Remarks of

**Q. TODD DICKINSON**

**ASSISTANT SECRETARY OF COMMERCE AND**

**COMMISSIONER OF PATENTS AND TRADEMARKS**

at

**PTO DAY**

**ANNUAL CONFERENCE ON PATENT & TRADEMARK OFFICE LAW AND pRACTICE**

**WASHINGTON, D.C.**

**DECEMBER 6, 1999**

**[INTRODUCTION]{.underline}**

Good afternoon, and thanks Ron for that very gracious introduction. I
also want to thank Herb Wamsley and all the IPO staff who have put
together today's program. PTO Day has become somewhat of an annual
tradition in our communities, and it's always a pleasure to be here.

I don't usually have a problem thinking of things to talk about at
forums like these. Actually, it\'s usually just the opposite. Today is
certainly no exception. In fact, with all the developments that have
recently occurred on the legislative and international fronts, I\'m not
sure how I'm going to fit everything in \-- in just 40 minutes. But
don't worry, I promise not to keep you here beyond the allotted time.

##### YEAR IN REVIEW

1999 has been an interesting -- and in some senses -- an exhilarating
time for the PTO. On the international front, we continued consultations
with other major patent offices to streamline the procedures for
securing patent protection throughout the world. This included
developing a formal proposal to simplify the Patent Cooperation Treaty
and preparation for the Diplomatic Conference on the Patent Law Treaty
next May. We also implemented the Trademark Law Treaty and continued our
efforts to simplify and harmonize the requirements for acquiring and
maintaining a trademark registration abroad.

Here at home, we implemented full production of electronic filing of
trademark applications through our award-winning TEAS system, and we
initiated the pilot phase of electronic filing of patent applications.
We made all patents issued since 1976 and all registered trademarks
freely searchable on the Internet, we launched websites devoted
specifically to independent inventors and children, and we certified our
computer systems as Y2K compliant all the way back in July. We were
selected to serve as co-chair, along with the Justice Department, of the
new National Intellectual Property Law Enforcement Coordination Council,
and later this week we will issue the 6 millionth U.S. patent.

Our issuance of the six millionth patent is really a testament to the
extraordinary value of our Nation\'s intellectual property in today's
new digital economy. The United States is currently enjoying the longest
peacetime economic expansion in history \-- an expansion credited in
large part to enhanced competition generated by new technologies. In
fact, industries that produce and manage \"knowledge\" have replaced
capital and machinery-intensive industries as the primary source of our
economic growth.

Today, economic vitality and effective intellectual property protection
are inextricably linked, and we are experiencing arguably the greatest
period of invention in human history. It took eighty years to reach the
first "millionth patent milestone," but since the issuance of the five
millionth patent in 1991 we have cut the time between these milestones
nearly in half.

**[QUALITY]{.underline}**

Before I talk about the biggest development this year -- the recently
passed patent reform bill \-- I want to say a few words about quality,
because this year we recorded the largest increases in customer
satisfaction in the history of our annual customer surveys.

As we all know, business at the PTO is booming. Patent filings were up
25% in the last two years, and trademarks applications were up nearly
25% this year alone. In fact, our workload is up over 60% since the
beginning of the Clinton Administration.

This year we received 270,000 patent applications and granted 161,000
patents. We received 290,000 trademark applications and registered
104,000 classes. We're likely to go over the 300,000 mark for patent and
trademark applications next year.

The challenges of managing this growth, improving the quality of the
work we do, and preparing our intellectual property systems for the
demands of the global electronic marketplace are significant \-- and
often stressful. Thanks to the dedication and commitment of all our
employees, however, the PTO is rising to meet these challenges.

Our overarching goal at the PTO is to provide our customers with the
highest level of quality and service in all aspects of our operations.
And this year our customers have told us that quality is up at the PTO
\-- in virtually every area. Overall, customer satisfaction in the
patents and trademarks areas increased by 5 percentage points and 6
percentage points, respectively.

In the patent area, overall satisfaction stands at 57%, up from 52% a
year ago. Not only that, the dissatisfaction rate dropped 5 percentage
points \-- to below 20%. Responses to 27 of 29 items in the patent area
improved from last year, and the majority of the improvements are in the
6 to 10 percentage point range.

Satisfaction with the quality of our patent searches increased 8
percentage points. In fact, we have seen a nearly 20 percentage point
increase in search quality in the last three years. And, based upon our
own internal, "end-check" quality review, 95.7% of prior art searches
were conducted satisfactorily.

In the trademark area, overall satisfaction increased by 6 percentage
points to 69%. This is the largest increase we\'ve ever seen in
trademarks. 87% of the respondents expressed satisfaction with the
courteousness of their treatment, and 77% indicated satisfaction with
the clarity of our communication.

Here are some actual quotes from some of the surveys:

-   "I am most pleased about the improvement in attitude across the
    board. Routinely, people are listening, trying to be helpful and
    working really hard. The improvement has been outstanding. Keep it
    up."

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-   "Improvements in performance and professionalism among USPTO
    examiners and staff have been noticeable over the last 5 years.
    Costs have also been managed well. We continue to be impressed by
    the quality of our patent office, particularly in comparison to some
    foreign patent offices where expediency, economy, and courtesy are
    seldom encountered."

Needless to say, these are outstanding comments, and they wouldn\'t be
possible without the dedication and hard work of every member of the PTO
community. I am very proud of our Examining Corps and all PTO employees.
We all should take great satisfaction in these accomplishments.

Now on to the big news that's on everybody's mind.

**[LEGISLATION]{.underline}**

As you know, before adjourning for the year, Congress passed landmark
legislation that will have a number of significant impacts on the Patent
and Trademark Office. This action came after four years of often
acrimonious debate, and it represents an important step forward for the
United States patent system and the Patent and Trademark Office. A
number of people in this room deserve credit for finally getting this
measure over all the legislative hurdles, and I want to especially
single out Herb Wamsley for all his fine work.

The patent measures, which are part of the \$390 billion omnibus
spending package signed by the President last Monday, contain the most
significant changes in our patent system since passage of the 1952
Patent Act. They will fundamentally restructure the PTO and alter the
nature of operations.

These organizational and substantive changes will go a long way in
helping our office -- and the U.S. intellectual property system -- meet
the challenges of the 21^st^ century. Perhaps most importantly, they
will enable the PTO to provide better services and be more responsive to
our customers.

The measures \-- eight separate titles in all \-- take effect on various
dates, ranging from immediately upon enactment to a year later. I have
asked Al Drost, Acting Solicitor, and Steve Kunin, Deputy Assistant
Commissioner for Patent Policy and Projects, to head up two internal
working groups to sort through the array of issues tied to
implementation. And we have already started putting together rules
packages to implement these changes.

Needless to say, it's going to be quite an undertaking. We have a lot of
decisions to make. And we're also grappling with how to fund the
start-up costs of the bill, which could run on the order of \$10 to \$20
million. All of the changes are very resource-intensive, and in light of
our overall budget picture, we may need to ask Congress for a
supplemental appropriation next year \-- or request authority to carry
over money from last year's budget. (More about that later.)

Let me briefly summarize the eight titles. Then I will go into more
detail about four of them.

#### [Title A]{.underline} provides new measures to protect inventors against deceptive practices of invention promotion companies. 

#### [Title B]{.underline} reduces patent filing fees by \$50 and patent maintenance fees by \$110. This is the second year in a row patent fees have been reduced, and it will save inventors about \$30 million annually. Title B also allows us to adjust trademark fees to ensure that trademark operations aren't subsidized by patent fees.

#### [Title C]{.underline} provides a limited defense against patent infringement to inventors who developed and used a business method prior to that method being patented by another party.

-   [Title D]{.underline} guarantees a minimum 17-year patent term for
    diligent applicants, so that they are not penalized for certain PTO
    processing delays and for delays in the prosecution of applications
    pending more than three years. Day-for-day extensions would be
    available for delays in issuance of a patent due to interference
    proceedings, secrecy orders, and appellate review.

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-   [Title E]{.underline} requires publication of patent applications 18
    months after filing, unless the applicant requests otherwise upon
    filing and states that the invention has not been the subject of an
    application filed abroad.

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-   [Title F]{.underline} provides for an optional inter-partes
    reexamination process for reviewing patent validity.

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-   And [Title G]{.underline} establishes the PTO as a performance-based
    organization, subject to policy direction by the Secretary of
    Commerce, with substantial autonomy in decision-making about the
    management and administration of our operations. It allows us to
    exercise independent control of our budget allocations and
    expenditures, personnel decisions and processes, and procurements
    and other functions.

### PBO

One of the most significant portions of the patent reform bill is its
restructuring of our office into a performance-based organization \-- or
PBO. In fact, the PTO will now be only the second federal agency in
history to be a PBO, after the Education Department's Office of Student
Financial Assistance.

I think most of us in this room would agree that the PTO needs to be run
more like a business. In keeping with Vice President Gore's successful
reinventing government initiatives, this measure gives us the
flexibility and independence to do just that -- with greater autonomy
over our budget, hiring, and procurement.

As a PBO, we will be exempt from employee hiring caps, and the
individuals who serve as the new Commissioner of Patents and the
Commissioner of Trademarks will be eligible for performance-based
bonuses.

Let me stress, that PTO employees will still retain their Title V civil
service protections. All of the existing merit protections, benefits,
pay grades, etc., afforded to federal employees still apply to us. There
will be no layoffs. Quite simply, the status quo applies in this area.

As a PBO, however, we will be freed from many bureaucratic rules, and
the measure allows us to move ahead, on our current path, toward our
relocation to the Carlyle site in Alexandria.

Effective next March 29^th^, the PTO will be headed by an individual,
appointed by the President, with the dual title of Under Secretary of
Commerce for Intellectual Property and Director of the PTO. Below that
will be a Deputy Director, whole will be nominated by the Director and
appointed by the Secretary of Commerce. Under the Deputy Director will
be a Commissioner for Patents and a Commissioner for Trademarks, each
appointed by the Secretary for 5-year terms. A Patent Public Advisory
Committee and a Trademark Public Advisory Committee, each with nine
members, will also be established to advise the Director on agency
policies, goals, performance, budgets, and user fees. Representatives of
our employee unions will be able to serve as non-voting members on both
committees.

With this new agency status, we hope to be able to retain 100% of our
fee revenue in the future. However, we still will be subject to the
annual appropriations process, which means anything can happen.

To summarize, the PBO title envisions the PTO as an organization with
two separate operating units: the Patent Office and the Trademark
Office.

[Publication]{.underline}

Of all the bill's substantive provisions, the pre-grant publication of
patent applications will likely have the greatest impact on our
operations.

Effective next November 29^th^, patent applications also filed abroad
will be published 18 months after the U.S. filing date, unless the
applicant requests otherwise upon filing and states that the invention
has not been the subject of an application filed in a foreign country.

This publication will allow American inventors to see an English
language translation of the technology that their foreign counterparts
are seeking to protect at a much earlier point than today. It will give
applicants a reasonable head start and allow others to understand the
state of the art so that they can improve upon it and make wise R&D
investment decisions. And, because we will be publishing more patent
applications, more prior art will be available than ever before.

Of course, we have a number of decisions to make about the nature of
this publication: Will publication be by paper or electronic means -- or
both? Will it be as the application is originally filed or as it looks
later on in the process? Once publication occurs, how much public access
will we provide to the publications?

Our goal, of course, is to put out a meaningful publication, at a
reasonable cost, that is useful for both examiners at the public as a
whole. One thing I can tell you is that it is likely to be in electronic
form.

[Term Extension]{.underline}

The bill's provisions to help guarantee a 17-year patent term for
diligent applicants go into effect six months after enactment -- May 29,
2000. Specifically, day-for-day extensions will be made available --
although we hope this will be a moot point \-- in what we call 14-4-4-4.
We refer to it as the 14-4-4-4 provision because it will provide term
extensions for the PTO's failure to:

-   notify an applicant of rejection or allowance of a claim within
    **[14]{.underline}** months after filing;

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-   respond to an appeal or a reply within **[4]{.underline}** months;

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-   act on application within **[4]{.underline}** months after a
    decision by the Board of Patent Appeals and Interferences or a
    decision by a federal court; and

-   issue a patent within **[4]{.underline}** months after the issue fee
    was paid.

To use a basketball analogy, we will be on a shot clock from the time an
application arrives in the office. This, of course, has major financial
and human resources implications. Again, because of the budget situation
and some of the limitations on hiring, this will be a significant
challenge. Clearly, we don't want to find ourselves in the position of
giving out carte blanche extensions. Fortunately, we currently meet
these time frames in almost all of out technology areas.

### Optional Inter-Partes Reexamination

The final, primary patent law revision in the bill establishes a
reexamination alternative that would expand the participation of
third-party requesters. It is designed to reduce litigation in district
courts and make patent reexamination a more viable and affordable
alternative to litigation.

Specifically, the bill gives third-party requesters the option of
inter-partes reexamination procedures, in addition to current ex parte
reexam. The third party is provided the opportunity to respond, in
writing, to an action by a patent examiner, but only when the patent
owner does so. Those third-party requesters would not be able to appeal
adverse decisions outside the PTO and would not be able to challenge, in
a later civil action, any fact determined during the process of the
reexamination.

This is the PTO's first effort at inter-partes reexamination, so it
presents some challenges. We now must decide what rules and processes to
put in place in order to ensure the timely handling of cases, and we
must be careful to have measures in place to tackle inappropriate
delaying tactics.

**[FY 2000 BUDGET]{.underline}**

While passage of the patent reform bill was a major victory for the PTO
and our nation\'s intellectual property system, not all that Congress
did in the waning days of the legislative session were positive
developments for our agency.

As I mentioned earlier, our near-term budget outlook is not pretty. Our
fiscal year 2000 budget is leaner than we need to do the job we're
assigned to do. Our final budget allocation has been set at \$871
million \-- \$30 million less than the amount we had requested. On top
of that, the .38% across-the-board spending reduction for all federal
agencies, which was part of the final budget agreement, means that we
will lose an additional \$3 million.

These budget cuts, coupled with the new costs associated with
implementation of the patent reform bill, mean that we have some very
difficult decisions to make. And the fact that Congress has limited our
access to fees earned from incoming work in excess of our projections
makes matters even worse.

It\'s a zero sum game, so there is going to be some pain no matter what
we do. For one thing, it may mean that we've reached the high-water mark
in pendency and cycle time improvements.

Quite simply, we're going to have to find more money -- either from
Congress or by getting access to this year's and next year's fee revenue
that Congress has reserved for our use in 2001. The reality is that if
we're going to operate like a business, we need to be funded like a
business. We're going to need the help of IPO members in making this
happen. I also want to thank our new Chief Financial Officer, Clarence
Crawford, for the excellent work he is doing in tackling these problems.

Some good news for the year I neglected to mention earlier is that our
pendency rate and cycle times are down. In the Trademark area, one year
ago we were at 7.6 months to first office action. Currently, we're down
to 4.5 months. And on the patent side, we are moving closer to our
target of 85% of patents in 12 months by 2001 and all patents in 12
months or less by 2003.

**[EAST-WEST]{.underline}**

Another area where we're experiencing some challenges is in our new text
and image database search systems - EAST and WEST. For those of you that
don't know, EAST and WEST are clients that provide access to our search
engine software - known as BRS. WEST, which is Browser-based, was first
deployed in August 1998. EAST, which is Windows-based, was deployed in
August 1999.

We installed EAST and WEST because the old search system, Messenger,
wasn\'t Y2K compliant and was limited to 200 concurrent users. The old
search system also had more than 1.5 million lines of custom code in
archaic programming languages, which made it very difficult to maintain.

The new search system can handle several hundred users at the same time.
EAST and WEST also allow examiners to easily submit a single search
transaction and concurrently search all six text databases. Under
Messenger, multi-file searching was more difficult and wasn't widely
used.

Of course, any time you install new software there are bound to be
problems, and we have had our fair share. Examiners and public searchers
have rightfully been frustrated with the bugs in the system.

I want to assure every member of the audience that we are working
aggressively to rectify the situation. We are continuously deploying new
software and upgrades to work out the performance problems.

We have installed a new server - the biggest one Hewlett-Packard makes
\-- and faster disk drives and making improvements to the EAST and BRS
software. We have also reorganized the text data base. We have
identified more than 20 \"fixes\" for Dataware to incorporate into its
BRS Search software product and they are planned to be implemented in
mid-December. We have also identified some enhancements to the BRS
Search softaware product that Dataware has agreed to include in the
1^st^ quarter 2000 release of the next version of BRS.

We also are expanding training for examiners to help them become
proficient with the new search systems. This past week we provided EAST
text search training overviews to about 1,500 examiners from all Tech
Centers. And this week we are doing 4-hour, hands-on classroom training
sessions on EAST text search. I would point out that we worked with POPA
to provide comp time for this training, but most examiners aren't using
it. I hope this will change.

At the same time, we've been working with POPA to identify
functionalities that examiners have expressed a need for. These
functions will be incorporated into new software releases as they're
developed.

This is going to be a process of continuing improvements, but I am
confident that we're well on our way to working out most of the bugs by
the end of next month. In fact, I am pleased to report that we have
achieved one of our performance benchmarks for about two weeks in a row:
80% of searches returned in 30 seconds or less. So, stay tuned.

**[TRADEMARK ELECTRONIC OFFICE]{.underline}**

Also on the automation front, and as I mentioned earlier, we are very
encouraged about the future of TEAS, our electronic trademark
application system. *Yahoo Magazine* has selected TEAS as one of the
most useful sites on the Web.

To take full advantage of TEAS and improve customer service, we will be
fully implementing the concept of \"one stop electronic shopping\" in
the Trademark Examining Operation.

Under this new system, electronically filed applications will be routed
directly to an e-Commerce focused law office for all initial processing,
examination, intent-to-use processing, and publication for opposition.
The applications will receive prompt examination, probably much faster
than their paper counterparts, and applicants will be encouraged to use
electronic communication to handle all examination activities associated
with the application. We anticipate that the e-Commerce law office will
be available to applicants some time mid- next year. This is just one
component in our efforts to aggressively automate our operations and add
new electronic business systems to serve our customers better.

In fact, next week on December 14^th^, the firm of Burns & Doane will
file the first electronic utility patent application. Again, stay tuned.

**[PATENT COOPERATION TREATY]{.underline}**

The last item I would like to touch on is a bigger picture, more global
one: our efforts to move toward a global patent system. As we look ahead
to the challenges of the 21^st^ century, we are working hard to achieve
such a system. The chief action in this regard is our proposal to simply
and streamline the Patent Cooperation Treaty (PCT). In fact, last month
in Berlin at a meeting with our Trilateral Partners in the Japanese and
European Patent Offices, I unveiled the United States\' proposal to
reform the PCT.

Although the PCT has been somewhat successful in helping patent
applicants obtain protection in a number of different worldwide markets,
it is not living up to its full potential because it is far too
complicated and rule-bound. As a practitioner myself, I know first-hand
that many inventors and patent applicants \-- in the United States and
elsewhere \-- refuse to use the PCT system because of its complexity and
perceived inefficiency.

That is why we are seeking to simplify and streamline the treaty\'s
procedures and make the PCT more \"user friendly.\" Convergence of
patent practices worldwide is not enough in and of itself.

In conjunction with the adoption of the Patent Law Treaty, the reforms
we are recommending would result in the ability to prepare a relatively
simplified application in a single format \-- preferably in electronic
form. This would be accepted by all patent offices, throughout the
world, as a national patent application or an international PCT patent
application.

At the same time, processing of such an application \-- whether
national, international or both \-- could be accomplished in a much more
seamless fashion, minimizing any distinctions between the two. In
addition, the system could move away from its current, non-binding
patentability opinions and adopt procedures where substantive rights may
eventually be granted through the PCT channel.

Our proposed changes to the PCT could be accomplished in two stages. In
the first stage, we propose that the PCT be amended to simplify certain
procedures and to conform the PCT to the draft Patent Law Treaty. These
revisions could take place in the near term \-- within the next three or
four years.

The second stage of PCT reform includes a much more comprehensive
overhaul of the entire PCT system, which would likely result in a system
bearing little resemblance to the PCT system of today. This would be a
more long-term undertaking. While not critical to either stage of PCT
reform, international substantive harmonization would enhance the
chances of success for the adoption of those proposals.

Our reform proposal received a fairly warm reception at last month's
Trilateral meeting. Our colleagues in the Japanese and European Patent
Offices recognize that there is a need for PCT reform, and they will be
giving us their comments and suggestions of their own. Over the next few
months, the Trilateral Offices will develop a proposal based on all of
these comments. This process will take some time, however, but I am
hopeful about the final outcome.

##### WTO

Lastly, let me say a few words about last week's WTO Ministerial
meeting. I attended the meetings in Seattle, and let me say that it was
quite a week. I never thought I would be tear-gassed in this job.....but
I was.

While the WTO meeting as a whole was not successful, I am pleased to
report that \-- from an I.P. perspective \-- it was a success.

The United States' principle I.P. goal going into the Ministerial was to
prevent the TRIPs Agreement from being re-opened and to maintain the
January 1^st^ 2000 deadline for compliance by developing nations.
Fortunately, we overcame tremendous pressure from the E.U. and others to
reopen TRIPs for negotiations on issues -- such as geographic
indications -- that would have compromised the agreement. Instead, we
were able to maintain the focus of WTO members on implementation of
TRIPs. We preserved the integrity of the global intellectual property
system and the protections afforded under the TRIPs Agreement. I want to
thank Bob Stoll and his staff for all their hard work in making this
happen.

**[CONCLUSION]{.underline}**

Charles Duell, the PTO Commissioner at the turn of the 20^th^ century,
stated in his annual report in 1899 that the United States\' \"future
progress and prosperity depend on our ability to equal, if not surpass,
other nations in the enlargement and advance of science, industry and
commerce. To invention we must turn as one of the most powerful aids to
the accomplishment of such a result.\"

Commissioner Duell\'s remarks were quite telling. The 20^th^ century was
a period of unprecedented invention and innovation, witnessing the birth
of entire global industries, such as aeronautics and computers. These
technological advances have spurred robust economic growth and a higher
standard of living for all Americans.

So, as the 21^st^ century dawns, I am very encouraged about the future
of the PTO and our Nation\'s intellectual property system. Thanks to our
dedicated staff and the enthusiasm of our customers, the PTO will
achieve new heights in the years ahead and continue to enable fledgling
technologies to prosper and become enduring global industries. Building
on our impressive legacy in the last one hundred years, we will continue
to do our part to ensure the United States' economic and technological
prowess in the new millennium.

Thank you very much.