO managers and supervisors, POPA has become aware that the vast majority of them have not been consulted either.

True to his word, Director Rogan’s Strategic Plan certainly proposes some “nontraditional” initiatives. The 21^st Century Strategic Plan calls for separating the prior art search and examination, accepting searches from foreign patent offices in place of a thorough search by USPTO examiners, increasing training and review of examiners’ work, recertification of primary examiners and patent attorneys, and dramatically changing the fee structure of the USPTO resulting in significantly higher costs to inventors to file patent applications. POPA believes the Strategic Plan will neither increase quality nor reduce pendency of patent applications.

THE NEW FEE LEGISLATION AND USPTO REFORM

            POPA opposes the new fee structure on several grounds. The new USPTO fee structure contemplates sweeping changes in the patent examination process that POPA believes will significantly and adversely affect the U.S. Patent System. Approval of the proposed USPTO fee legislation will be construed by the Agency as approval by Congress to implement the 21^st Century Strategic Plan. These changes are reflected in the proposed new USPTO fee structure in the form of separate fees for filing and examination and by allowing the Director, by regulation, to reduce fees for applicants who provide an appropriate search report. The proposed fee structure would permit continued diversion of USPTO fee income and make such diversions an essentially permanent part of the appropriations process. The proposed fee structure would also dramatically increase the cost of obtaining a patent by charging significantly increased fees and surcharges for additional claims and pages of a patent application and for filing related patent applications while placing additional burdens on applicants to pay for prior art searches elsewhere.

Separation of Search and Examination

Separating the prior art search from patent examination will result in a loss of integrity and efficiency of the U.S. Patent System, reduce the quality of patent examination and, for some applications, is tantamount to surrendering the sovereign functions of the United States to foreign powers.

Examiners have raised their collective voice in opposition. Over 1,000 patent examiners have signed a petition requesting Congress to keep the search and examination together. A copy of this petition is submitted herewith as Appendix 1. Examiners recognize that separating the search and examination would adversely impact the quality of patent examination and be a disservice to the American people.

The prior art search and the patent examination are integral parts of the same process. There is a synergy between the two functions that will be lost if search and examination are separated. As a patent examiner performs a prior art search on a patent application, the examiner is simultaneously becoming familiar with the state of the art in the subject matter of the application, identifying additional relevant search terms, modifying the search in response to preceding search results, and mentally formulating rejections to apply to the claimed invention. Thus, when the examiner prepares to take action on the case, much of the decision making process has already been completed.

Furthermore, as an examiner continues to search in a particular technology area, the examiner becomes more and more familiar with the prior art in that technology, increasing the quality of the examiner’s search and examination. Many examiners gain such a level of expertise that they are regarded as experts in their technologies both within and outside the USPTO. The USPTO represents the single largest accumulation of technological expertise in the federal government. Where else can one find a single collection of engineers and scientists with the collective expertise to examine anything from safety pins to atom bombs; from fishing lures to genetically engineered plants and animals? This is the inherent efficiency of the combined search and examination process. The expertise of examiners will be diminished rather than enhanced by separating the search from examination. This will reduce the quality of examination.

The European Patent Office (EPO) has recognized this inherent efficiency. After many years of experience with a separated search and examination process, the EPO has begun implementing the “BEST” program – Bringing Examination and Search Together. The BEST program places the responsibility for the search and examination with the same examiner in the same manner as current USPTO practice. In his statement before this Subcommittee, Charles P. Baker, Chair of the Section of Intellectual Property Law of the American Bar Association (ABA), indicated that the “best testament against separating the search function and an examination function is the fact the European Patent Office, which has had such a system for years, has recently decided to abandon it.” POPA agrees with Mr. Baker. Now, irrespective of the years of experience of the EPO culminating in the BEST program, the USPTO wants to take the opposite approach and separate the search from the examination.

In his statement before this Subcommittee, Michael K. Kirk, Executive Director of the American Intellectual Property Law Association (AIPLA), expresses the concerns of AIPLA that “the presumption of validity could be adversely affected if the PTO simply hands off the responsibility for obtaining the search to applicants and CSSs [Certified Search Services].” POPA shares AIPLA’s concern.

Patent applicants want patent rights for themselves. Evidence of prior, very similar inventions uncovered during the search stands in their way. Letting them choose who finds - or does not find - the prior art evidence to be used against their application, and how much the searcher gets paid, pits the searcher’s efforts against the applicant’s interests. It is the equivalent of letting the fox guard the henhouse.

  To ease AIPLA’s concerns, Mr. Kirk states “[T]he PTO must ultimately be responsible for ensuring that the searches it relies upon are the highest quality, whether done by its examiners, CSSs, or qualified foreign patent offices.” Mr. Kirk expresses particular concerns with CSS searches stating “PTO examiners should always assess whether the search was complete and, if not, demand that the CSS research the application and ‘get it right.’” Finally, Mr. Kirk states “the ultimate responsibility in each individual case must rest with the PTO examiner, to ensure that the search is complete in the first instance and to conduct supplemental searches as appropriate as the claims in the application are modified as the application advances through the examination process.”

The USPTO, however, does not intend to maintain its present search capabilities. The Strategic Plan contemplates recouping significant overhead expenses by “putting the prior art search in the hands of private industry” and realizing “substantial savings in automation development and maintenance costs for EAST, WEST, ABSS, CDB access, etc.,” in addition to substantial savings from reduced upkeep and maintenance of both the U.S. and International Patent Classification Systems. These various systems are the very search tools that examiners rely on for performing prior art searches. If these tools are no longer available, patent examiners will not be able to ensure that prior art searches are complete and of the highest quality. Even worse, the 21^st Century Plan contemplates reducing the amount of time available to an examiner for each case by 20-25% as stated by Director Rogan before this Subcommittee. Without the time and tools to do the work, the Agency has effectively precluded examiners from doing the work.

How can patent examiners determine if a search is “complete” without conducting searches themselves? How will examiners know if a CSS “got it right” without conducting searches themselves? How will examiners “conduct supplemental searches as appropriate” when the very search tools they use today are no longer available or properly maintained? How can patent examiners be held ultimately responsible in each case, when they are not provided with the necessary tools to perform their duties? The plain truth is: they cannot and the USPTO knows it. On the other hand, if patent examiners are themselves conducting searches to verify the completeness of outsourced searches or carrying out supplemental searches, then where is the efficiency of outsourcing the search and where are the substantial savings to the Agency to justify the outsourcing? This is the inefficiency of the Agency’s Strategic Plan. To ensure the integrity of the presumption of validity, patent examiners would be necessarily duplicating the work of the prior art search performed by others. Clearly, the more efficient method is to simply continue having patent examiners do the prior art search themselves. To maintain the integrity and the efficiency of patent examination at the USPTO, the search and examination should remain together under the control of the examiner.

USPTO Reliance on Private Sector and/or Foreign Patent Office

Prior Art Searches Will Not Improve Quality of Examination

The 21^st Century Strategic Plan provides initiatives to substitute prior art searches from certified private sector certified search services (CSSs) or search reports from foreign patent offices for searches currently done by examiners. These initiatives are enabled in the proposed new fee structure by allowing the Director to reduce fees for applicants who provide a search report that meets conditions prescribed by the Director. These proposed initiatives will not improve the quality of patent examination at the USPTO.

Examiners already have the ability to rely on searches provided by applicants in the form of Information Disclosure Statements (IDS) and/or International Search Reports (ISR) provided by a foreign patent office. Examiners routinely review these documents when they are provided in a patent application. Indeed, if an examiner were to ignore relevant prior art in these documents, such an action could be construed by Agency management as an error against the examiner’s performance rating. Experience has shown, however, that the prior art provided in these documents is seldom sufficient for examination purposes.

POPA has recently surveyed its membership on the wisdom of separating search and examination, as well as the adequacy of prior art submissions from applicants and from foreign patent offices. The results of this survey are attached herewith as Appendix 2.

Ninety five percent (95%) of examiners do not believe they will be able to issue valid patents and protect the public from unwarranted patents without doing the search themselves. Ninety six percent (96%) believe that overall quality will go down if search and examination functions are separated.

When asked the following: “In new applications where an IDS (information disclosure statement) is filed, approximately how often do you need to apply additional references when making a rejection in the application,” ninety one percent (91%) indicated that they need to apply additional art “almost all the time” (74%) or “most of the time” (17%). Only two percent (2%) said they “almost never” need to apply additional art.

Similarly, when asked the following: “In new applications containing foreign search reports, approximately how often do you need to apply additional references when making a rejection in the application,” ninety two percent (92%) indicated that they need to apply additional art “almost all the time” (69%) or “most of the time” (23%). Only two percent (2%) said they “almost never” need to apply additional art. These last results clearly illustrate the fact that U.S. patent laws require analysis and application of prior art in patent applications in a significantly different manner than do foreign patent laws.

Examiners, those most familiar with the prior art and its application under U.S. patent laws, are convinced that separating search and examination functions and increasing reliance on private sector or foreign patent office searches will negatively impact the quality of patent examination in the USPTO.

The Search Is A Sovereign Function

            Separating the search and examination will also result in tacitly transferring the sovereign functions of the United States to foreign powers. In his keynote address to the ABA, on June 27, 2002, Director Rogan indicated that the quasi-judicial determination of patentability is a sovereign function that he believed should never be contracted out. Naively, Director Rogan did not ascribe that same sovereignty to the prior art search. Contrary to Director Rogan’s position, POPA believes that the search and examination both represent sovereign functions of the United States. If, as contemplated by the 21^st Century Strategic Plan, examiners would have to rely on search results provided by a foreign patent office as the basis for patentability determination, the net effect is to delegate that patentability determination to the foreign patent office. The patentability determination can only be as good as the prior art on which that patentability determination is founded. If the search is provided by a foreign patent office, then any decision based on that search has ultimately been determined by that foreign patent office. Hence, the sovereign function of patentability determination has been indirectly delegated to a foreign power. POPA opposes such a delegation of sovereignty and opposes the proposed USPTO fee structure that would provide the Agency with the authority to make that delegation.

Deferred Examination Is Contrary to the Public Interest

And Will Increase Application Pendency

            In conjunction with separate search and examination fees, the 21^st Century Strategic Plan would allow patent applicants to defer examination up to eighteen months after filing a patent application. POPA opposes deferred examination because it is contrary to one of the underlying public interests of the U.S. Patent System, i.e., to ultimately place the knowledge and creations of inventors in the public domain, it will lengthen the period of uncertainty during which the public will not know what, if anything, is patentable, and it will further increase the total pendency of patent applications. Competitors of a patent applicant who want to invest in new facilities and processes, need to know if they are infringing any patents. These negative impacts on the public far outweigh any perceived benefit to the USPTO.

            The 21^st Century Strategic Plan touts that deferred examination would give patent applicants an opportunity to explore the economic viability of their inventions prior to having to pay the significant fees for examination. Current U.S. patent law already provides such a process in the form of a “provisional” patent application which provides a patent applicant 12 months to make the determination to go forward with patent prosecution. If the patent applicant determines that his/her application is worth pursuing, the patent applicant files a regular patent application for prosecution.

The proposed new fee structure sets the fee for a provisional application at $160. Thus, with no further changes in the patent laws, no increase in pendency before the Agency, and no increased period of uncertainty of the public, a patent applicant can purchase 12 months of deferred examination for the nominal fee of $160. POPA believes this existing process provides sufficient time for applicants to determine the economic viability of their inventions without placing undue burdens on the public.

            The Strategic Plan asserts that allowing deferred examination will decrease pendency of patent applications. The Agency is merely redefining pendency of an application by starting the time period for pendency at the time of payment of the examination fee. The Agency’s redefinition of pendency is deceptive. By redefining the starting point, the Agency has effectively discounted the increased period of uncertainty caused by the additional 18 months of deferred examination. Pendency, the total time of uncertainty experienced by the public, should be measured from the time of filing to the time of allowance or abandonment.

Fee Income Diversion

            POPA continues to join its collective voice with all those who oppose the diversion of USPTO fee income to fund other unrelated non-USPTO appropriations. POPA believes that such fee diversions represent hidden and unfair taxes on America’s inventors. If a governmental service or program is worthy of appropriation, it should be funded from appropriate taxes and general funds, not at the expense of inventors and innovators. POPA urges Congress to permit the USPTO the full use of its fee income in the year it is received.

            POPA believes the new proposed fee structure is intended to provide additional revenues for the express purpose of funding non-USPTO activities. The President’s FY 2003 budget proposal called for surcharges on patent and trademark fees to provide $162 million in additional fees to be diverted for use in funding other government programs. The new fee structure contemplates alternatives to the President’s surcharges that would still produce income levels equivalent to the 2003 budget proposal so that an equivalent sum may be diverted.

Far more ominous is the fact that the proposed fee structure would actually codify a fee structure that contemplates continued fee diversion. POPA believes this would have the effect of making fee diversions a permanent part of the USPTO appropriations process. In the absence of specific guarantees that all USPTO fees will be used for USPTO activities, POPA believes the new USPTO fee structure represents a hidden tax on inventors and would set a statutory precedent for annual fee diversions for the foreseeable future.

Limitations on the number of application claims and pages

            Although POPA opposes the new USPTO fee structure as presently written, some parts of the legislation merit further consideration. Of particular interest to examiners are the fees for additional claims and pages of the application above a threshold number. Examiners can attest to the huge increase in work required to examine patent applications as the number of claims increases. Generally, as the number of claims increases, so does the number of pages of the application. POPA is sympathetic to the Agency’s desire to exercise some form of control over the size of applications and the numbers of claims so as to manage the amount of work that needs to be done in any one case. Notwithstanding that sympathy, POPA believes that the proposed fee structure is extreme and would unduly burden patent applicants.

            POPA would welcome a more moderate fee structure in this regard if, and only if, the fees obtained were directly translated into additional time for examiners handling the burden of these more complex patent applications. This has not been the case in the past. The existing USPTO fee structure already requires additional fees for more than three independent and more than 20 total claims. These fees were imposed because it was recognized that additional claims place an additional burden on the examiner by requiring additional work. In his testimony before this Subcommittee, Director Rogan admitted that complex cases with numerous claims require examiners to spend “inordinate” amounts of time examining such cases. POPA agrees with Director Rogan on this point. Unfortunately, examiners have not been given the additional time which applicants purchased with the payment of these fees. In those very rare instances where a supervisor may provide some time for an exceptional application, the time virtually never approaches the time the examiner actually used.

            In their respective statements to this Subcommittee, both the AIPLA and the ABA have expressed support for establishing fees that represent the actual costs to the Agency to provide necessary examination services. When an application contains a significant number of additional claims, has large information disclosure statements (often disclosing a hundred or more prior art references), or requires additional considerations such as review of related cases for double patenting, it is the examiner who bears that burden. Yet the Agency does not use the additional fees from that complex application to provide additional time to that examiner. The examiner only has a very limited amount of time for each application and cannot be expected to provide the same quality examination to a complex application without additional time.

Unless examiners are given the additional time commensurate with the Agency fees for additional examination services, both existing and proposed fees for additional claims and other services represent nothing more than another hidden tax on inventors rather than a payment for examination services rendered.

THE AGENCY’S PROPOSED QUALITY INITIATIVES

            The 21^st Century Strategic Plan proposes several initiatives ostensibly for improving patent examination quality at the USPTO. These initiatives include such proposals as re-certification of primary examiners, requiring passage of the Patent Bar Exam for promotion to GS-13, quadrupling the number of work product reviews for primary examiners, and expanding the “second pair of eyes” review. POPA believes these initiatives represent a burdensome imposition of managerial authority designed to increase control rather than enhance quality.

            No amount of review and no amount of automation can ultimately improve patent examination without first providing examiners with the necessary time and resources to properly do the job. The current production quotas were put in place over twenty-five years ago and have become the largest single obstacle to quality patent examination. Since these quotas were put in place, the technological complexity of applications, the number of pages of description, the number of independent claims and the number of total claims in each application has increased substantially. In addition, there has been a veritable explosion of technology information. Furthermore, examiners have been required to provide more detailed explanations of the bases of their decisions. The old quotas no longer provide examiners with sufficient time to adequately search and examine current cases. Real increases in quality will require real increases in time per case.

            Compounding the problems of production quotas is management’s lack of support for adequate search tools to allow examiners to accurately and efficiently search the prior art. Management has, by neglect, effectively abandoned the U.S. Classification System. Fewer and fewer resources have been allocated for maintaining and updating the U.S. Classification System. Full time classifiers have been slowly phased out by attrition until finally, on July 11, 2002, management effectively abolished the job position and moved the remaining full time classifiers to hybrid classifier/examiner positions. U.S. classification of foreign patent documents ended in the mid-1990’s, effectively removing this significant source of prior art from classified searches.

The automated patent databases have also been shortchanged. Management has repeatedly failed to allocate adequate resources to finish converting the patent image database to a fully text-searchable database. While patent images are available back to 1790, the text searchable database is only adequately usable back to 1971. Management recently made available an additional database using optical character recognition (OCR). The “dirty” OCR database is, however, of such poor quality as to render it almost useless for text searching with the Agency’s current search engine. These are examples of failed management practices that have resulted in decreased quality of patent examination over time.

            The Strategic Plan quality initiatives are designed to reduce or eliminate the freedom and independent judgment of patent professionals. Patent examiners operate in a quasi-judicial capacity when making patentability determinations. The proposed quality initiatives would place the examiners under more stringent control of management and subject them to political pressures from both management and applicants, and production goals that will ultimately result in a further erosion of examination quality. This is analogous to a federal judge being under executive branch management control when making judicial decisions. It is analogous to a medical doctor having to have a diagnosis and treatment regimen approved by an accountant. At the USPTO, many supervisors manage art areas in which they, themselves, have not been trained. Hence, patent examiners well-trained in their technology, are reviewed by a generalist supervisor.

            In almost all professional positions, the professional is tested once and then expected to remain current in his profession through continuous formal and on-the-job training. Attorneys do not retake the bar exam every year or two. Doctors do not sit for their board certifications every year. Repeated testing is not the accepted way of maintaining professional standards in the private sector and neither should it be at the USPTO. POPA has always been a strong proponent of adequate and continuing training in both technology and patent laws. The patent professionals of POPA are hard-working, dedicated public servants and deserve the honor and respect of USPTO management. Rather than increasing the number of managers necessary to review one patent examiner, management should provide adequate opportunities for examiners to keep current with changes in patent laws and in their respective technologies. Adequate time and training, more than anything else, will directly result in significant improvements in patent examination quality.

CONCLUSION

            POPA opposes the proposed new USPTO fee structure and the 21^st Century Strategic Plan as presently written. We would welcome the opportunity to work together with the Subcommittee and the USPTO to develop a Strategic Plan and fee structure that would be acceptable to all parties concerned and meet the objectives of improving patent quality and decreasing patent application pendency. We will be happy to answer any questions regarding the comments we have submitted.

APPENDIX 1

APPENDIX 2

POPA July 17, 2002 Survey Results