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U.S. PATENT AND TRADEMARK OFFICE: FEE

SCHEDULE ADJUSTMENT AND AGENCY REFORM

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

JULY 18, 2002

Serial No. 92

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://www.house.gov/judiciary 

(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., WISCONSIN, Chairman 

HENRY J. HYDE, Illinois 

GEORGE W. GEKAS, Pennsylvania 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

BOB BARR, Georgia 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

LINDSEY O. GRAHAM, South Carolina 

SPENCER BACHUS, Alabama 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

DARRELL E. ISSA, California 

MELISSA A. HART, Pennsylvania 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

JOHN CONYERS, JR., Michigan 

BARNEY FRANK, Massachusetts 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California

PHILIP G. KIKO, Chief of Staff-General Counsel 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

HOWARD COBLE, North Carolina, Chairman

HENRY J. HYDE, Illinois 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia, Vice Chair

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

LINDSEY O. GRAHAM, South Carolina 

SPENCER BACHUS, Alabama 

JOHN N. HOSTETTLER, Indiana 

RIC KELLER, Florida 

DARRELL E. ISSA, California 

MELISSA A. HART, Pennsylvania 

HOWARD L. BERMAN, California 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York

BLAINE MERRITT, Chief Counsel 

DEBRA ROSE, Counsel 

CHRIS J. KATOPIS, Counsel 

MELISSA L. MCDONALD, Full Committee Counsel 

ALEC FRENCH, Minority Counsel 

(III)

C O N T E N T S 

JULY 18, 2002

OPENING STATEMENT 

Page 

The Honorable Howard Coble, a Representative in Congress From the State 

of North Carolina, and Chairman, Subcommittee on Courts, the Internet, 

and Intellectual Property .................................................................................... 1

The Honorable Martin T. Meehan, a Representative in Congress From the 

State of Massachusetts ........................................................................................ 3

WITNESSES 

Honorable James Rogan, Undersecretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office 

Oral Testimony ..................................................................................................... 5

Prepared Statement ............................................................................................. 7

Ms. Kathryn Barrett Park, Executive Vice President, International Trademark Association 

Oral Testimony ..................................................................................................... 25

Prepared Statement ............................................................................................. 26

Mr. Michael K. Kirk, Executive Director, American Intellectual Property Law 

Association 

Oral Testimony ..................................................................................................... 35

Prepared Statement ............................................................................................. 36

Mr. Charles P. Baker, Chair, Intellectual Property Law Section, American 

Bar Association 

Oral Testimony ..................................................................................................... 42

Prepared Statement ............................................................................................. 44

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Prepared Statement of the Honorable Howard Coble, a Representative in 

Congress From the State of North Carolina, and Chairman, Subcommittee 

on Courts, the Internet, and Intellectual Property ........................................... 3

Prepared Statement of the Honorable Howard L. Berman, a Representative 

in Congress From the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property ......................... 57

Prepared Statement of the Honorable Chris Cannon, a Representative in 

Congress From the State of Utah ....................................................................... 65

Letter from Kathryn Barrett Park, Executive Vice President, International 

Trademark Association, on the PTO’s proposal to use certified search services ......................................................................................................................... 78

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Lamar Smith, a Representative in 

Congress From the State of Texas, and Chairman, Subcommittee on Crime, 

Terrorism, and Homeland Security .................................................................... 81

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress From the State of Michigan, and Ranking Member, Committee 

on the Judiciary ................................................................................................... 84

Letter from Douglas U. Mennie, President, Cummins-Allison Corporation ....... 85

Page

IV

Letter from and Prepared Statement of Ronald J. Stern, President, Patent 

Office Professional Association ........................................................................... 87

Letter from and Prepared Statement of James O. Thomas, a citizen ................. 95

Letter from Steven Shore, President, and Beverly Selby, Executive Director, 

Alliance For American Innovation ...................................................................... 100

Prepared Statement of Biotechnology Industry Organization ............................. 103

Letter from Dan Boehnen, Current President, and Bruce H. Bernstein, Past 

President, Association of Patent Law Firms ...................................................... 108

Letter from David Peyton, Director, National Policy, National Association 

of Manufacturers .................................................................................................. 111

Letter from James E. Malacknowski, President, Licensing Executives Society . 118

Summary and Prepared Statement of Intellectual Property Owners Association ........................................................................................................................ 120

Prepared Statement of Joseph L. Ebersole, Counsel, Coalition for Patent 

and Trademark Information Dissemination ...................................................... 125

Letter from and Prepared Statement of R. Lee Grantham .................................. 128

Prepared Statement of Martha K. Taylor, President, National Association 

of Patent Practitioners ......................................................................................... 133

Letter from Carl E. Gulbrandsen, Managing Director, Wisconsin Alumni Research Foundation ................................................................................................ 138

Letter from Kathleen Cooney-Porter, Esq., Co-Chair, and Jody Haller Drake, 

Esq., Trademark Chair, Steering Committee, Intellectual Property Law 

Section, District of Columbia Bar ....................................................................... 139

Letter from Randy Rabin, President, PatentArts, Ltd., LLC ............................... 142

Prepared Statement of LeEarl A. Bryant, P.E., President, Institute of Electrical and Electronics Engineers—United States of America (IEEE-USA) ..... 144

(1)

U.S. PATENT AND TRADEMARK OFFICE: FEE 

SCHEDULE ADJUSTMENT AND AGENCY REFORM 

THURSDAY, JULY 18, 2002

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COURTS, THE INTERNET,

AND INTELLECTUAL PROPERTY, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:01 a.m., in Room 

2141, Rayburn House Office Building, Hon. Howard Coble [Chairman of the Subcommittee] presiding. 

Mr. COBLE. Good morning, ladies and gentlemen. The Subcommittee will come to order. 

My good friend and Ranking Member, the distinguished gentleman from California, Howard Berman, is elsewhere on the Hill 

today, but I think he may, hopefully, join us prior to the conclusion 

of the hearing. But he is involved with another legislative matter 

that requires his attendance there. 

Good to have you all with us today. 

Let me make a few informal statements before I present my formal statement. As you all know, we have confined ourselves during 

hearings this session to four witnesses. Others wanted to be at the 

table. Their conspicuous absence is by no means their lack of interest or that they’re being dissed by us. We’ve tried to be balanced 

as we have invited panelists. 

And I see Herb Wamsley from the Intellectual Property Owners 

group. They’ve been very helpful. 

I don’t think Robert Holleyman is in the audience. He’s more 

concerned about copyright, but to some extent patents. Robert and 

his BSA and other groups have been very helpful. 

And I will say this later in the meeting, but I want you all to 

know that any statements that want to be submitted will be received. 

And I will say now, anybody on the Judiciary Committee who 

has any statement or information regarding this matter, feel free 

to submit that as well. 

And I was going to tell Howard Berman. I haven’t had a chance 

to talk to Howard this week. This may well be one of the most significant hearings, if not the most significant hearing, that we have 

had this session and maybe even during my tenure as Subcommittee Chairman. 

2

And, Judge, unlike other times, there may be disagreements 

today. And that’s not to say that just because we’re not unanimous 

in agreement that we can’t disagree agreeably. 

You have undergone maybe the not enviable morphing transition 

of going from legislator on the one hand to a very able executive 

representative on the other. And I’m sure that doing that well. It 

may be making an old man out of you ahead of your time——

[Laughter.] 

In any event, folks, having said all that, let me give my opening 

statement. 

And I think the gentleman from Massachusetts wants to be recognized as well, do you not, Mr. Meehan, for an opening statement? 

Mr. MEEHAN. Thank you. 

Mr. COBLE. I’ll recognize you subsequently. 

Well, it’s deja vu all over again, folks. It was not that long ago 

when we met to study the operational problems that continue to 

plague the Patent and Trademark Office. As we know by now, simply shaking our collective fist at the appropriations process is not 

an adequate response. 

I believe our Subcommittee understands the necessity to work 

with our friends at the Appropriations Committee, not against 

them. We need to pursue strategies that will place the agency in 

the best possible position to maximize its administrative efficiencies, which ultimately translates into enhancing patent and 

trademark quality first, and reducing pendency and backlogs second. Only then can we play a stronger hand when requesting more 

funds on behalf of the PTO. 

Now, I said earlier we need to be friends with our Appropriations 

Committee. I don’t want anybody to misinterpret what I’m saying. 

I’m not suggesting that we no longer pursue the fight to turn off 

this diverting spigot. I want that diversion to cease and desist, on 

the one hand. On the other hand, we’re at war, and it’s not likely 

that that diversion process is going to be terminated imminently. 

But at some time, I want the spigot turned off, Judge. And I 

want those monies to be retained down there, down yonder, as we 

say in the rural South, where they belong. 

At our last gathering, I also mentioned that Jim Rogan is the 

right man to lead PTO into the 21st century. His work since that 

time makes my point yet again. The Director has aggressively and 

boldly developed a strategic business plan to transform the agency 

and make it more responsive to the needs of the user community. 

This does not mean that the Director will receive a blank check 

today or in the future. While no one in this room questions his intentions or earnestness in developing the strategic plan, there are 

many who question some of the details of the plan, starting with 

the new fee schedule, which is the focus of our hearing today. 

The user groups that subsidize the agency I believe have a right 

to critique these proposals, just as the taxpayers review the work 

of their respective Congressmen. 

I encourage the witnesses to remain candid in their testimony, 

and I am confident we will remain civil as well. Or, hopefully, we 

will remain civil as well. Knowing the parties at the table, I’m sure 

we will. After all, at the end of the day, the Subcommittee, the user 

3

groups, and the PTO want the same thing: strategies that will help 

a good agency get better. 

Finally, I know there was much demand to participate in the 

hearing today. Again, I want to encourage those parties who did 

not make the cut at the table to submit statements for the record. 

[The prepared statement of Mr. Coble follows:]

PREPARED STATEMENT OF THE HONORABLE HOWARD COBLE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF NORTH CAROLINA

‘‘Good morning. The Subcommittee will come to order. 

‘‘Well, folks, it’s deja-vu all over again. ‘‘It wasn’t that long ago that we met to study the operational problems that continue to plague the Patent and Trademark Office. As we know by now, simply shaking our collective fist at the appropriations process is not an adequate response. I 

believe our Subcommittee understands the necessity to work with our friends at the 

Appropriations Committee—not against them. We need to pursue strategies that 

will place the agency in the best possible position to maximize its administrative 

efficiencies, which ultimately translates into enhancing patent and trademark quality first, and reducing pendency and backlogs second. Only then can we play a 

stronger hand when requesting more funds on behalf of PTO. ‘‘At our last gathering I also mentioned that Jim Rogan is the right man to lead 

PTO into the 21st Century. His work since that time makes my point yet again. 

The Director has aggressively and boldly developed a Strategic Business Plan to 

transform the agency and make it more responsive to the needs of the user community. ‘‘This does not mean that the Director will receive a blank check today or in the 

future. While no one in this room questions his intentions or earnestness in developing the Strategic Plan, there are many who question some of the details of the 

plan, starting with the new fee schedule which is the focus of our hearing. The user 

groups who subsidize the agency have a right to critique these proposals just as the 

taxpayers review the work of their congressmen. I encourage the witnesses to remain candid in their testimony, and I am confident we will remain civil as well. 

After all, at the end of the day, the Subcommittee, the user groups, and the PTO 

want the same thing: workable strategies that will help a good agency get better. 

‘‘Finally, I know there was much demand to participate in the hearing today. I 

would encourage those parties who did not make the cut to submit statements for 

the record. 

‘‘I now recognize my friend, the Ranking Member from California, for his opening 

statement.’’

Mr. COBLE. I now am pleased recognize the distinguished gentleman from Massachusetts, Mr. Meehan, for an opening statement. 

Mr. MEEHAN. Thank you, Mr. Chairman. And I will be very brief. 

I too want to commend Jim Rogan for his commitment, and I too 

have confidence in his leadership. I compliment him and the PTO 

for setting forth a bold plan for reforming the PTO. While the PTO 

has done reasonably well over the years, I think that it needs to 

become more innovative, more responsive, more efficient. And I 

think this proposal will help to do that. 

What I don’t agree with and oppose is PTO’s proposal to increase 

patent fees by 50 percent or more. I just don’t think it’s a good 

idea, particularly in the face of a severe recession in the high-technology industry. 

From my perspective, the last thing we need to do is increase 

taxes on new inventions, which is my perspective of these fee increases. 

Secondly, it’s difficult to rationalize a fee increase in the face of 

the continued divergence of patent fees for other uses. This has 

gone on and become a tradition, fee divergence. And I’m disappointed the Administration is continuing this fee divergence. In 

4

2003 alone, I think the Administration will divert $162 million in 

patent fees to unrelated programs. 

This is at a time where there an excessive, obviously, backlog on 

patent application. 

So it seems that it’s a budgetary shell game. Members of the 

Committee here have tried to stop it. And we need to do everything 

we can to try to stop that. 

So I appreciate, as I say, Mr. Rogan’s effort. Look forward to 

working with you and Members of the Committee on this important issue. 

Thank you, Mr. Chairman. 

Mr. COBLE. I thank the gentleman. And I will remind everyone 

that neither the Democrats nor the Republicans own a corner of 

the diversion market. Each have inserted their grubby paws into 

the coffers down there. I said it before. I say it to Democrats. I say 

it to Republicans. I’m bipartisan to that extent. 

We’ve been joined by our good friend from the Smoky Mountains 

of east Tennessee. Mr. Jenkins, do you have an opening statement? 

Mr. JENKINS. Thank you, Mr. Chairman. No, I do not have an 

opening statement. 

Mr. COBLE. Thank you, sir. 

Our first witness today is Jim Rogan, the Undersecretary of 

Commerce for Intellectual Property and Director of the U.S. Patent 

and Trademark Office. He was nominated by President George W. 

Bush on May 25, 2001, and confirmed by the U.S. Senate on November 30, 2001. We all remember him as a valued colleague who 

served on our Subcommittee from 1997 to 2001. 

Judge Rogan had a distinguished career in public service. He 

was a gang murder prosecutor in the Los Angeles County District 

Attorney’s Office, and became California’s youngest sitting State 

court judge in 1990 prior to his election to California State Assembly in 1994. Judge Rogan earned a B.A. degree from the University 

of California at Berkeley in 1979, and his J.D. from the UCLA 

School of Law in 1983, where he served as a member of the UCLA 

Law Review. 

Our next witness is Ms. Katherine Barrett Park, trademark 

counsel for the General Electric Company. She is testifying in her 

capacity as executive vice president of the International Trademark 

Association, commonly known as INTA. 

Ms. Park previously was vice president and senior intellectual 

property counsel of NBA properties and has worked in private 

practice. During her legal career, she has concentrated on trademark and copyright law, with special emphasis on trademark prosecution, enforcement, and licensing. Ms. Park is a graduate of 

Brown University and the Colombia University School of Law. 

Our next witness is Mike Kirk, unknown to no Member of this 

Subcommittee. That’s not to say that the rest of you are unknown 

either, but Mike Kirk we see frequently up here. It’s good to see 

you again, Mr. Kirk. 

Mr. Kirk served, as you know, as the executive director of the 

American Intellectual Property Law Association. In 1993, Mr. Kirk 

served as the acting assistant secretary of Commerce and acting 

commissioner of patents and trademarks. From May 1994 through 

March 1995, he served as deputy assistant secretary of Commerce 

5

and deputy commissioner of patents and trademarks. Mr. Kirk 

earned his bachelor of science in electrical engineering at the Citadel, his juris doctorate from the Georgetown Law Center, and his 

master of public administration from Indiana University. 

Our final witness today is Mr. Charles P. Baker, who is currently 

Chair of the Intellectual Property Law Section of the ABA and a 

member of the ABA Section Division Committee on Professionalism 

and Ethics. Mr. Baker is a partner with Fitzpatrick, Cella, Harper 

& Scinto, a New York law firm comprised of 150 lawyers specializing in all aspects of intellectual property law. 

Mr. Baker obtained his J.D. from the University of Virginia and 

a bachelor of engineering physics from Cornell University. He is 

admitted to the New York State Bar and several Federal bars. 

Good to have each of you with us. We have written statements 

from all the members of the panel, and I ask unanimous consent 

to submit them into the record in their entirety. 

I ask that each witness limit his oral statement to 5 minutes. As 

you know, we try to comply with the 5-minute rule. We will not severely penalize you if you violate that. But when you see the red 

light appear in front of you, you know that’s your sign to begin to 

wrap it up. 

We apply the 5-minute rule to ourselves as well, as we question 

you all after you submit your testimony. 

Mr. Rogan, we will start with you, Judge. Good to have you back 

on the Hill. 

STATEMENT OF THE HONORABLE JAMES ROGAN, UNDERSECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY 

AND DIRECTOR OF THE U.S. PATENT AND TRADEMARK OFFICE 

Judge ROGAN. Mr. Chairman, thank you. Thank you for that 

very generous introduction. 

Mr. COBLE. Jim, if you would pull that mike a little closer to you, 

please? Thank you. 

Judge ROGAN. Mr. Chairman, thank you for the introduction and 

for calling the hearing. 

I also want to thank my friend from Massachusetts for his very 

kind comments. 

I appreciate our Ranking Member’s unenviable duty today. I 

know he’s been very engaged in this issue, and were he not called 

to something that none of us envy him for, I know he would be 

here also. 

Mr. Chairman and Members of the Committee, 3 months ago, I 

testified before the Subcommittee that the U.S.P.T.O. was facing a 

crisis due to our increasingly large and complex workload. To tackle this head on, and in keeping with the expectations of the Administration, Congress, and owners of intellectual property and the 

patent bar, I said that we would put forward a comprehensive plan 

to enhance quality, reduce pendency, and transform the agency 

into an information age, e-commerce-based organization. 

This plan does precisely that and pursues four main objectives. 

It improves quality, which is our first and foremost objective. It reduces pendency. It listens more closely to our applicants and the 

demands of our national and global marketplace. And it allows us 

6

to be more productive while hiring 2,500 fewer examiners than the 

previous plan anticipated, and spending half a billion dollars less 

than the previous plan had anticipated. 

If Congress provides us with the funding and statutory changes 

necessary for implementation, this plan shows our benchmark for 

reaching a quality-driven 18-month average pendency for patents, 

by far the fastest in the world, accomplished through a reform of 

the entire patent search and examination system, greater reliance 

on outside searches, and incentive-driven fees. 

Mr. Chairman, in the Committee’s call to order, it said that I 

would be here to defend the plan. I’m not sure if that’s the way it 

should be phrased, because if a defense is needed, perhaps it 

should be for those who want to defend the status quo. It’s simply 

unacceptable. 

But if the Committee needs a defense for this aggressive plan, 

I would offer it in two sentences. One comes from the House of 

Representatives, and one comes from the Senate. Listen to what 

both houses said in their report language last year. 

The House said, ‘‘The Patent and Trademark Office is unable to 

meet the demands of the increasing number of patent applications. 

With the increased funding the office has received in the past, 

there is no measurable increase in performance. The PTO has been 

unsuccessful in proving that increased funding will decrease the 

amount of time it takes an applicant to receive a patent.’’ This from the Senate, Mr. Chairman. The Senate said ‘‘the PTO 

has failed to provide a thorough business plan that demonstrates 

how resources will be used and what results will obtain. Second, 

PTO management has not been sufficiently innovative. Although 

patent filings have increased dramatically over the past decade, 

PTO management chose to remain wedded to an archaic patent 

process and attempted to hire its way out of its workload problems. 

Substantial amounts of funds have been expended on information 

technology projects over the last decade, but no significant increase 

in examiner productivity has been noted. Finally, the Committee 

lacks full confidence in the information provided to it by PTO management regarding its needs and performances.’’

Make no mistake, Mr. Chairman, implementation of this plan 

will not be painless. It challenges the status quo. It is far-reaching. 

It is predicated on behavioral changes from within the PTO and 

also from within our user community. 

Our proposed fee schedule compares quite favorably with the fees 

of other foreign offices, particularly with Japan, whose equivalent 

fees are twice what we are suggesting. In the European office, 

they’re about four or five times what we are suggesting. 

Other fees are punitive, and I will repeat that they are meant 

to be punitive, not to collect revenue, Mr. Chairman, but to discourage behavior that is crippling our ability to provide a quality and 

timely patent. 

Our agency does not have the luxury of sitting back and waiting 

for fee diversion to end. Diversion is an issue that Congress and 

the Administration are discussing. They will continue those discussions. 

However, the U.S.P.T.O. must move forward now, not tomorrow, 

to give American intellectual property the protection it deserves. 

7

Our plan is the only existing plan that addresses all the challenges 

facing our agency and does it within the expectations set before us 

by the Congress and by the President. 

Mr. Chairman, Franklin Roosevelt once said, ‘‘Try something. If 

it doesn’t work, try something else. But try something.’’ I throw 

that quote in to appeal to my friends on the other side of the aisle. 

Mr. Chairman, through this plan, we’re trying to try something. 

If it doesn’t work, we’ll try something else. But we must try something. And this is a starting point for that discussion. 

Thank you, Mr. Chairman. 

[The prepared statement of Judge Rogan follows:]

PREPARED STATEMENT OF JAMES E. ROGAN

Mr. Chairman and Members of the Subcommittee: 

Thank you for this opportunity to appear before you once again to discuss the future of the United States Patent and Trademark Office (USPTO). As always, Mr. 

Chairman, it is a pleasure to work with you, Ranking Member Berman, and the 

other members of the Subcommittee on the array of intellectual property issues 

which are so vital to our nation’s economic security. 

A little over three months ago, this Subcommittee conducted an important oversight hearing on the operations and funding of the USPTO. At that hearing, I described the rather grave situation that confronted the agency due to our increasingly 

large and complex workload. For example, an estimated seven million patent applications are currently pending in the world’s examination pipeline, and the annual 

workload has been growing at a rate of 20–30 percent. Because of this unprecedented growth, patent pendency rates in the United States now average over two 

years, and without significant changes to our method of processing applications, 

data shows pendency soon will reach three to four years. The backlog of unexamined 

patent applications continues to grow as well. We currently have a backlog of approximately 400,000 applications, and this year we project we will receive a total 

of 340,000 new patent applications. To complicate matters, the technologies we are 

examining are increasingly complex, with applications sometimes accompanied by 

the equivalent of millions of pages of supporting data. 

At the April oversight hearing, I indicated that these trends might necessitate 

fundamental changes in the way USPTO operates if we are to accomplish our mission in a timely and quality-focused manner. To that end, earlier this year I initiated an aggressive top-to-bottom review of the agency to identify new and possibly 

nontraditional ways to improve quality and reduce pendency. Today I am pleased 

to report that, after a considerable team effort, that review is now complete. Most 

importantly, based upon our review, we have put forward a comprehensive plan—

the 21st Century Strategic Plan—to transform the USPTO into a quality-focused, 

highly productive, responsive organization supporting a market-driven intellectual 

property system. This Plan will boost productivity and substantially cut the size of 

the USPTO’s inventory while transforming the agency into an information age, ecommerce based organization that reflects the values of President Bush’s Management Agenda. 

In proposing this plan, Mr. Chairman, the USPTO has stepped up to the plate 

and heeded the calls of the Administration, Congress, the owners of intellectual 

property, the patent bar, and the public-at-large to boldly address the challenges of 

improving quality, reducing pendency, and promptly implementing e-Government. 

Not surprisingly, the 21st Century Strategic Plan is not without controversy. It 

challenges the status quo and is far-reaching. I submit, however, that anything less 

would fall woefully short of what the times demand. Furthermore, it is the only existing plan that addresses all of the challenges facing the agency, and does so within 

the expectations articulated by Congress and the Administration.

The 21st Century Strategic Plan is the USPTO’s roadmap for creating, over the 

next five years, an agile and productive organization fully worthy of the unique 

leadership role the American intellectual property system plays in the global economy. The Plan is predicated on behavioral changes within the USPTO and a willingness to embrace change among all players in the intellectual property system. 

The Plan is intended to incorporate the best ideas of American inventors and creators, as well as our counterparts in other industrialized countries. It takes a global 

8

perspective by envisioning the patent and trademark systems of the future that 

American innovators will need to remain competitive around the world. It is built 

on the premise that American innovators need to obtain enforceable intellectual 

property rights here and abroad as seamlessly and cost-effectively as possible. The 

Plan emphasizes the need for the USPTO to collaborate with other intellectual property organizations in automation, global patent classification, and mutual reliance 

on search results. 

The 21st Century Strategic Plan pursues three main objectives. First, make 

USPTO’s processes simpler, faster, and more accurate. Second, listen more closely 

to the voices of USPTO applicants and to the demands of the national and global 

marketplaces. Third, be more productive while hiring 2,500 fewer examiners than 

was proposed under the 2003 Business Plan—and spending half a billion dollars 

less than originally planned. 

The new initiatives in our Strategic Plan are targeted toward timeliness, e-Government, employee development and competitive sourcing—all with a central quality focus. If Congress provides the USPTO with the funding and statutory changes 

necessary to implement this new strategy, the Plan will:

• Enhance the quality of patent and trademark examining operations through 

consolidation of quality assurance activities in fiscal year (FY) 2003.

• Transition from paper to e-government processing for trademarks by October 

1, 2003.

• Accelerate deployment, by leveraging outside resources, of a fully operational 

system to process patent applications electronically by the end of 2004.

• Achieve an average time to first action in patent applications that is more 

than 50 percent lower than the time projected in the original 2003 Business 

Plan (i.e., in 2008 5.8 months from time of request for examination rather 

than 12.3 months from time of filing).

• Achieve and maintain 18 months patent pendency (from time of request for 

examination) by 2008, compared to over 25 months (from time of filing) in the 

2003 Business Plan.

• Reduce total patent examiner hires through FY 2008 by 2,500 compared to 

the 2003 Business Plan projection. We still plan to hire 3,000 examiners 

through FY 2008, but Congress has made clear that our hiring goals in the 

2003 Business Plan were unrealistic.

• Competitively source classification and search functions, thereby concentrating Office expertise as much as possible on the core examination functions.

• Expand our bilateral and multilateral discussions to strengthen intellectual 

property rights globally and, through work sharing, reduce duplication of effort among major industrial offices.

Here are some specifics on the Plan’s initiatives for improving quality and reducing pendency. 

Quality must permeate every action taken by every employee of the USPTO. Accordingly, this Plan will assure quality by hiring the people who make the best patent and trademark examiners, certifying their knowledge and competencies throughout their careers at the USPTO, and focusing on quality in all aspects of the examination of patent and trademark applications. In addition, current quality assurance 

programs will be enhanced by integrating reviews to cover all stages of examination. 

For example, quality will be engineered into our processing, including the selective 

expansion of the ‘‘second-pair-of-eyes’’ review in advanced fields such as semiconductors, telecommunications, and biotechnology. A statistically meaningful sample of all 

first actions and final actions will be pulled on a continuous basis and reviewed for 

quality and correctness, and information regarding examination errors will be used 

for training and continuous quality improvement actions. We believe these initiatives will bolster confidence in the quality of U.S. patents and trademarks, thereby 

spurring our economy and reducing litigation costs. 

With respect to pendency, the 21st Century Strategic Plan would ensure a steady 

18-month average examination duration time for patents—by far the fastest in the 

world—and a 12-month pendency time for trademarks. This will be accomplished 

through a radical redesign of the entire patent search and examination system 

based upon four examination tracks, greater reliance on outside searches, and variable, incentive-driven fees. Likewise, trademarks will restructure the way it does 

business to be compatible with an e-Government environment. 

For patents, the single-track examination process will be replaced by four examination options that leverage search results of other organizations and permit appliVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
9

cants to choose the timing of the processing of their applications. As part of this 

new process, the current basic filing fee (which now covers both the search and the 

examination) will be replaced with a filing fee and separate examination fee. This 

will allow applicants to file an application and delay deciding whether to request 

examination for as long as 18 months from the earliest U.S. filing date, giving them 

time to obtain a commercially provided search regarding patentability and to decide 

whether the application has sufficient commercial value to justify the costs of having an application examined. This change will eliminate duplication of effort, encourage greater participation by the applicant community and public, improve the 

quality of patents, and decrease processing time. Indeed, we anticipate that requiring a separate request for examination and a separate examination fee could create 

a pre-examination ‘‘dropout’’ rate of about 10 percent of all applications. It should 

be noted that this figure is a conservative estimate, and other industrial property 

offices have even higher dropout rates. However, only actual experience with the 

new system will show how much currently needless work will be saved. 

In order to achieve greater examiner productivity and reduce pendency, the Plan 

also calls for outsourcing search and classification processes using USPTO-certified 

search and classification firms and international patent searches. With approximately 45 percent of the USPTO’s applications coming from foreign applicants who 

have filed in other patent offices first, this initiative will enable us to leverage the 

work product from those other offices. This will result in increased productivity for 

the USPTO and reduce the Office’s need to hire additional patent examiners. 

In addition to separate filing and examination fees, other proposed revisions to 

our fee structure in fiscal year 2003 include charging higher fees for longer applications with more claims and charging less for shorter applications with limited 

claims. Patent applicants also will be given a new market-driven ‘‘rocket docket’’ option of choosing an accelerated examination procedure with priority processing and 

a pendency time of no longer than 12 months. We are still finalizing the details for 

the ‘‘rocket docket’’ process, however, so this option is not part of our proposed FY 

2003 fee legislation. 

Let me make two important points on the proposed fee changes. First, enactment 

of our proposed FY 2003 fee legislation, while laying the groundwork for reforms 

of the examination system such as four-track examination, only directly impacts our 

fee structure. Separate legislation will need to be enacted next year in order to fully 

institute the needed changes to the examination system. Second, the Plan’s proposed 

USPTO fee schedule compares quite favorably with the fee schedules at other major 

industrial property offices. For example, equivalent filing, issue and maintenance 

fees in the European Patent Office and the Japan Patent Office would be approximately $54,000 and $24,000, respectively, compared to our proposal of $12,000. 

Once the 21st Century Strategic Plan is implemented, market forces will drive our 

business model. Fees will remain steady for the foreseeable future. Geography and 

time will be irrelevant when doing business with the USPTO. We will strengthen 

our ability to be ranked as one of the highest quality, most-efficient intellectual 

property organizations in the world. Our products and services will be tailored to 

meet the needs of customers. Examination will be our core expertise. U.S. industry 

and the public will benefit from stronger, more enforceable intellectual property 

rights worldwide. Our workplace will become a state-of-the art facility designed for 

the 21st Century. 

The 21st Century Strategic Plan will create a nimble, flexible enterprise that responds rapidly to changing market conditions. Under the Plan, we will make the 

USPTO a premier place to work; we will rely on a cadre of highly trained and 

skilled employees; and we will place greater reliance on the private sector, including 

drawing on the strengths of the information industry. We will enhance the quality 

of work life for our employees by exploring expansion of work-at-home opportunities 

and moving to the new Carlyle campus facility in Alexandria, Virginia. In addition, 

we will establish alliances with our friends in other national and international intellectual property organizations to strengthen American intellectual property rights 

around the world.

This Strategic Plan reflects both a thorough internal process review and a systematic attempt to incorporate the best thinking of our applicants, USPTO career experts, and the experiences and best practices of intellectual property offices in other 

countries. We are grateful for the wisdom and experience of the many individuals 

who contributed to the Plan’s development, and for the candor and positive spirit 

of representatives of industry groups and other associations who shared their views. 

Key stakeholders also include our dedicated employees, without whose commitment 

10

the Strategic Plan could not have been developed and its success could not be assured. 

This Strategic Plan is only the first step toward creating a quality-focused, highly 

productive, responsive USPTO that supports a market-driven intellectual property 

system for the 21st Century. Once the initial phases of this Plan have been supported, adopted and implemented, the USPTO will explore further options to enhance its ability to operate more like a business. 

We intend to refine and update our Strategic Plan periodically to adjust to changing conditions and to incorporate the best thinking of the entire intellectual property 

community. We are eager to work with those who believe, as we do, that American 

innovators and businesses must have the very best intellectual property system in 

the world. This 21st Century Strategic Plan represents an important first step in 

the pursuit of this goal.

Mr. Chairman, the 21st Century Strategic Plan is yet another manifestation of 

the Bush Administration’s firm commitment to ensuring that the USPTO continues 

to lead the world in producing the most timely and reliable intellectual property 

rights protection for American innovators. I am hopeful that the continued support 

of the members of this Subcommittee, coupled with the Administration’s dedication 

to our agency, will enable the USPTO to meet the challenges that lie ahead. 

Implementation of the 21st Century Strategic Plan will not be painless. It will require new ways of thinking among USPTO employees and our users. It will depend 

upon our ability to streamline operations and the enactment of President Bush’s 

budget request to fund these needed changes. It will require revisions to current 

rules. It also will require congressional support for enacting legislation relating to 

our fee schedule and examination system. 

Change is never easy, and there are those who say that they cannot support a 

fee increase until USPTO is allowed to retain all of its fee revenue. The USPTO 

does not have the luxury of sitting back and waiting for that to occur. As many have 

stated before this Subcommittee, the Office is in crisis and bold action is needed. 

Mr. Chairman, we have embraced the counsel of many and put forth an innovative, comprehensive plan for the future. We have upheld our end of the bargain. As 

noted earlier, the 21st Century Strategic Plan is the only plan that exists that addresses all of the challenges facing the Office and does so within the constraints imposed by Congress and the Administration. However, it is only a first step, and it 

must remain a continual work in progress. President Franklin D. Roosevelt once 

said: ‘‘Try something; if it doesn’t work, try something else. But for goodness sake, 

try something.’’ We have heeded that advice. If aspects of the Plan fail to meet expectations, we will say so and try something else. But failure to try is no longer 

an option. 

We need the support of this Subcommittee and of our user community to ensure 

the USPTO can do the job our Founding Fathers intended us to do: make the 

USPTO the world’s premier intellectual property office. This Plan offers a modern 

day roadmap to remain faithful to their vision.

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Mr. COBLE. Thank you, Judge, for your comments. Thank you. 

Ms. Barrett Park. 

STATEMENT OF KATHRYN BARRETT PARK, EXECUTIVE VICE 

PRESIDENT, INTERNATIONAL TRADEMARK ASSOCIATION 

Ms. BARRETT PARK. Good morning, Mr. Chairman. On behalf of 

the over 4,100 members of the International Trademark Association, I want to thank you, Mr. Coble, particularly for your consideration in providing INTA the opportunity to share the views of 

America’s brand owners concerning proposed increases to trademark fees at the U.S. Patent and Trademark Office. 

INTA’s interest in the PTO comes from the fact that trademark 

owners, along with our patent colleagues, supply the agency with 

100 percent of its funding. In short, we are the PTO’s customers, 

and the PTO’s future is our concern. 

Mr. Chairman, INTA has always been a strong supporter of a 

modern and efficient PTO. We worked alongside this Subcommittee, for example, to pass the American Inventors Protection 

Act, and we have consistently supported the PTO in its efforts to 

increase voluntary usage of the e-filing system and other new technologies. 

INTA concurs with the statement in both the Chairman’s and 

Congressman Meehan’s opening statements that Undersecretary 

Rogan has showed bold leadership with the development of the new 

strategic plan, an endeavor that seeks to transform the agency over 

a 5-year period into a quality-driven, productive, and cost-effective 

organization that is capable of supporting an international marketbased international property system. 

I want to thank Undersecretary Rogan for his initiative and note 

our support for the concepts that lie behind the strategic plan. Our 

support for those concepts, however, does not mean that we are 

prepared at this time to endorse the trademark fee increase in section 5 of the proposed reauthorization legislation. The proposed 

language is so broad, it gives the Director unlimited authority to 

raise trademark fees in fiscal year 2003. There are no limits as to 

how high the fees can be raised, what fees can be raised, or how 

many times those fees can be raised. It is premature for the PTO 

to ask Congress to authorize trademark fee increases when the 

need for these increases has not been established. 

The strategic plan has just been unveiled. The specific plan we 

have in front of us today is not likely to be the final product. As 

the plan’s details are reviewed, intellectual property owners will no 

doubt have differences with the PTO and alternative proposals to 

share. 

Already, INTA’s members are voicing concerns about proposals to 

allow the Director to set response time to trademark office actions 

through regulation and mandatory use of certified search services 

in order to receive certain benefits, such as expedited examination. 

There will no doubt be other issues that require discussion. We 

trust that the Congress also will weigh in with its own ideas and 

suggestions. Once it is clear exactly what elements of the plan will 

be adopted, we need to carefully evaluate the cost to implement 

those changes and the degree to which existing fees will cover that 

cost. 

26

It should not be automatically assumed that a fee increase will 

be necessary. After all, the current fee structure reflects the cost 

of processing what has been predominantly a manual, paper-based 

system. 

With the widespread implementation of technological initiatives 

envisioned by the strategic plan, the cost of trademark processing 

may decrease, leaving current fee incomes sufficient to cover the 

costs of the plan. Even if fee increases for PTO operations are ultimately justified, their implementation will be meaningless if the 

money does not stay with the agency. And I’m referring to the annual battle over the diversion of PTO user fees. 

In the President’s budget proposal for PTO funding for fiscal year 

2003, the Administration advocated a surcharge on America’s intellectual property owners that would raise an additional $207 million 

in revenue, with $162 of that $207 million relegated to the general 

Treasury for disbursement elsewhere in Government. 

This surcharge approach has since been replaced with the reauthorization legislation we’re considering today. 

Whatever the means of the proposed fee increases, there remains 

one inescapable reality: The Administration has not renounced its 

intent to fill at least part of that $162 million revenue shortfall 

with PTO money. Unless controls are put in place, any PTO fee increase will provide a considerable portion of revenue to fill that 

gap, essentially imposing a tax on America’s intellectual property 

owners. 

While there may be a need at some point for additional revenue 

to support the initiatives associated with the strategic plan, we are 

simply not there yet. There remains much work to be done on 

which specific proposals will be included in the end product. 

INTA and its members look forward to being part of that constructive dialogue. We need to ensure that the PTO can effectively 

protect America’s ideas and its creativity while spending every last 

dollar of fee revenues to improve services to customers. 

That concludes my opening statement, Mr. Chairman. I thank 

the Subcommittee once again for this opportunity. And I look forward to answering your questions. 

[The prepared statement of Ms. Barrett Park follows:]

PREPARED STATEMENT OF KATHRYN BARRETT PARK

INTRODUCTION

Good morning, Mr. Chairman. My name is Kathryn Barrett Park and I currently 

serve as the executive vice president of the International Trademark Association 

(‘‘INTA’’). I am employed by INTA member General Electric Company as trademark 

counsel. As do all INTA officers, board members and committee members, I serve 

on a voluntary basis. 

INTA is grateful for this opportunity to assist the Subcommittee on Courts, the 

Internet and Intellectual Property in its consideration of statutory and regulatory 

fee increases for trademarks that have been proposed by the U.S. Patent and Trademark Office (‘‘PTO’’). They are:

• An unlimited and potential across the board increase in all trademark fees 

[Statutory].

• A $50 increase on documents submitted on paper for which an electronic form 

is available [Regulatory].

• An increase to reflect fluctuations in the Consumer Price Index (CPI) [Regulatory].

27

1See http://www.uspto.gov/web/offices/com/strat2001/index.htm. 2 United States General Accounting Office, Intellectual Property: Fees Are Not Always Commensurate With the Costs of Services, 32 (May 1997). 3 United States Patent and Trademark Office, Fee Legislation: United States Patent and 

Trademark Office Reauthorization Act, Fiscal Year 2003, http://www.uspto.gov/web/offices/

com/strat2001/21stCSP—Legislation.pdf, 7 (July 5, 2002). 4 United States Patent and Trademark Office, Purpose and Need for Proposed Statutory 

Changes to 35 U.S.C. 41—Fees 1, http://www.uspto.gov/web/offices/com/strat2001/21stCSP—

Legislation.pdf, 1 (July 5, 2002). 5 Id.

While we support the goals associated with modernizing the PTO and encouraging 

greater use of new technologies, we are opposed to these fee increases for three reasons:

(1) The elements of the PTO’s 21st Century Strategic Plan have not yet been 

agreed upon by the intellectual property community and Congress, and 

therefore the amount of money needed to implement the plan is not yet capable of ascertainment.1

(2) The PTO has not made a clear and convincing case that the additional 

money is needed to cover the cost of current services.

(3) More importantly, we must oppose any fee increases when we know that a 

significant portion of the money that our members pay as a result of those 

increases will be siphoned off for government agencies and programs completely unrelated to the PTO. This diversion of funds is a tax on every customer of the PTO—large or small—and whether or not the programs to 

which PTO funds are diverted are laudable, they should not be funded in 

a manner that places at risk the protection afforded to America’s creativity 

and ingenuity. 

INTA

INTA is a 124-year-old not-for-profit organization comprised of over 4,100 member 

companies and firms. It is the largest organization in the world dedicated solely to 

the interests of trademark owners. The membership of INTA, which crosses all industry lines and includes both manufacturers and retailers, values the essential role 

that trademarks play in promoting effective commerce, protecting the interests of 

consumers, and encouraging free and fair competition. The members of INTA, who 

routinely apply for and maintain trademark registrations, along with patent filers 

and owners, are the customers of the PTO. The money paid to the PTO by its customers is the agency’s sole source of funding. The PTO attends to its responsibilities 

without the assistance of a single penny of taxpayer money.2

THE PROPOSED ACROSS THE BOARD INCREASE

Section 5 of the proposed reauthorization legislation now before this subcommittee 

states with respect to trademarks:

For fiscal year 2003, the Director may adjust fees under section 31 of the Trademark Act of 1946 by amounts in excess of fluctuations during the preceding 12 

months in the Consumer Price Index, as determined by the Secretary of Labor, 

without regard to any other provision of law.3

This broad, sweeping language, for all intents and purposes, provides a blank 

check for the PTO. There are no limits on how high the director may raise fees, 

which fees he may raise, or how many times he may raise them during FY 2003. 

INTA urges Congress not to sign this check. Before any additional funding is agreed 

upon there must be a better accounting of what precisely this money is needed for, 

and, if the need is established, language inserted in the legislation that specifies 

which fees will be raised and by how much, and a limit on the number of times 

the fees may be raised during the fiscal year. 

The PTO states that this fee increase is required to:

(1) More accurately reflect the costs of services provided.4

(2) ‘‘[E]nsure that there [is] no delay in the implementation of the USPTO’s 

new initiatives at improving the quality of granted patent and trademark 

registrations, increasing efficiency through e-Government programs, and reducing pendency in processing applications for patents and for registration 

of trademarks,’’ all of which are part of the PTO’s proposed 21st Century 

Strategic Plan.5

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6 INTA has concerns about certain elements of the strategic plan. For example, the use of certified search services and of the ID manual in order to obtain expedited examination at the lowest cost, and the ability of the director to set response times through regulation, to name a few. 7See http://www.uspto.gov/web/offices/com/strat2001/index.htm at T–02 8 In FY 2002, as a result of ‘‘scoring,’’ approximately $44 million of PTO revenue was diverted. 

The president’s proposed budget for that year, asked for a withholding of $207 million in PTO 

money to be used as ‘‘ ‘offsetting collections’ to be made available for other government programs.’’ (Note, PTO Funding Clears House Without Amendment on Drug Patents, 140 Bureau 

of National Affairs: Regulation, Law and Economics A4 (July 23, 2001)). For FY 2001, the final 

number was $116 million. The then administration proposed a diversion of $113 million. (See

Note, House Refuses to Restore Funding Cut to Patent and Trademark Office, 124 Bureau of National Affairs A10, 11 (June 27, 2000)). 9 67 Fed. Reg. 35081 (2002). 

With respect to the costs of services, the PTO has not provided to its customers 

and, as far as we can tell, to the Congress, any detail whatsoever as to which costs 

are out of line with the fees now charged. As for the strategic plan, we applaud 

Under Secretary Jim Rogan for his strong leadership in undertaking this creative 

endeavor. The plan seeks to transform the agency over a five-year period into a 

quality-driven, productive and cost-effective organization that is capable of supporting an international market-based intellectual property system. As is noted at 

the outset of this statement, INTA supports these goals, and we look forward to 

working with the PTO to refine the details of the plan. 

The strategic plan has just been unveiled, however, and consultation between the 

PTO and Congress and the private sector is at an early stage. At best, it is premature for the PTO to ask Congress for unfettered authority to raise trademark fees 

when the need for this increase has not been established. As the consultation process continues, intellectual property owners may have differences with the PTO and 

offer alternative proposals.6 We trust that the Congress will need time as well to 

study what the PTO has proposed and weigh in with its own suggestions. 

Once it is clear what elements of the plan will be adopted, there will need to be 

a careful evaluation of the cost of implementing the plan and the degree to which 

the existing fees will cover that cost. It should not be automatically assumed that 

a fee increase will be necessary. After all, the current fee structure reflects the cost 

of processing what has predominately been a paper-based, manual system. With the 

widespread implementation of electronic filing and other technological and operational initiatives envisioned by the strategic plan, the costs of trademark processing may decrease, leaving current fee income sufficient to cover the costs of implementing the plan. Indeed, the strategic plan contemplates substantial savings 

from the move to an electronic processing system. The ‘‘Trademark E-Government’’ section of the plan indicates that ‘‘[i]t is anticipated that costs for handling applications and related materials, and reliance on increasing numbers of employees or 

contractors to handle increases in filings, will be substantially reduced as the reliance on paper disappears from internal processes.’’ 7 In any event, the basis for any 

fee increases must be specifically identified, agreed upon, and justified before Congress authorizes such an increase. 

Even if fee increases for PTO operations can be justified, their implementation 

would be meaningless if the money raised does not stay with the agency. We are 

referring to the now five-year-old battle over the diversion of PTO money derived 

from user fees.8

In the president’s budget proposal for PTO funding for FY 2003, the administration advocated a surcharge on America’s intellectual property owners that would raise an additional $207 million in revenue. Only $45 million of this money would 

have been returned to the PTO. The remaining $162 million would have been relegated to the general treasury for disbursement elsewhere in the government. This 

surcharge approach has since been replaced with the reauthorizing legislation that 

is now before this subcommittee. 

Whatever the means of the proposed fee increases, there remains one inescapable 

reality: the administration has not renounced its intent to fill at least part of the 

$162 million revenue shortfall in the general treasury with PTO money. Unless controls are put in place in this reauthorization bill, any PTO fee increase will provide 

a considerable portion of the revenue to fill that gap, again imposing a tax on America’s intellectual property owners. 

PROPOSED INCREASE ON PAPER FILINGS

On May 17, 2002, the PTO published a Federal Register notice whereby the agen- cy proposed a $50 increase for the submission on paper of any trademark-related 

documents for which an electronic form currently exists.9 The proposal is intended 

to increase use of the PTO’s trademark electronic filing system, which today hovers 

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10 United States Patent and Trademark Office, FY 2003 Budget Submission of the President, 

22 (February 2002). 11See INTA Statement, Before the Subcommittee on Courts, the Internet and Intellectual 

Property (April 11, 2002); Testimony of Nils Victor Montan, President of INTA, Before the Subcommittee on Courts, the Internet & Intellectual Property (June 7, 2001); and INTA submission 

in response to August 30, 2001 PTO notice of proposed rulemaking on Electronic Submission 

of Applications for Registrations and Other Documents (October 12, 2001) (‘‘INTA supports the 

trend of increased e-filing usage and believes that the PTO should continue to encourage, but 

not require, members of the trademark bar to use the automated system.’’). A copy of the INTA 

response to the proposed $50 increase on paper documents is attached to this statement as Appendix 1. 12 64 Fed. Reg. 67775 (1999). 13 67 Fed. Reg. 35081 (2002). 14 15 U.S.C. § 1113(a) states that the director may by regulation adjust established fees only 

insofar as the adjustment reflects fluctuations in the Consumer Price Index (CPI). Anything beyond that requires congressional authorization (See, e.g. P.L. 106–113). 15The statutes cited in the notice, 35 U.S.C. § 2 and 15 U.S.C. § 41, as amended, do not refer 

in any way to the director’s ability to set fees. Section 41 of 15 U.S.C. establishes the Federal 

Trade Commission, and 35 U.S.C. § 2, which lists the ‘‘Powers and Duties’’ of the PTO, makes 

Continued

at around 30 percent. The agency has indicated that its goal is to reach an 80 percent e-filing rate by October 1, 2003.10

INTA is on record both with this subcommittee and the PTO in supporting greater 

use through voluntary means of new technologies to improve trademark office operations, and in our response to the PTO’s notice we said that we remain ‘‘firmly committed’’ to such a course.11 Nevertheless, we oppose the PTO’s $50 fee increase. The 

proposed $50 increase for paper filings is unsupportable both from a budgetary and 

statutory standpoint. These substantive issues are addressed below. 

Budgetary 

The current fee structure became effective in January 2000 and resulted in in- creases to a number of fees, including the basic filing fee, which rose from $245 to 

$325 per class. According to the PTO, these changes were needed to reduce pendency, reduce backlog, hire more trademark examiners, and to ‘‘fully cover the costs 

of trademark operations.’’ 12 It is clear that these fees were based on the cost of examining paper documents, since at that time, e-filing had not yet reached even 20 

percent and the overwhelming majority of trademark-related documents received by 

the PTO were on paper. The notice published by the PTO states that the proposed $50 paper processing 

fee ‘‘reflects the additional average cost of processing a paper document rather than 

an electronic document within the trademark operation.’’ 13 But, the notice does not 

state that this $50 is above and beyond the current cost recovery model. If, hypothetically, this were the case, current trademark operations would be operating at 

a significant deficit, since roughly 70 percent of the trademark-related documents 

received by the PTO are still on paper. There is nothing in the notice to suggest 

such a circumstance exists. Indeed, it is more plausible that the cost of examining 

an electronic trademark application represents a cost-savings for the PTO. Because 

the PTO is supposed to operate on a dollar-for-dollar basis, those savings should be 

passed on to the customer—the trademark owner—through a reduction in fees for 

electronically filed documents. 

We therefore conclude, based on the information provided in the notice, that the 

proposal is inconsistent with the agency’s well-established dollar-for-dollar cost recovery business model. We can only assume that the money that would be raised 

through this increase would be vulnerable to diversion during the appropriations 

process. 

Statutory 

Beyond the lack of merit associated with the proposed $50 increase, there is also 

the issue of the PTO circumventing Congress in proposals to raise established fees. 

The Lanham Act only authorizes the PTO director to adjust established fees to reflect fluctuations in the CPI; to fully cover the costs of trademark operations for any 

other reason, he must first seek authorization from the Congress.14

Trademark owners strongly believe that the imposition of the $50 charge would 

de facto adjust already established fees for existing services. If, for example, the 

PTO proposal were to go into effect tomorrow, a trademark owner filing a paper application for examination, an existing service, would pay $375, an amount which is 

$50 above the established $325 fee. That is a fee increase. It is greater than an adjustment due to the CPI and, as we indicated above, only Congress can authorize 

such an increase.15

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no reference whatsoever to the ability of the agency to adjust fees. The general rule of construction indicates that if Congress deliberately enumerated specific powers, they necessarily intended to limit the powers to those enumerated. The same can be said of 35 U.S.C. § 3 and 35 

U.S.C. § 41, to which the PTO directed us after we raised initial concerns regarding statutory 

authority to raise fees. The statute entitled ‘‘Patent fees; patent and trademark search systems,’’

35 U.S.C. § 41, does exactly what the title says; it sets patent fees and says that the director 

can charge for access to automated search systems, but mentions nothing with regard to general 

rule-making authority concerning trademarks. Section 3 of 35 U.S.C. merely establishes the officers of the PTO, but, as with 35 U.S.C. § 41, mentions nothing with regard to the rule-making 

authority of the director. Nor does this statute address the director’s ability to establish fees. 16See Appendix 2 of this statement. 

Today, America’s brand owners ask their Members of Congress to join with them 

for the reasons stated above in opposing the proposed regulatory fee increase on 

trademark-related documents that are submitted on paper. We strongly urge Congress to exercise its oversight role and prevent the PTO from taking an action by 

rulemaking, namely increasing certain filing fees by $50, that is clearly outside of 

the rulemaking authority of the PTO and that continues to rest within the lawmaking authority of Congress. 

CONSUMER PRICE INDEX INCREASE

On May 7, 2002, the PTO published a Federal Register notice whereby the agency 

proposed to increase the basic filing fee for trademarks from $325 per class to $340 

per class to reflect fluctuations in the CPI. On June 4, INTA submitted its response 

in opposition to the proposed increase, once again citing the likelihood that a substantial part, if not all, of the funds raised through the increase would be diverted 

for non-PTO uses, and thus not available to PTO to enhance PTO technology, improve the quality of examination, and prepare for new initiatives such as the Madrid Protocol.16

CONCLUSION

Thank you, once again, Mr. Chairman, for the opportunity to present INTA’s 

views on the trademark-related fee changes proposed by the PTO. We urge this subcommittee to reject the PTO’s proposed legislation to increase trademark fees across 

the board and to join with trademark owners in opposing proposed regulatory 

changes to the trademark fee structure for the reasons set forth above.

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Mr. COBLE. Thank you, Ms. Barrett Park. 

Mr. Kirk. 

STATEMENT OF MICHAEL K. KIRK, EXECUTIVE DIRECTOR, 

AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION 

Mr. KIRK. Thank you, Mr. Chairman. I am pleased to present the 

views of AIPLA on the PTO’s proposed fee bill and structural reform. We truly appreciate the efforts of Undersecretary Rogan and 

his team to craft an imaginative plan to achieve the quality, pendency, and e-filing goals Congress has set. However, I must report 

that AIPLA strongly opposes the proposed fee bill. 

AIPLA would support a reasonable fee increase to enhance quality, reduce pendency, and implement an effective e-filing system, 

but this fee bill, as was just noted, is designed to raise $162 million 

extra for diversion. For this reason, many of the proposed fees are 

excessive and not reasonably tied to achieving the goals. 

For example, notwithstanding the significant projected reduction 

in application filings for next year, the PTO still proposes to raise 

the same amount of revenue as proposed by the President when 

the filings were projected to be some 24 percent greater. These 

higher fees will have significant adverse impact on patent applicants. And it must be kept in mind that patent applicants will have 

the additional expense of paying a private contractor to conduct the 

search. These higher fees and other additional expenses will preclude some independent inventors and startup companies from 

using the patent system, and they will curtail its use by major 

American companies. 

We do believe, however, that certain proposed fees can reasonably be tailored to foster best practices as in the fee bill, establishing fees to ensure that applicants pay the actual cost of the effort required to examine applications could have the salutatory effect of discouraging applicants from needlessly filing large numbers 

of claims. Obviously, however, the fees need to be designed to encourage best practices and not be punitive or penalize legitimate 

practices. 

The fee bill would also impose a surcharge of more than $10,000 

on applications merely because they contain claims that are 

patentably indistinct from claims in other applications, with much 

higher surcharges for additional overlapping cases. 

Both this proposed surcharge and the proposed excess claim fee 

schedule would substantially increase applicants’ costs as they seek 

to navigate the pitfalls created by the Supreme Court’s Festo decision in protecting their inventions. 

The adoption of a deferred examination system would be a very 

significant change in the United States. Contrasted with the benefits the PTO projects for itself and patent applicants are the costs 

for the public. Deferring examination extends the period of uncertainty during which the public will not know whether a patent will 

issue or what its scope will be. 

Weighing these competing interests, however, AIPLA has determined that it would not object to a limited period of deferral that 

would give applicants the opportunity to obtain a search. To minimize the uncertainty, however, this deferral should not be greater 

than 14 months. Thus, AIPLA opposes the 18-month period of deVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
36

ferral in the bill, in the transitional section as well as the provision 

giving the Director discretion to modify that period. 

For these reasons, we urge the Subcommittee to reject the proposed fee bill. 

Regarding structural reform, AIPLA endorses the effort to promote work-sharing among patent offices. Making greater use of 

search reports under the Patent Cooperation Treaty and by other 

offices is long overdue. 

We also support the hiring, promotion, and training initiatives 

outlined by the PTO as well as the acceleration of the e-filing initiatives. We do not believe, however, that applicants should be permitted to procure searches directly from private search contractors 

and submit them to the PTO. 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. 

We also believe that pendency should be measured from the time 

a patent application is filed, whether or not it is also measured 

from the time that an applicant requests application. The period 

from filing to grant is the period of uncertainty that is of most concern to the public. 

For pending applications without a first action on the merits, the 

PTO would impose a limited duty of inquiry as to documents within an applicant’s possession, along with a mandatory information 

disclosure statement that must contain an explanation of the relevancy of cited information to the claims with those citations exceed a certain number. This will impose a heavy burden on thousands of applicants who have previously filed their applications and 

increase their risk to charges of inequitable conduct. 

Summarizing, Mr. Chairman, AIPLA strongly opposes and urges 

rejection of the proposed fee bill. We do believe, however, that Undersecretary Rogan and his team have laid a foundation on which 

we can begin to make real improvements to the PTO. 

We pledge our continuing support for the goals the Undersecretary is seeking and our willingness to work with the PTO and the 

Subcommittee to achieve those goals. Thank you. 

[The prepared statement of Mr. Kirk follows:]

PREPARED STATEMENT OF MICHAEL K. KIRK

Mr. Chairman: 

I am pleased to have the opportunity to present the views of the American Intellectual Property Law Association (AIPLA) on ‘‘The U.S. Patent and Trademark Office: Fee Schedule Adjustment and Agency Reform.’’

The AIPLA is a national bar association of more than 14,000 members engaged 

in private and corporate practice, in government service, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting 

intellectual property. Our members represent both owners and users of intellectual 

property. 

BACKGROUND

At the Oversight Hearing which the Subcommittee held on April 11, 2002 on ‘‘The 

U. S. Patent and Trademark Office: Operations and Fiscal Year 2003 Budget,’’

AIPLA testified that achieving a strong and effective Patent and Trademark Office 

would require focusing on three critical objectives: quality, timeliness and improved 

electronic filing and processing capabilities. These objectives were stated in H.R. 

37

2047, the ‘‘Patent and Trademark Office Authorization Act of 2002.’’ This legislation 

calls for the Director to develop a five-year strategic plan that would—

‘‘ (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 Patent 

and Trademark Office and the public for all aspects of the patent and 

trademark processes....’’

Under Secretary Rogan announced in March that he was preparing to begin a topto-bottom review of all non-examination and administrative support operations, and 

expected to see a compelling justification for every non-examination operation within the agency. Shortly thereafter, the PTO began working intensively to develop a 

five-year strategic plan called for by Congress. The ‘‘The 21st Century Strategic 

Plan’’ (hereafter ‘‘Strategic Plan’’) published on July 5th represents the current status of that effort. 

AIPLA established a three-pronged Task Force under the leadership of AIPLA 

First Vice-President Rick Nydegger—focusing on Patents, Trademarks, and Patent 

e-Commerce—to work with the Office to critique and offer suggestions on various 

proposals that the PTO shared with us and on which our input was solicited. The 

PTO accepted some of the suggestions of the Task Force for modifying its proposals 

and rejected others as it developed its Strategic Plan. More recently, the PTO proposed a sweeping adjustment of the patent and trademark fee structure contained 

in the fee bill which we are asked to address today. The AIPLA Board of Directors 

then debated and discussed the PTO’s proposed fee legislation and Strategic Plan 

for more than six hours of meetings and arrived at the views which I express today. 

We will continue to review the newer proposals which we have only recently received and to provide our comments to both this Subcommittee and the PTO. 

PTO’S PROPOSED FEE BILL

At the outset, I would like to make it very clear that the AIPLA strongly opposes 

the PTO’s proposed fee bill. In our testimony three months ago on the President’s 

Budget, we reiterated our strong opposition to any diversion of patent and trademark fees. We added that if there is a need for additional resources for some urgent 

program or service unrelated to the patent and trademark systems, the President 

and the Congress should explain that need and, if the existing tax revenues are insufficient, propose a tax increase on all citizens who will receive the benefits of such 

program or service. It should not be hidden away as a stealth tax increase only on 

America’s inventive community. 

AIPLA continues to oppose diversion and, for that reason and others, we strongly 

oppose the PTO’s fee bill. The fees are fixed in the fee bill at levels to recover the 

arbitrary amount of revenue targeted in the President’s FY 2003 Budget, $1.527 billion, released in February. This is the same amount that the President had proposed 

to raise through the imposition of 19% and 10% surcharges on patent and trademark fees, respectively, in order to raise an additional $162 million in revenue to 

be available for siphoning-off to other, unrelated government programs. AIPLA opposed the President’s Budget for the PTO principally because of its proposed fee diversion; AIPLA opposes the fee bill proposed by the PTO because it contemplates 

the same diversion. 

At the Oversight Hearing on the PTO’s Fiscal Year 2003 Budget in April, AIPLA 

stated that ‘‘We would support a reasonable statutory fee increase to implement a 

five year plan that would achieve the goals Congress and we seek.’’ Unfortunately, 

the fees contained in the bill are excessive because they are arbitrarily set to bring 

in a total of $1.527 billion. 

Moreover, the fees are not reasonably tied to achieving the objectives of a thoughtful business plan. There are several aspects of the fee bill which fail in this respect. 

For example, under the President’s FY 2003 Budget, the PTO proposed to collect 

$1.527 billion in revenue from user fees (including the surcharges noted above) 

which were to be paid for and used to process 404,600 patent applications and 

330,000 trademark applications. Due in part to the current economic downturn, the 

PTO has downwardly revised its projections for patent and trademark application 

filings, and now estimates that only 338,000 patent applications and 254,000 trademark applications will be filed in FY 2003. Notwithstanding this significant projected reduction in filings, the PTO still proposes a fee bill designed to raise the 

same $1.527 billion in fee revenues as proposed in the President’s FY 2003 budget 

when the combined application filings were projected to be some 24% greater. The 

fees have simply been set at levels designed to raise the targeted revenue amount 

38

of $1.527 billion dollars, rather than being tied to real costs of doing business under 

the Strategic Plan. 

The levels of fees necessary to raise the President’s targeted amount of revenue 

are in fact so high that we believe that the PTO underestimates the adverse impact 

these fees will have on patent applicants. And it must be kept in mind that U.S. 

inventors and companies will, under the Strategic Plan proposed by the PTO, have 

the additional expenses of paying to obtain a search and to request examination 

based on the search results. These fees and other associated costs will preclude 

some independent inventors and start-up companies from using the patent system 

and they will clearly have a dampening effect on the use of the system by major 

American companies. 

We also believe that the fee schedule proposed by the PTO could possibly generate more than $1.527 billion in revenue. In this regard, we understand that, under the 

President’s Budget, the PTO is expected to recover $411,300,000 in maintenance 

fees in FY 2003. Under the revised fee schedule, where maintenance fees are increased by 48%, the PTO is estimating that in FY 2003 it will receive only 

$449,632,392 in patent maintenance fees—a mere 9% increase. Similarly, the new patent examination fee of $1250 for utility patent applications is expected to raise 

$153,500,000 in FY 2003, but we understand from the PTO that this amount represents only one-half of the amount that this new fee will generate in the following 

years. This is because the Office expects that only 50% of the applicants who file 

in FY 2003 under the proposed 18-month deferred examination system will request 

examination in FY 2003. This means that the overall fee revenue for the PTO will 

automatically increase by more than 10% in FY 2004 from just this one fee, without 

taking workload or inflation into account. While we cannot definitively say that this 

will be the case with other fees as we have not yet had sufficient opportunity to 

study the proposed fees and PTO workload assumptions (which have changed during the process), these points demonstrate some of the reasons why we believe the 

proposed fee bill must be rejected by this Subcommittee. 

We do not, however, want to leave the impression that there are not some useful 

concepts in the fee bill. We believe that certain types of fees as contemplated in the 

fee bill can be reasonably tailored to foster best practices. Establishing fees to ensure that applicants will pay the actual costs of the effort required on the part of 

the PTO to examine applications could have the salutary effect of discouraging applicants from needlessly filing inordinately large numbers of claims and excessively 

long patent specifications. It would also be fairer to those applicants whose applications are shorter and do not require as much examination effort. We do not believe, 

however, that steeply escalating fees for claims should begin with the 4th independent claim or the 21st total claim in an application. Beginning moderately increased fees with the 7th independent claim and the 41st total claim would avoid 

penalizing the more than 95% of applicants who currently fall below these thresholds. Similarly, we believe that the charge for excess pages in patent specifications 

should not begin at the 51st page if drawings are included—the 76th page would 

be more appropriate—and that sequence listings, source code listings, and other 

similar types of lengthy submissions of information, which should be required to be 

filed on CD-ROMs, should not be included in such calculations. 

The imposition of an appropriate surcharge on the filing of continuation applications and continuation-in-part applications beyond a reasonable limit would discourage the filing of such applications and avoid the prolonged public uncertainty as to 

the scope of any patent that may ultimately be granted. We do not, however, believe 

that such a surcharge should be imposed on divisional applications necessitated by 

restriction requirements ordered by examiners. In addition, we do not believe that 

the Director should have the discretion to begin the imposition of such fees prior 

to the third continuation or continuation-in-part application. 

Thus, fees designed to encourage best practices should be set to begin at limits 

and levels that are not punitive and do not penalize legitimate practices and events. 

They should be fixed at limits and levels so that those applicants who file applications with inordinately large numbers of claims and long specifications will pay for 

the added effort they impose on the PTO. 

The fee bill would also impose surcharges on applications merely because they 

contain claims that are patentably indistinct from claims in other applications. The 

TRANSITIONAL PROVISIONS in Section 4(3)(A) would impose a fee of over 

$10,000 for a first occurrence of such overlap, with much higher fees for additional 

cases of such overlap. Revised Section 41(a)(3)(B) in Section 2 of the fee bill would 

give the Director discretion to adjust this amount. We are informed that this surcharge is ‘‘particularly necessary to mitigate any tactical applicant use of multiple 

applications to circumvent the proposed increases in fees for additional claims.’’ We 

believe that such a surcharge would in fact adversely impact applicants who are not 

39

seeking to game the system, and that few applicants would engage in such tactics 

in any event. It is a dangerous solution in search of a problem and should be rejected. 

One of the most fundamental issues that is addressed both in the fee bill and in 

the proposals for procedural and operational changes relates to deferred examination. The notion of deferred examination is an integral feature of the PTO’s proposed 

Four-Tracks system. The fee bill addresses deferred examination in two places. 

First, in the TRANSITIONAL PROVISIONS in Section 4(3)(A), the fee bill sets an 

initial period of 18 months from the earliest effective U.S. filing date for requesting 

examination and paying the examination fee. Second, in revised section 41(a)(4) contained in Section 2 of the fee bill, the Director would be given discretion to modify 

the period for requesting examination and paying the examination fee. 

The adoption of a deferred examination system by the United States would be a 

significant departure from the existing U.S. system where all applications filed are 

automatically examined. The PTO is proposing 18-month deferred examination to 

‘‘allocate USPTO resources more rationally and to serve the actual needs of the customer better.’’ The PTO expects that the imposition of the additional fee for examination, after the opportunity to evaluate the search results, will induce a reduction 

in the number of applicants opting for substantive examination. It reasons that this 

will both free up examiner resources and allow applicants to avoid paying the examination fee for applications they are no longer interested in pursuing. The PTO estimates a drop-out rate of 10% with the proposed 18-month deferral period. 

With the benefits projected for the PTO and patent applicants, however, come certain costs for the public and the competitors of applicants. Delay in beginning the 

examination process extends the period of uncertainty during which the public will 

not know whether a patent will issue or what its scope will be. Thus, a deferred 

examination system should only be adopted if it is clear that the benefits outweigh 

the drawbacks. The balance that AIPLA strikes between these two competing interests is driven by the constraints which exist in the world in which we find ourselves. 

Having considered the competing interests and the structure proposed by the PTO 

in its Four-Tracks system, AIPLA has determined that it would not object to a period of deferral of 14 months or less. We believe that this strikes an appropriate 

balance; it would allow both domestic and foreign applicants the opportunity to obtain a search from an examiner, Certified Search Service (or CSS), or a foreign patent office, and would minimize the delays inherent in this procedure. For this reason, however, AIPLA opposes the 18-month period of deferral in the TRANSITIONAL PROVISIONS of the fee bill and opposes the provision in revised section 

41(a)(4) giving the Director discretion to modify the period for requesting examination and paying the examination fee. Any period of deferral should be fixed by statute. 

Finally, we would note that our position on deferred examination is within the 

context of the proposed Four-Tracks system. Were AIPLA given a blank sheet of 

paper, we would not have opted for the plan before us today. Thus, whether AIPLA 

would reach the same conclusion regarding deferred examination in a different context can only be determined after we have had the opportunity to review any such 

proposal. 

For the reasons stated above, we urge the Subcommittee to reject the PTO’s proposed fee bill. We have heard the dire prediction that if this fee bill is rejected, the 

PTO will not be given sufficient funding to carry out its Strategic Plan. We find that 

prospect considerably less frightening than a fee bill that prices the inventing community out of the patent system. 

PROPOSALS FOR PROCEDURAL AND OPERATIONAL CHANGES

AIPLA approaches the evaluation of the PTO’s operational changes in the realworld context in which it has been proposed. The United States patent examination 

system has been developed over a two-hundred-year period, with constant refinements and improvements. And although the proposal before us differs significantly 

from this time-tested system, we recognize that the PTO has to work in a system 

of constraints imposed by the Executive Branch and the Congress. While the PTO 

could continue to pursue a more traditional approach of asking for increased examiner resources to improve quality and reduce pendency, neither the Executive 

Branch nor the Congress are going to listen. Congress has made it very clear that 

it demands a new approach, one that seeks other ways to tackle these problems. 

So we could pursue the old way and watch the system continue to deteriorate, or 

we can try to work with the PTO to develop alternative ways to fix the problems, 

ways that might gather the needed support. We can either curse the darkness or 

try to light a candle. AIPLA has chosen to try to light a candle. 

40

AIPLA appreciates the comprehensive effort the PTO is making to address the 

quality, pendency, and electronic processing issues it faces. In this regard, the Strategic Plan evidences an effort to develop a strategy for enlisting the capabilities of 

patent examining offices globally to join in the common struggle all offices face 

under the increasing crush of patent applications worldwide. While we have concerns about several of the specific details of the Strategic Plan, we would not wish 

our reservations to obscure the desirable innovations proposed. 

The initiatives to create a competitive compensation package for Supervisory Patent Examiners to attract and retain the best employees in these jobs, develop suitability tests for potential examiner candidates, establish ‘‘training art units’’ for new 

examiners in high volume hiring areas, and develop a testing process to certify examiners for promotions are all right-on to enhance patent quality. Expanding the 

‘‘second set of eyes’’ concept successfully used with business method patent applications to other technology areas and to the expedited examination options in the 

trademark area would be welcome. Enhancing the reviewable record by increasing 

the amount of information included in patent application files regarding applicant/

examiner interviews will assist the public to better appreciate the exact metes and 

bounds of any resulting patent. AIPLA supports these steps and a number of other 

actions that the PTO has proposed in the papers associated with the Strategic Plan. 

We turn now to the central features of the restructuring proposed by the PTO. 

Four-Tracks System 

Central to the PTO’s plans for restructuring its patent examination process in 

order to improve the quality and reduce the pendency of patents is its ‘‘Four-Tracks 

Patent Examination Process’’ which would base examination on patent searches conducted by private firms and other patent offices. By using searches from CSSs, and 

other patent offices, the PTO hopes to off-load the search work from examiners, allowing them to concentrate on the core government function of examination. And 

as noted above, the proposed adoption of an 18-month deferred examination system, 

is an integral feature of the Four-Tracks system. 

There is one point about which AIPLA would like to be very clear. Page three of 

the Strategic Plan states that, provided the PTO receives the funding and statutory 

changes necessary to implement the Strategic Plan, it will ‘‘Achieve and maintain 

18 months patent pendency by 2008, compared to over 25 months in the 2003 Business Plan.’’ However, footnote 2 states that

[P]endency [under the Strategic Plan] is redefined as the examination duration 

period (i.e., from the time the applicant requests examination to the ultimate 

disposition of the patent application). This measure is the same measure that 

is used internationally in systems that permit deferred examination and is the 

proper metric of USPTO examination performance. When the average period of 

deferral is added, the average pendency from filing of the application to issue 

or abandonment would be 27 months.

Measuring pendency from the time applicants request examination would change 

the traditional method for measuring patent application pendency. It would make 

it appear that the PTO was achieving success in reducing pendency, when the pendency could in fact be greater than today, e.g., note the need to add 9 months to the 

18-month 2008 goal if pendency were measured in the traditional manner. While 

we do not object to the PTO measuring pendency from the date examination is requested to the date of issue/abandonment, measuring pendency from the date an application is filed in the United States to the date of issue/abandonment is the critically important measure of the period of uncertainty that the public and competitors 

endure. 

AIPLA welcomes the PTO’s proposal to make greater use of International Style 

Search Reports (ISSRs) prepared by International Search Authorities under the Patent Cooperation Treaty and by other patent offices under their national procedures 

by giving such searches ‘‘near full faith and credit.’’ We understand that such 

searches will be used by the PTO only following its determination that a given office 

can produce quality searches, a necessary prerequisite to achieving the quality levels we seek. This is clearly a step in a direction that will lead to greater cooperation 

and work-sharing among the world’s major patent offices. We are not prepared, 

however, for the PTO to give ‘‘near full faith and credit’’ to the examination conducted by another patent office. Not only do the laws, practices, and procedures of 

other patent offices differ from those of the PTO, but even the translation of the 

claims can distort the exact scope of what was allowed. AIPLA can only agree to 

giving ‘‘near full-faith-and-credit’’ to the search done by another patent examining 

office that has been approved by the PTO. 

41

AIPLA can accept the proposal of the Office to develop qualified CSSs to prepare 

ISSRs using criteria similar to those used to designate an International Searching 

Authority under the Patent Cooperation Treaty. Our position is based on the assurances that the PTO has given that it will particularly focus on the competency of 

the CSS to perform high-quality searches and that each CSS will be subject to regular re-certifications. 

We do not believe, however, that applicants should be required or even permitted 

to procure searches directly from CSSs and submit them to the PTO when they request examination of their applications. We are concerned that the presumption of 

validity of U.S. patents could be adversely affected if the PTO simply hands off the 

responsibility for obtaining the search to applicants and CSSs. The PTO must ultimately be responsible for ensuring that the searches it relies upon are of the highest 

quality, whether done by its examiners, CSSs, or qualified foreign patent offices. 

Particularly with a CSS, PTO examiners should always assess whether the search 

was complete and, if not, demand that the CSS re-search the application and ‘‘get 

it right.’’ The PTO will select and certify the CSSs and therefore it must exercise 

the same control over them to provide quality search results as it does over its own 

examiners. Finally, 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. 

Mandatory Information Disclosure Statements (IDS) 

For those applicants who have not received a first action on the merits from the 

PTO by the time the PTO’s Strategic Plan would go into effect, the PTO proposes 

to impose what it describes as a ‘‘limited duty of inquiry’’ on such applicants (as to 

documents within their possession) and a mandatory IDS. The PTO’s stated focus 

of the information to be submitted will be non-patent literature that is related to 

the claimed invention, including information used to draft the application, information used in the inventive process and information concerning improvements and 

state-of-the-art. Applicants are to submit the required information, with an explanation of relevancy for citations of patents over twenty and of non-patent literature 

over twenty. This mandatory IDS procedure is intended by the PTO as a way to 

transition those applications already on file into a separate search and examination 

procedure similar to those contemplated under the PTO’s Four-Tracks system. 

AIPLA opposes the imposition of this kind of obligation as well as the proposed 

requirement for applicants to explain the relevancy of prior art to the claims for any 

references in excess of twenty. The PTO proposal goes far beyond the current duty 

of candor under Rule 56(c). This proposal would unfairly impose an incredible burden on tens of thousands of applicants who have filed patent applications in the last 

few years, paid the required fees, and expect examination. In terms of time and 

costs, this burden will fall particularly hard on the largest filers, corporations with 

hundreds of unexamined applications in the pipeline. 

We also strongly disagree with the PTO’s statement that the public’s concern with 

the issue of inequitable conduct can be addressed simply by amending Rule 56. Not 

only would a rule not adequately protect applicants from challenges under the judicially-created doctrine of inequitable conduct, but the specific rule proposal once 

again, as in the case of the proposed CSS procedure, seeks to shift the responsibility 

for conducting the examination from the PTO to the applicant. 

Post-Grant Review 

One final comment about the PTO’s plans to enhance patent quality is in order. 

Throughout the proposals by the PTO for restructuring the patent examination 

process, a consistent theme is that a more vigorous post-grant review procedure will 

be established as a safety net. While AIPLA has long advocated and supported a 

robust post-grant opposition system, we do not agree with the emphasis of the PTO 

on using such a procedure as an integral part of its quality enhancement plans. In 

our view, the PTO should ‘‘get it right the first time.’’

In conversations which the AIPLA Patent Task Force had with the PTO, it was 

reported that the emphasis on post-grant review was in response to mandates it 

faces to measure the success it makes in improving quality. We cannot see any basis 

from either the extent of use or the outcome of post-grant proceedings for drawing 

conclusions of this type as to the quality of the examination process. For example, 

there has been a grand total of four inter partes reexamination proceedings instituted since that procedure was created in 1999. The only conclusion we draw from 

this fact is the conclusion almost everyone already knew: that procedure is fatally 

flawed. It informs no one about the quality of the patents being issued by the PTO. 

42

Finally, as noted above, AIPLA supports a vigorous post-grant review procedure 

as we have stated previously in testimony before this Subcommittee. While there 

are several features in the post-grant procedure proposed by the PTO with which 

we agree, we also have a number of suggestions for improvements which we are prepared to offer at an appropriate time. 

Trademarks 

The PTO is proposing that trademark applicants be allowed to choose between 

four filing options that will affect fees, method of filing, and speed of process. The 

first of these options would have the trademark applicant provide a likelihood of 

confusion search from a USPTO Certified Search Service. AIPLA does not believe 

that this option will enhance quality or reduce pendency or costs. The searches that 

trademark examining attorneys perform for likelihood of confusion issues are 

straightforward computer searches of PTO records which can be done with relative 

ease. The issues in the trademark examining operation are very different from those 

in the patent examining operation. Moreover, there is concern that search quality, 

the presumption of validity, and the value of trademark registrations may suffer. 

Given the absence of any demonstrated need for this proposal, such as a shortage 

of examiners or growing pendency (as exists on the patent side), AIPLA opposes this 

option. 

We would like to express our continued support for the Trademark e-Government 

plan to implement an electronic file management system and begin e-Government 

operations on October 1, 2003. Full electronic processing of trademark applications 

will improve quality and restrain, if not reduce, costs and the need for increasing 

numbers of employees or contractors to handle increases in filings as the reliance 

on paper disappears from internal processes. 

Patent e-Commerce 

AIPLA fully supports the PTO’s ongoing effort to accelerate its electronic filing 

and processing initiatives in the patent operations. The implementation of a truly 

effective, user-friendly system that would permit applicants not only to file, but also 

to prosecute, their applications electronically will save resources in terms of staff, 

space, and the reduction of clerical errors. We have continuing concerns, however, 

that those initiatives will not be sufficiently user-friendly to encourage widespread 

electronic filing of patent applications. Notwithstanding all of the agreements the 

PTO has entered into with contractors and other IP organizations, we still have not 

seen evidence that applicants will be able to easily and quickly file their patent applications. Notwithstanding any agreements or contracts that constrain the manner 

in which the PTO processes information internally or shares files with other patent 

offices, we urge the PTO to adopt a system that will permit applicants to electronically file documents produced using image files (such as .pdf or .tif) or documents 

produced using Word or WordPerfect and to receive office actions and all other PTO 

communications in such formats. 

CONCLUSION

While AIPLA strongly opposes and urges the rejection of the proposed fee bill for 

the reasons stated above, we recognize that the PTO must be adequately funded if 

it is to achieve the quality, pendency, and e-commerce goals it has announced and 

which AIPLA fully supports. The Task Force established by AIPLA has worked very 

hard to assist the PTO in its restructuring efforts. Notwithstanding our views on 

the fee bill, as well as on a number of the structural changes, AIPLA is committed 

to continuing the efforts begun by the Task Force. The road to strong and healthy 

patent and trademark systems is going to be long and arduous. There will be no 

magic wands. We believe that a foundation is being laid on which we can make real 

and lasting improvements to the PTO. AIPLA pledges its continuing support for the 

goals Under Secretary Rogan is seeking to accomplish and its willingness to work 

with the PTO and this Subcommittee to achieve those goals.

Mr. COBLE. Thank you, Mr. Kirk. 

Mr. Baker. 

STATEMENT CHARLES P. BAKER, CHAIR, INTELLECTUAL 

PROPERTY LAW SECTION, AMERICAN BAR ASSOCIATION 

Mr. BAKER. Mr. Chair and other Members of this Committee, I 

am personally honored to be here. You are performing one of the 

highest forms of public service to our country; you are devoting 

43

your time to try and resolve difficult and important issues that few 

citizens appreciate. But they benefit, unwittingly, from your dedicated efforts on behalf of the IP system and our Nation, a system 

which encourages investment in new jobs—not just new jobs, in 

new industries. 

I’m also honored to be here to give the views of the ABA and the 

21,000 members of its IP Law Section to help you decide what to 

do. 

Also, on a personal level, AP Carlton, who will be the ABA president in 3 weeks, sends his personal greetings to this Committee. 

Basically, we commend the effort of the office and Director 

Rogan, another dedicated public servant. It contains some good 

concepts, but it also contains some bad ones, such that we cannot 

support the proposal. 

While I know you share our views and I am preaching to the 

choir, and I will not spend much time on it, we are disappointed 

that this fee proposal comes to us without even a promise that the 

Administration will try to decrease the diversion of patent and 

trademark applicant fees. This injurious practice in the 10 years 

since it began has siphoned off $800 million from research and development budgets of the users of the IP system. 

Now Congress has the power to tax just about anything it wants. 

But taxing R&D, which creates new jobs, is a bad policy choice. 

The ABA House of Delegates has adopted a resolution opposing 

that diversion. 

The rest of my remarks are on behalf of the ABA IP Law Section 

only. 

The problems the office faces are not all of its own making, and 

they are not all bad moves. The great increase in filings means this 

country is investing more in research and development. Former 

Commissioner Mossinghoff reports that the pharmaceutical industry increased its R&D expenditures more than tenfold in 20 years 

from 1981 to 2001, from $2.3 billion to about $30 billion. We should 

all be heartened by what this means for our health. 

But that spending has added to the office’s headaches. In the 

same period, the pharmaceutical industry increased its patent filings by three times. Such problems are the best kind to have, but 

we must deal with them through increasing the capacity of the office. 

Now, one major success of the office, a success that shows it can 

solve problems, is on the trademark side. There the office can be 

justly proud of its electronic-filing system efforts. 

Turning to fees, we agree with the concepts in this proposal that 

increased fees that correlate with added work are appropriate. On 

the other hand, fees that escalate in a punitive way should be rejected. Patent applicants already have incentives not to file excessive numbers of claims or excessive related applications. Applicants 

do not spend money on their lawyers to do those things unless they 

believe it is necessary or desirable to protect an invention. 

For example, an application may have several embodiments, and 

the applicant may deem it wise to have a claim for each embodiment. Rather than devise language for a single claim that covers 

all embodiments and which may create other problems like undue 

breadth or vagueness. 

44

If the extra work causes the office extra work, paying for that 

work is reasonable. But to have punitive fees to discourage a reasoned practice would be unfair. 

One major area of harm in this proposal is moving prior art 

searches to private companies. If someone else has to do the 

search, the examiner still has to spend additional time reading and 

understanding the art. So the savings will not be as great, will not 

really be great. We have seen estimates that these savings could 

be as low as only 5 percent. 

But more important, prior art searches are the starting point for 

validity. If they are incomplete, the rest of the examination process 

goes for naught. 

Many of us were examiners. We know that examiners can perform good searches. Each of the 3,500 examiners has a narrow area 

of art of her own specialty. We also know that the examination is 

going on in the head of the examiner as she performs her search, 

and it guides the search. The end result is a better search and a 

better examination. 

In other words, if the examiner does not do the search, we will 

end up with a weakened presumption of patent validity, which is 

a bad idea. 

Selecting searches from selected foreign patent offices is somewhat different. But because of differences in laws, which are mentioned in my written statement, the search may be incomplete. It 

may be used as a starting point, but it should always be supplemented before a U.S. patent is issued. 

Deferred examination, for the reasons in my statement, is another bad idea, in our opinion. 

To the extent punitive fee revenues and high filing fees are necessary to pay for things like user-friendly reliable electronic filing, 

we urge that the revenue be raised by increasing maintenance fees. 

The present plan would increase filing fees by a factor of two or 

more, but maintenance fees by 50 percent. For reasons set forth in 

my statement, we would rather see more water carried by maintenance fees and less carried by filing fees. 

Finally, let me mention two items not related to fees but referred 

to in the plan which we favor: post-grant oppositions, if properly 

implemented, and accelerated examinations for an added fee. 

I would be glad to answer questions of yours or your staff today 

or at any time. And we would welcome the opportunity to work 

with you, the office, and others in the user community to develop 

a fee structure and patent office reforms on an entirely sound 

basis. 

We are glad to do what we can to help. Thank you. 

[The prepared statement of Mr. Baker follows:]

PREPARED STATEMENT OF CHARLES P. BAKER

INTRODUCTION

Thank you for the opportunity to testify on behalf of the American Bar Association and that Association’s Section of Intellectual Property Law. I am Charles P. 

Baker, Chair of that Section. The views that I express opposing the diversion of 

United States Patent and Trademark Office user fee revenue to fund programs unrelated to the functions of that Office represent views of the Association. The Association’s House of Delegates adopted them as ABA Policy. Views expressed on other 

issues, including on individual components of the Administration’s proposal for the 

45

restructuring Office user fees, have not been approved by the House of Delegates 

or Board of Governors of the Association. Those views are those of the Section of 

Intellectual Property Law (IP Law Section) alone. 

As requested by the Subcommittee, our comments today will focus on the new fee 

structure that has been developed by the Office and proposed by the Administration. 

Implicit in or contemplated by the proposed restructured fee schedule are numerous 

fundamental changes in the operations and services of the Office, in requirements 

imposed on the Office’s customers, and in utilization of Office resources, most particularly its human resources. To the extent these proposals are tied to the fee restructuring, we will also comment on them. 

Congress faces critical decisions regarding the future funding of the Office, and 

indeed, the future of the Office itself and the U.S. system of intellectual property. 

A brief review of relevant recent history may be useful in understanding the proposed fee restructuring and its accompanying components. 

BACKGROUND OF THE NEW FEE PROPOSAL

The Fiscal Year 2002 Funding Proposal and Business Plan 

About 18 months ago, the President sent his budget proposal for funding the Office in Fiscal Year 2002 to Congress. Most noteworthy in that submission, it projected that patent pendency would rise to more than 38 months by Fiscal Year 2006. 

What made this prediction still more disturbing, the Administration based it upon 

an assumption that user fee diversion would end after 2002, hardly a likely prospect. At the time these projections were made, many who depend upon the services 

of the Office believed that quality, equally if not more important than pendency, 

also showed numerous signs of deterioration. 

Congress made clear its serious concern about the inadequacy of the Administration’s response to the mounting problems. In its report on the bill containing the 

FY 2002 PTO appropriation, the Senate Appropriations Committee described its dissatisfaction as follows:

‘‘The ability of the administration to formulate an adequate budget for the PTO 

is complicated by two factors. First, the agency historically has formulated an 

incremental budget based on the previous year’s budget, and does not provide 

the Committee with a thorough business plan that demonstrates how resources 

will be used and what results will obtain. Second, PTO management has not 

been sufficiently innovative. Although patent filings have increased dramatically over the past decade, PTO management chose to remain wedded to an archaic patent process and attempted to hire its way out of its workload problems.’’

The counterpart House Appropriations Committee report sounded similar criticism, and also served notice on those of us in the PTO user community that the 

appropriators are not particularly impressed by our argument that all user fees 

should be made available to the PTO immediately upon collection, particularly when 

they saw no evidence that the existing fee structure is based upon the real funding 

needs of the Office. The House report stated:

‘‘The PTO and the patent user community have continually criticized the Congress and the Administration for not allowing full access to their fees in the 

year they are received, yet PTO has been unsuccessful in proving that increased 

funding will decrease the amount of time it takes an applicant to receive a patent. PTO bases its budget submission on anticipated fee income, which is derived from an estimation of its anticipated workload. However, there is no indication that the existing level of fees was developed based on any direct relationship to the actual costs of doing business.’’

To address the deficiencies they found in the Office’s budgetary planning and execution, both Senate and House appropriators directed the Office and Secretary of 

Commerce to submit long-range budget plans. The Senate demanded a 5-year strategic plan with three ‘‘core objectives,’’ expressed as ‘‘(1) prepare the agency to handle the workload associated with the 21st century economy, (2) improve patent quality, and (3) reduce patent and trademark pendency.’’ The report also directed the 

PTO to accelerate its implementation of electronic processing of patent applications, 

with a completion date of 2004, two years earlier than PTO projections. 

Similar planning and reporting requirements are contained in H.R. 2047, the authorization bill authored by Chairman Coble and Ranking Member Berman, which 

the House passed last November, and in a counterpart Senate bill (S. 1754), which 

passed the Senate on June 26. 

46

The FY 2003 Funding Proposal 

Despite this unified call for budget reform from the four key congressional entities 

with responsibility for authorizing and funding the Office, the Administration this 

February submitted a FY 2003 funding proposal which bore a striking resemblance 

to the FY 02 proposal that had drawn congressional criticism as lacking in innovation and based on little strategic planning other than for the agency to ‘‘hire its way 

out of its workload problems.’’ The PTO Business Plan that accompanied the budget 

proposal called for hiring 950 patent examiners in FY 2003. In order to finance this 

and at the same time continue user fee diversion to the extent of $162 million, a 

one-year surcharge of 19.3% on patent fees and 10.3% on trademark fees was proposed. The proposal also projected hiring 950 patent examiners in each of the succeeding four years. 

In testimony before this Subcommittee on April 11, Director Rogan noted that the 

five-year Business Plan in the President’s budget was prepared before he took office 

in December. While calling it ‘‘an important first step toward a long-range strategy 

to refocusing the agency’s priorities on improving quality and timeliness,’’ he also 

characterized it as ‘‘a traditional response to attack increasing pendency . . . and 

stem the tide of rising pendency.’’ Perhaps signaling perception that the original 

budget proposal and its Business Plan lacked sufficient support in the user community and in the Congress to gain approval, Director Rogan expressed a view that 

there is a need to go beyond the measures proposed to date. Noting that he had 

begun a ‘‘thorough top-to-bottom review’’ of the PTO to identify non-essential functions and to shift resources to mission critical tasks, Director Rogan pledged to examine all options, ‘‘including the restructuring of our fee system and workforce.’’

THE CURRENT PROPOSAL

Overview 

The proposal that is being considered today bears witness that Director Rogan has 

honored the commitment that he made before this Subcommittee in April. He, the 

Office, and the Administration are to be commended for the very serious dedication 

to self-analysis and reform that is embodied in or anticipated by the proposed new 

fee structure. This proposal and others that are said to follow are specifically designed to address congressional mandates to produce long-term strategic planning 

that deals with deficiencies in pendency and quality and expedites conversion to an 

end-to-end electronic environment. The objectives of improving patent and trademark processing and examination are worthy ones, and the proposals advanced to 

these ends certainly represent a departure from the ‘‘business as usual’’ approach 

that has hampered previous PTO planning and reform efforts. We also believe that 

certain concepts reflected in the bill can help form the framework for an effective 

overhaul of the PTO user fee system. For example, the IP Law Section supports setting fees at levels that reflect actual costs to the Office in providing the services involved, a concept that is reflected in some, but not all, of the revised fees proposed. 

We also approve of other initiatives the Office is contemplating. For example, we 

believe that the proposals for electronic processing, if properly implemented, will decrease processing time. We also support the proposals for certifying and recertifying 

all examiners to assure the qualifications of all examiners, who are the heart of the 

U.S. patent system and must be as qualified as possible. 

While we applaud the commitment and effort that has gone into this proposal and 

we endorse some elements of it, we cannot endorse the final product as a whole. 

It suffers from a number of flaws, both in conceptualization and in individual components, which we address below, along with the features of the proposal that we 

do support. 

The Fee Proposal Works Backwards, Rather Than Forwards 

The proposed wholesale restructuring of patent and trademark user fees is represented as the product of a ‘‘top-to-bottom’’ review of Office service needs and resource allocation. It appears, however, to have begun with an end result in mind 

and worked backward to achieve that objective. That end result is to produce the 

same level of revenue as called for in the President’s original budget submission for 

FY 2003, including some $207 million to be raised by surcharges of 19.3% on patent 

fees and 10.3% on trademark fees. The imposition of such a limitation undermines 

the integrity of the process and the validity of the representation that individual 

fees proposed are based on improving the services of the Office. Increasing fees for 

punitive purposes, which we oppose in a discussion that follows, is one possible result of such a flawed approach to fee setting. 

47

Fee Diversion, Which the ABA Opposes, Has Not Been Addressed 

The American Bar Association and its IP Law Section cannot support the bill because neither it nor accompanying statements by the Administration suggest any 

end to the diversion for other purposes of fees paid by users for patent and trademark services. Indeed, the proposal takes a further step in the wrong direction. By 

building a margin for diversion into a permanent restructuring of fees, Congress 

would be codifying and institutionalizing user fee diversion. From the time this injurious practice began a decade ago up to the start of FY 2003, it will have removed 

$817,000,000 from the research and development budgets of those who use our patent system. This diversion is a tax which decreases investment in research and development in new technologies, and in turn diminishes the creation of new jobs. 

The IPL Section Views the PTO’s Trademark Initiatives Favorably, but Prefers Incentives in the Form of Discounts over Penalties in the Form of Surcharges 

Turning to specific features of the current proposal, the IP Law Section believes 

the Office has done a very good job in creating an electronic filing system for trademark applications and post-issuance trademark filings, and generally supports the 

Office’s new initiatives to continue to expand and encourage use of that system. 

While the system is still capable of being improved and made even more user-friendly, it is a success story of bringing Office operations into the modern electronic age, 

of which the Office can be justly proud. The Section also supports incentives to encourage members of the public to use the electronic filing option, as it reduces operating costs, reduces the potential for typographical errors through the transcription 

of paper documents into electronic formats at the PTO, and promotes overall efficiency. 

The Section, however, opposes the fee increase included in the proposed amendment of Trademark Rule of Practice, published at 67 FR 35081 on May 17, 2002, 

to impose a surcharge of $50 per International Class as a processing fee for each 

document submitted on paper when an appropriate electronic document is available 

for use. The IP Law Section opposes that surcharge and believes the more appropriate and customer-focused way to encourage electronic filings is to provide a positive incentive—for example, a $50 per class discount when the document is filed 

electronically—rather than a penalty in the form of a $50 per class surcharge when 

the document is filed in paper form, especially when the Office is legally obligated 

under the Trademark Law Treaty to accept paper trademark filings as well as electronic filings. 

Fees That Reflect Increased Cost Are Fair 

The IP Law Section supports surcharge fees in the bill that reasonably reflect actual costs. For example, surcharges for specifications and drawings that exceed 50 

pages, and surcharges for abnormally high numbers of claims seem appropriate, to 

the extent they reflect added costs in examining longer applications or applications 

with more claims. It is reasonable to charge those who file 200-page applications 

more than those who file 20-page applications. The IP Law Section does not have 

data to say what the correct amounts should be, but in principle, we believe this 

is a fair approach. 

Increased Fees That Are Punitive Should Be Rejected 

The IP Law Section opposes increased fees that are punitive and fail to reflect 

actual costs. For example, the bill proposes that the cost for presenting the sixth 

independent claim be four times the cost for presenting the fourth independent 

claim. Such a fee has no relationship to the cost of examining an extra claim. See 

Sec. 41(a)(2)(A). The difficulty of examining a sixth claim is not four times the difficulty of examining the fourth claim. Surcharge fees for total claims (Sec. 

41(a)(2)(B)) also escalate at a rate unrelated to added cost, and hence they are also 

punitive. While the Office states that it wants to ‘‘modify behavior’’ by discouraging 

applicants from filing more that 3 independent claims or 20 total claims, in many 

situations more than those numbers of claims are reasonable and appropriate, and 

they should not be discouraged by punitive fees. 

As additional examples of punitive charges contemplated by the Office’s proposal, 

the Office is seeking to impose punitive fees for filing related applications. Specific 

amounts are set forth in ‘‘Transitional Provisions’’ (Sec. 4(b)), and unspecified 

amounts are provided for in ‘‘Related Application Surcharge’’ (Sec. 2(a)(3)). We presume the amounts set forth in the transitional provisions are a prediction of what 

the unspecified amounts will be. Punitive fees would be imposed for related applications that are not ‘‘patentably distinct’’ from a pending application or an issued patent. See Sec. 41(a)(3)(B). There is also a proposed $16,690 charge for a terminal disclaimer if similar claims are presented in three other applications. The Office justiVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6621 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
48

fies this, in part, as a way to prevent applicants from avoiding the excessive claim 

fees mentioned in the previous paragraph. Similarly, to punish the filing of continuations, surcharges will be added when the benefit of parent applications is claimed. 

See Sec. 41(a)(3)(A). Also, escalating fees are proposed for claiming the benefit of 

more than one parent application ($1,000 for three; $4,000 for five), and these fees 

apply even if only one patent issues. 

The proposal to raise the appeal brief fee from $300 to $1,600 also appears punitive. Historically the Office has not charged for an appeal, since it is frequently necessary to correct an error of the Office. Such a charge, if any, should not be required 

until after submission of the Examiner’s brief in opposition, because many appeals 

are settled in the applicant’s favor before the Examiner’s brief is filed, essentially 

conceding that the applicant was correct. 

The practices which the Office proposes to penalize with excessive charges are entirely appropriate in many circumstances. There are times when it is reasonable to 

have more than three independent claims and more than 20 claims altogether. Applicants often claim several important embodiments of the same invention, some of 

which may be patentably indistinct from other pending or issued claims. Also, the 

question of whether a related application is patentably distinct from another is often 

a matter of dispute between the Office and the applicant, and it cannot be decided 

properly until after the examination process is completed. As another example, 

sometimes one accepts allowed claims to limited subject matter and permits a patent to issue, but refiles to attempt to get broader claims in a continuation. Such 

practices not only reduce pendency time but they rarely require an additional search 

of the art, and they also reduce the number or appeals, actually saving the Office 

money. Also, filing related applications can be a good tool for providing full protection for important inventions. Punitive fees would discourage these practices, discourage applicants from seeking the coverage they feel they are entitled to, and 

weaken the system. Finally, related applications are often necessary because of the 

Office’s action or inaction, and any excessive fees for them would be doubly unreasonable. 

The burdens would be particularly heavy in some fields. For example, in the communications, data and software industries judicial rulings and legislation require 

various independent claiming forms and formats. One application may appropriately 

have transmitter claims, receiver claims, systems claims, method claims and meansplus-function claims. Such additional claims are unlikely to add substantially to examination time because they usually involve the same core combination of elements, 

but such claims might arguably not be patentably distinct. 

Specifically, examples of punitive fees in the Act which we oppose by section numbers are, 

Section 41(a)(2)(A)—Excess claim fees for independent claims; 

Section 41(a)(2)(B)—Excess claim fees for total claims; 

Section 41(a)(3)(A) and related transitional provisions—Surcharge for continuation 

applications; 

Section 41(a)(3)(B) and related transitional provisions—Surcharge for continuation 

applications having patentably indistinct claims; 

Section 41(a)(7)(B)—Surcharge for appeal brief. 

In sum, the IP Law Section opposes legislation which would provide escalating filing and claim fees that are punitive. The Section also opposes legislation which 

would provide for punitive related application and other excessive surcharges. 

Increases in Post-Grant Fees Are Preferable 

To the extent necessary for Office operations (as opposed to matching an arbitrary, pre-set budget amount), the IP Law Section generally favors increases in 

maintenance fees over increases in filing and prosecution fees. Higher fees at the 

beginning of the patent process would discourage the filing of new applications, and 

hence they would discourage the disclosure of new technology. Also, higher fees 

would not necessarily increase revenue. For many companies, fewer applications 

will be filed in proportion to the increase in filing fees. 

On the other hand, the costs of maintenance are easier to justify and pay once 

a patent has issued. Its value to the patent owner’s business then becomes plain. 

If maintenance fees are paid at all, they are usually paid because the patents are 

worth significantly more than those fees. Any particular patent application, however, is a more risky investment; the patent owner does not know if the invention 

is patentable, or, if it is, how broad the patent will be. 

Hence, increased maintenance fees, rather than increased filing and prosecution 

fees, are a better way to raise necessary revenue. 

49

Deferred Examination Should Be Rejected 

The bill proposes replacing the present single fee for filing and examination with 

separate filing and examination fees, and examination could be requested before any 

action is taken by the Office. 

The advantage of this change to patent applicants is that it would enable the applicant to withdraw an application if it is determined that the invention has insignificant commercial importance before substantial costs are incurred. Applicants, 

however, who have doubts as to whether they want to pursue a particular application, already have this capability in the provisional filing procedure. For most applicants, however, the major cost is in preparing the application, and most decisions 

to abandon are made in that period. Deferred examination would add a layer of unnecessary procedure. 

Deferred examination, however, has no benefit for the public because the claims 

that will be allowed would remain uncertain until issuance. The primary function 

of the Office is to protect the public from improperly issued patents. With the publication of patent applications, the public sees broad claims that may, someday, be 

issued as a patent, not the final version of the claims, whose appearance would be 

delayed be deferred examination. Such broad claims may create uncertainty and reduce investments. Industry, both large and small, needs a rapid and robust examination of the application to reduce that uncertainty. Deferred examination would 

increase that uncertainty and public cost. 

Incidentally, there is a suggestion in the materials on deferred examination that 

the Office may begin counting the examination period from the time examination 

is requested or begins. We do not object to reporting additional times in the prosecution process, but we believe strongly that the Office should continue to report pendency from the date of filing as the primary indicator of pendency. 

While we understand that deferred examination is expected to reduce the Office’s 

workload, and hence reduce pendency, we believe the amount of that reduction 

would be small, and on balance any benefits of deferred examination are outweighed 

by the downsides to the users and the public. 

Use of Private Sector and Foreign Patent Office Prior Art Searches Presents Several 

Problems 

The bill provides the Office unfettered discretion to reduce examination fees for 

applicants who provide a search report that meets conditions prescribed by the Office. This will make possible the implementation of a four-tier search proposal, 

which would reduce the amount of searching the Examiners have to do. As a result, 

the Office expects to hire fewer Examiners. 

The use of independent searchers raises a number of problems, from insuring the 

quality and uniformity of search results, to how searches will be updated if different 

claims are presented after the initial examination, to providing adequate facilities 

to enable these searchers to perform this work. The IP Law Section believes the Office should still maintain overall responsibility of the searching function and use foreign search results as a starting point rather than a substitute for its own searches. 

We are convinced that U.S. Examiners generally can perform the best, highest 

quality searches in the world. We are concerned about any proposal to decrease the 

role of Examiners in the search of the art. 

Many of us have spent part of our careers as Examiners, and we understand the 

process from the inside. An Examiner who is going to make an obviousness decision 

begins to make that determination as the search proceeds. When in the course of 

this simultaneous search and examination a certain element becomes important, the 

Examiner can adjust the search accordingly to find the best art with respect to that 

element. (One must keep in mind that under U.S. law, in contrast to the law of 

other countries, it is important not only to find each element of a patentable combination in the prior art, but also a teaching to combine the elements. One who does 

the prior art search but not the examination may find the elements, but not the 

teachings to combine.) 

More than that, each of the 3500 U.S. Examiners gets to know quite well her/

his art areas, which are highly focused. 

We therefore believe that the search is part of the examination, and if the Examiner does not do the search, it will not be done as well, which would weaken the 

presumption of that validity. That presumption gives certainty to U.S. patents, and 

without a reasonable level of certainty, investors will not invest to develop new technology and create new jobs. 

Additionally, maintaining the quality of private sector search firms may be difficult, and the public may have little confidence that persons in the private sector 

can be counted on to protect these interests of the public. Another problem would 

50

arise if a private search authority is disqualified. Will the patents it searched before 

disqualification be presumed valid? 

Even if the quality of searches were shown to be the same under some new procedure, we believe there are inefficiencies in the proposed process as a whole. While 

the Office may spend less if it puts the search on the shoulders of the applicant, 

as far as total costs to the applicant, the public, and the system are concerned, we 

believe they would be greater. The fee for the private search, which has been estimated at $1,000, combined with the increased filing and examination fees, would 

increase the basic filing fee from its current $740 to over $2,500. Also, we doubt that 

savings to the Office would be great. We have seen estimates that time and cost 

savings to the Office would be no greater than 5%. 

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. 

Some of our concerns are speculative. If the Office will perform studies to support 

this major change, and the studies show that the searches are equivalent, the examinations equivalent, and that there are significant cost savings to the system as 

a whole—we will be glad to consider them. 

The Office is also proposing, as part of its four-tier system, to amend its rules to 

include a mandatory prior art statement and a mandatory statement of relevancy. 

The advantage of the provisions for a mandatory prior art inquiry will be the 

issuance of stronger patents, provided the Examiner continues to perform a search. 

The disadvantages to the applicant will be the increased costs during prosecution 

and the cost of determining in later litigation whether the new duty of disclosure 

requirements had been complied with. A simple solution to these disadvantages is 

not available where the duty of disclosure is expanded. 

Several of the reasons we have given for adhering to our present system of having 

Examiners do the searching disappear or have less effect if the search has been 

done by a qualified foreign patent office, but the similarities among patent laws are 

fewer than one might think. We have already mentioned the issues raised by whether there is a teaching in the art to combine elements. A foreign examiner may not 

search for such teachings, and a U.S. examiner presented with a search that includes none, may allow a patent improvidently. In such cases we believe it is proper 

for a U.S. Examiner to accept a foreign Office’s search as a starting point, but if 

the Examiner, based on a review of the art identified in that search, finds patentable subject matter, then a supplemental search should be mandated. 

In sum, the IP Law Section believes that reliance by the Office on searches made 

by qualified Patent Offices of other governments may be appropriate, if supplemented when allowable claims are found, but the Section opposes the Director’s ac- cepting searches of private companies or requiring the applicant to make mandatory 

searches and statements concerning what is relevant in the prior art. 

Post-Grant Opposition Procedures Are Conceptually a Good Idea 

While not presented by the current legislation, we would like to comment on a 

number of additional proposals that have come up in the planning process. One of 

them is a post-grant inter partes opposition procedure. 

We do not consider it a safety net that will excuse a poor initial examination. The 

Office should do its best to get examination and issuance right the first time. 

We do, however, see a need for something short of full-scale litigation to remove 

uncertainties. A post-grant opposition of that kind we find acceptable conceptually. 

It should utilize the Patent Office ALJ’s who currently handle interferences and 

have demonstrated that they can handle limited inter partes matters expeditiously. 

We contemplate that the procedure could be instituted within 12 months of a patent’s grant and be over in one year, with appeal by either party to the Federal Circuit. 

Accelerated Examination Would Be a Useful Tool 

The IP Law Section also supports the Office’s providing accelerated examination 

for an extra fee, which we understand the Office is considering, though it is not in 

the present bill. 

Electronic Processing in Patent Operations Must Be Implemented Properly 

The fee proposal contemplates funding of accelerated implementation of Patent eGovernment, with an objective of ‘‘end-to-end’’ electronic processing by the end of 

FY 2004. The advantages of electronic processing to applicants will be expedited 

prosecution and issuance and in the long term, reduced costs. The disadvantages 

will be the additional up front costs, including hardware and software requirements, 

needed by applicants, their agents and attorneys to generate and prosecute cases 

electronically. 

51

Initial experience with electronic filing in the U.S. has been that the Office has 

adopted software standards that are convenient for the Office, but they fail to comply with the requirements of practitioners. For example, the Office’s initial software 

for filing a patent application electronically was designed for stand-alone use where 

the attorney prepares and submits the application from his/her computer. It did not 

permit the electronic document to be prepared in a network environment where the 

application would be processed by a word processing department and receive final 

review by a docketing department. 

We understand, however, from recent reports that the Office may abandon its existing e-filing technology and instead adopt some version of the EPO software, making the U.S. system compatible with the European and Japanese e-filing systems. 

This approach would solve at least some of the existing problems with the Office’s 

e-filing system. 

CONCLUSION

We will be glad to answer questions and supply more detail on the recommendations we have presented. We would also welcome the opportunity to work with the 

Subcommittee and the PTO to develop a fee structure and other reforms that can 

attain the worthy objectives that are set out in, but not attained by, Director 

Rogan’s 21st Century Strategic Plan.

Mr. COBLE. Thank you, Mr. Baker. And thanks to each of the 

panelists. 

We have been joined, since we began, by the distinguished gentleman from Michigan, the Ranking Member of the Judiciary Committee, as well as the distinguished gentleman from California, the 

distinguished lady from Pennsylvania, and the distinguished gentleman from Alabama. 

Ladies and gentlemen, we apply the 5-minute rule against us as 

well. But if need be, we will have a second round of questioning. 

Let me start, Judge, with you. Ron Myrick, a long-active member 

of IPO and AIPLA, said not too recently that the PTO is nearing 

or has already arrived at a crisis. Do you agree, A? And if so, what 

risks confront the agency if we don’t proceed with your strategic 

plan? 

Judge ROGAN. Mr. Chairman, a few days ago, my two little girls 

that you know so well were watching the ‘‘Wizard of Oz.’’ I’m not 

sure how close the cyclone has to get to Auntie Em’s house before 

everybody starts heading for the cellar, but I can assure you that 

our storm windows are ready to close. 

Whether we are in a crisis or approaching a crisis really is not 

what’s relevant. What’s relevant is what kind of damage is being 

done to America’s intellectual property with a Patent and Trademark Office that increasingly is drowning in pendency and also 

raising issues respecting quality of patents that are being issued. 

I don’t think there’s any dispute from any of the witnesses here 

today that pendency and quality are of utmost concern to them. 

And if that is the case, then we cannot wait until tomorrow to try 

to fix that. That’s what this plan is attempting to address, as Congress has directed us to do. 

Mr. COBLE. Let me put this question to the three witnesses to 

my left, starting with Ms. Barrett Park. 

For years, we adhered to what I will call Plan A to help the PTO. 

Plan A meant that we tried to extract more money from the appropriators. And as I said at the outset, I have done battle with Democrat and Republican appropriators and usually come out secondbest. 

52

Now, we did save some money, considerably, last session. But 

still, the appropriators managed to walk off with a good haul. That 

strategy by itself doesn’t work or hasn’t worked. 

Director Rogan has now developed Plan B. If we don’t use his 

handiwork as a means to improve the PTO operations, what, Ms. 

Barrett Park, would your Plan C be to extend the late FDR’s proposal, Jim, of trying something? 

Ms. BARRETT PARK. Mr. Chairman, we don’t think that we need 

to go to a Plan C. We think there is something we all can work 

with in the strategic plan, or, as you’re calling it, Plan B, that Undersecretary Rogan has proposed. I think we’re looking forward to 

having a constructive dialogue imminently to see if we can’t get the 

strategic plan to a place where everyone, both the constituency and 

the agency, are comfortable with it. 

Mr. COBLE. Mr. Kirk? 

Mr. KIRK. Mr. Chairman, we would agree with Ms. Park’s comments. There are, in this plan, a number of what we think are solid 

bases on which to begin to develop a change in the system that we 

work with. In the patent area, to start relying more heavily on the 

searches coming from other quality patent-examining offices, such 

as the European office under the Patent Cooperation Treaty or the 

other national offices with which the U.S.P.T.O. arranges a search 

agreement. 

We agree with the plans that the office has announced for hiring 

more qualified people, for better training, for promoting after tests, 

and those types of things, for building a more adequate and reviewable record. There are many things in the plan that we find to be 

good ideas and ideas to build on. 

Even the ideas of the increased fees for excess claims and 

lengthy applications, we don’t oppose that notion. We think that 

those who file great numbers of claims should expect to pay the 

costs for having those claims examined. 

We do not agree with punitive charges, however, because we 

think that applicants have very legitimate reasons for filing large 

numbers of claims in some cases, or at least more than the minimal number set forth in the fee bill. But we think those applicants 

should be required to pay for it. And to that extent, we agree with 

that aspect of the plan. 

As far as the fees themselves are concerned, we stated at the 

hearing that you had in April on the President’s proposal that we 

will support a reasonable increase in statutory fees, and we stand 

by that. What we do not support is a fee bill that is designed with 

the purpose in mind of diverting $162 million. 

Five years ago, when President Clinton sent a proposed budget 

to the Hill that suggested that there was $50 million that was 

going to be raised by the Patent and Trademark Office, that he 

proposed to rescind because ‘‘the PTO didn’t need the money,’’ this 

Subcommittee took him at his word and gave a new fee bill to the 

President, one that reduced the overall fee revenue by $50 million. 

Since the PTO did not need the money, you concluded the applicants didn’t need to pay for that money, and we agreed totally with 

that view. 

53

So in this particular case, we would not oppose an increase in 

fees. We would oppose an increase in fees designed to continue diversion. 

Thank you. 

Mr. COBLE. Thank you. 

Mr. Baker, my time has expired. Hold your thought and——

Mr. CONYERS. Mr. Chairman, can I yield you some of my time? 

Mr. COBLE. No, you go ahead, John. I’ll get it on my second 

round. We will have a second round. 

I recognize the gentleman from Michigan. 

Mr. CONYERS. Well, let’s continue the discussion, Mr. Baker. 

Mr. BAKER. Thank you. I won’t repeat the ideas people have said 

before me. We agree, generally, that this has got some good concepts in it; we should identify those good concepts. It has some bad 

concepts in it; we should identify those bad concepts. 

One of the bad concepts is its settling for fee diversion. We would 

like to see that addressed in some way so that we can do what we 

can to change this bad policy decision. 

But once we have identified the good and the bad, we would be 

glad to work together with the Subcommittee, with the office, with 

the other user groups, and come to a consensus. 

Director Rogan, Judge Rogan, has done a great job, and his agency, in what amounts to 4 or 8 weeks. It just needs more to work. 

Mr. CONYERS. Hi, Jim. 

Judge ROGAN. Mr. Ranking Member. 

Mr. CONYERS. What do you say about these comments? 

Judge ROGAN. Mr. Chairman, I certainly appreciate people coming forward and saying, ‘‘I don’t want to pay more fees.’’ And I especially appreciate people saying, ‘‘I don’t want to pay fees that the 

Director has admitted are punitive.’’ And in some cases, Mr. Conyers, the fee structure is designed to be punitive, not because we’re 

mean, not because we don’t like certain aspects of technology, but 

because we have an agency that is not designed to handle some of 

the claims that are coming up. 

Mr. Chairman and Members of the Committee, let me just give 

you a quick snapshot. We will get this year about 350,000 new applications that will go on top of a pile of 450,000 sitting in a backlog from previous years. We have about 3,200 or 3,400 examiners 

to handle all of them. 

Now, when people send in multiple claims in an application—if 

you send in 10 independent claims in one application, that, in a 

very real sense, is like sending in 10 separate inventions in one 

file. We don’t get them just with two and three and four. We get 

them with 100, 200, 300, 1,000, 5,000. 

Now, if you have one examiner that’s told to go and investigate 

this patent with 5,000 claims—we just had one from an oil company recently: 5,100 claims in one application. The system is not 

designed to handle them. 

When we look at the world of biotech, some of the most important patents that come through, some that are bringing incredible 

increases to our economy, to quality of life, and everything else, the 

average number of claims that we grant on a biotech patent is 17 

total. And yet, in some of these areas, either because——

54

Mr. COBLE. I didn’t hear the figure, Jim. What was the figure? 

The average is what? 

Judge ROGAN. Seventeen. 

But we’re getting many of these claims in in the hundreds and 

sometimes in the thousands. 

Now, some of it is that they’re not sure what they need to claim, 

and so they claim everything. They haven’t seen a search report 

yet, and so they’re throwing everything out there. 

We’re hoping that by competitively sourcing the search and giving our claimants an opportunity to look at a search report and 

weigh that against what they would like to claim, that in and of 

itself will help them narrow their claims. 

But we simply cannot address the issues of quality and pendency 

when we are, for a very minimal fee, allowing applicants to start 

sending in things that the system is just not designed to handle. 

Mr. CONYERS. Ms. Barrett Park, your turn. 

Ms. BARRETT PARK. Representative Conyers, I am not a patent 

attorney, and I think I’m going to defer to one of my colleagues who 

can address that specific issue. 

Mr. KIRK. Mr. Conyers, in terms of the number of claims included in applications, the PTO published a rule proposal back in 

1998 in which it indicated that less than 5 percent—less than 5 

percent—of all applications have more than six independent claims. 

So we have a proposal before us that’s designed to start penalizing 

applicants. Nearly 18 percent of the applicants file more than three 

independent claims. 

So the penalties are starting very early. We think too low; we 

think they should start at a higher number. And we think—we 

have no objection to the fees being charged to repay the patent office for the cost of doing the work. We don’t object to that. And that 

in itself is going to have a salutatory effect, because to the extent 

that someone now gets a quasi free ride, in the sense that they 

don’t have to pay the costs of examination, they’re going to be given 

an encouragement, once they have to pay the full boat, to look at 

reducing the number of claims. 

We don’t object to that at all. Our concern is with the punitive 

nature of this. 

Mr. BAKER. Just briefly, I think you’ve got to be careful about extreme examples. He cites one thing as 5,000 claims and now says, 

from that, I extrapolate that everything else—that punitive fees 

are appropriate. 

The way it’s drafted now, these punitive fees begin at a very low 

level. As proposed, the cost for presenting the sixth independent 

claim would be four times the cost for presenting the fourth independent claim. Now, there’s no reason in the world that the sixth 

claim requires four times as much work as the fourth claim. 

So we don’t—there’s got to be a more reasonable tie to the 

amount of work in these claims. And there’s no reason to be punitive. 

As I mentioned in my earlier statement, an applicant is not going 

to spend money on something he thinks is a waste of time. He is 

going to have his own reasons, in view of the patent law, to do it. 

If he wants to do it and pay for it, fine. But he shouldn’t be penalized for doing it. 

55

Judge ROGAN. Mr. Conyers, if I may, that addresses the issue 

right there. Right now, under the current system, there’s very little 

additional an applicant has to pay to have a shotgun approach. 

Under the system that we are proposing, we want them to be more 

selective in what they send to our examiners, because our examiners are expected to get these applications out through the door 

and get these products to market, if indeed they are patentable. 

Mr. COBLE. I thank the gentleman. And we’ll have a second 

round, if you have other questions. 

The gentleman from California—I see the gentleman from Tennessee has departed. Mr. Issa is recognized for 5 minutes. 

Mr. ISSA. It’s good never to leave your seat. [Laughter.] 

Mr. ISSA. Thank you, Mr. Chairman. 

I, too, am concerned with a couple of these proposals. And I’ll 

sort of take them in economic and then maybe non-economic order 

first. And I guess the economic one that I’d like to understand, and, 

Secretary Rogan, maybe you can, since you’re the author, or at 

least the named person here of this plan, I’m trying to understand 

a little bit. 

If you have a fee to do something which is constitutionally mandated—we have no choice, Congress has no power to stop patents. 

We have an absolute responsibility to ensure that Government provide them. And we have a fee, and that fee is being siphoned off, 

and we get more fee, then that’s a tax increase, isn’t it? 

Judge ROGAN. If you’re asking me the question, Congressman 

Issa, from a philosophical standpoint——

Mr. ISSA. We’ll start with philosophy here. 

Judge ROGAN. It sounds like you’re reading one of my prior 

speeches as a former Member of this Committee. 

Mr. ISSA. You know, Jim, what I really like is I know you’ve sat 

in this seat, and I know what you would have asked. [Laughter.] 

Judge ROGAN. And it sounds like you know how I would have answered. [Laughter.] 

Mr. ISSA. But I want to hear it. I mean, Jim, this is a tax increase. If we assume what is likely to happen, which is at least 

some of it over time will be siphoned off, unless we change a policy 

that has gone on for a decade of taking what is called surpluses, 

and now you’re going to produce more surpluses. 

You know, I’m an old—I’d like to say not ‘‘old,’’ but I guess an 

old Reaganite, and I know what a revenue enhancement is. It’s a 

tax under a Republican administration. 

Judge ROGAN. Mr. Issa, I’m not going to quarrel with you on this, 

because I’ve made the very same speech myself as a Member of the 

Committee. The question before Congress is whether or not the 

President’s request for additional funds is a worthwhile request or 

not. 

Now, in his budget, he requested that this agency, the PTO, contribute from a $1.5 billion budget essentially 10 percent, $162 million. He has requested from the PTO through the revenues that 

come through from the user community for homeland security. And 

the question for not just the user community but for Congress is 

whether or not that is appropriate, and Congress will make that 

determination. 

56

Mr. ISSA. Okay. Well, for this particular Member, since I have 

the luxury of being on this side of the dais, I don’t believe we have 

a right to tax patents. I don’t believe we have a right to tax an obligation of Government. An obligation to deliver when taxed is in 

fact a breach of the obligation to deliver. 

We have a right to take those funds which would be legitimate 

overhead. And if 10 percent is a legitimate overhead of the Federal 

Government, I don’t have a problem with it. I do have a concern 

that, in fact, blatantly in this administration—my administration, 

I’m proud to say—is making a mistake in this case and is in fact 

assuming that this revenue source is a legitimate revenue source 

to be siphoned off. And I guess that is a philosophical concern that 

I have. 

Is there anyone else on the panel that wants to take on the constitutional question, or would you rather get to the next part? 

Then we’ll get to the next part. 

Secretary Rogan, you probably will be pleased to find out that I 

support the concept of being punitive with excessive claims. Like 

some of your panelists, I’m a little concerned if three is excessive. 

One of the questions I have, though, is, why is it that independent 

claims should be penalized in any way, shape, or form, when in fact 

the proliferation is typically you’ve got one idea and 4 million ways 

of expressing it, or 5,100 ways of expressing it. 

Judge ROGAN. Well, we’re not saying that people shouldn’t express it. We’re just saying that we hope that they’ll express it in 

a reasonable fashion that is within our capacity to absorb it and 

to get the file out through the process, through the pipeline in a 

reasonably proficient and quality-driven manner. And some of them 

just overwhelm the system. 

And if I may, for the benefit of my colleagues here at the table, 

I am the first person to concede that there may well be individual 

cases, individual files, that warrant excessive claims. There may be 

some technology so unique or something that really is very narrowly drawn. And in that instance, Mr. Issa, Members of the Committee, although it isn’t expressed in the plan, I certainly would 

have no objection to Congress attempting to give us the right not 

unilaterally to increase fees, give us the right to rescind fees or to 

rebate fees. I think if in fact we are granting claims in applications 

that are warranted, that there ought to be some recognition of that. 

The trouble is, Mr. Issa, that so many of these claims end up getting rejected, so many of them are just thrown out in shotgun approach, that it overwhelms us. 

Mr. ISSA. Mr. Chairman, if I can do a quick follow-up on the 

same line? 

Since you’re pointing out the possibility of some sort of a waiver 

authority, would you also support a waiver authority when—let’s 

just say that there’s a single invention and hypothetically a hundred independent claims, that in fact if there is effectively a requirement, which there is in many cases, that you not bifurcate 

that into multiple patents, that that would be a natural area for 

waiver, rather than when, obviously, when most of the time there 

is one independent and gazillions of dependent claims. 

Judge ROGAN. I think, knowing you as I do, Mr. Issa, as a true 

free-market conservative, I hope this answer will appeal to you. 

57

What we have attempted to structure is a fee system that simply 

says, ‘‘if you’re going to make us do more work, we’re going to 

charge you more. If we do less work, we’re going to charge you 

less.’’ And as far as the fees being arbitrary and capricious, I have conceded that some of them are designed to be punitive. But if I may, 

under the proposed fee structure, if you have four independent 

claims and 40 total claims, the fee is $6,000. Is that arbitrary and 

capricious on some very highly technical patent application? That’s 

for Congress to decide. But right now the cost is $444. Is that a 

market-driven solution? I don’t think so. 

So that’s what we are attempting to bring into this. We have to 

account to Congress for every dime that we spend. 

Mr. ISSA. Thank you. Thank you, Mr. Chairman. I’ll wait for the 

second round. 

Mr. COBLE. I thank Mr. Issa. 

We have now been joined by the late Howard—— [Laughter.] 

Mr. COBLE. I say that with tongue in cheek, because they know 

where you’ve been, Howard. Howard, we are just completing our 

round of questions, would you like to make your opening statement 

now? 

Mr. BERMAN. Would you be offended if I just put my opening 

statement in the record? 

Mr. COBLE. We won’t be offended at all. It’s good to have you 

with us, Howard. 

Mr. BERMAN. It’s good to be here. I think I’ll sit back awhile. 

Mr. COBLE. All right, sir. 

[The prepared statement of Mr. Berman follows:]

PREPARED STATEMENT OF THE HONORABLE HOWARD L. BERMAN, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Chairman, 

Thank you for calling this hearing on the Patent and Trademark Office’s strategic 

plan and proposed new fee schedule. 

I commend Director Rogan for providing us with a detailed and comprehensive 

plan for the PTO’s future in a short amount of time. I am sure Mr. Rogan understands that, without the vision provided in the strategic plan, it would be difficult 

for this subcommittee to understand and support any changes to the fee schedule. 

I appreciate this foresight, and look forward to a careful scrutiny of the PTO’s plan 

for its future. 

The PTO plays a vital role in fostering innovation and generating new commercial 

activity. In order to fulfill this mission, substantive and immediate changes are 

needed. Current patent pendency is nearly 24 months, and the PTO has a backlog 

of over 400,000 applications. The annual workload growth rate is as much as 30 percent. The PTO is already overwhelmed by its current workload, and without immediate action it will be completely unable to meet its quality, pendency, and technology goals. 

Part of the solution is to provide the PTO with the funding it needs to fulfill its 

mission. Chairman Coble and I have long sought to end the use of patent and trademark fees in funding other non-PTO programs in the government. H.R. 2047 authorizes the PTO to retain all the fees it collects. This bill passed in the House last 

November, and the Senate recently approved a similar authorization measure. In 

the meantime, however, the FY 2003 budget still diverts $160 million out of the 

PTO. It is difficult for us to determine appropriate fee schedules for the PTO when 

such diversion is taking place. The proposed fee schedule does not reflect the actual 

cost of services provided, but rather the bottom-line amount that the Administration 

budget requires, including the diverted funds. 

Inventors and intellectual property associations have expressed their concern 

about proposed fee increases—particularly the expensive, behavior-modifying fees 

that are not commensurate with the cost of evaluating the application. These behavVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00061 Fmt 6633 Sfmt 6621 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
58

ior-modifying fees appear to be designed to encourage small, separate applications. 

This will strongly penalize the high-tech and biotech industries, whose patents are 

often incredibly complex and can contain many claims. The behavior-modifying fees 

could cripple these industries and discourage them from filing patents. In evaluating 

the proposed changes to the fee schedule, we need to consider not only the effect 

on the PTO, but also its impact on innovators. 

The fee schedule is only a small component of the changes planned by the PTO. 

Other proposals, such as external search services and the multi-track examination 

process, will also require careful consideration. Additional oversight and legislation 

will be necessary before a complete solution for the PTO can be developed. I hope 

this will be the first of several hearings for this committee to evaluate and implement an appropriate strategic plan for the PTO.

Mr. COBLE. Now, I believe the gentlelady from Pennsylvania arrived, Spencer, before you did. So I’ll now recognize the gentlelady 

from Pennsylvania for 5 minutes. 

Ms. HART. Thank you, Mr. Chairman. 

I have several questions, and I think I’m going to start with my 

first line of questioning dealing specifically with from what I understand are covered under class 705, which is data-processing, financial business practice management, or cost-price determination 

area of patent sector. 

I’ve been approached by some constituents who are part of a coalition that’s comprised of financial services companies that are 

dedicated to helping to improve the functionality of the Patent and 

Trademark Office. Most of the patents that they seek are in that 

class 705, as I mentioned. 

As I understand it, there are currently under 100 examiners who 

are able to examine patents in this class. And the information that 

I have suggests it would take about 300 examiners 3 years to clear 

the backlog, because apparently it takes up to 5 years to have a 

patent granted in that class. 

So as it currently exists, the Patent and Trademark Office is not 

working for these people. This is what they’re telling us. 

I want to know, basically, I guess, Mr. Rogan, if you can address 

that, what the plan is to really specifically address the 705 backlog. 

And anybody else on the Committee, if there are suggestions and 

things that you’ve been working with PTO, to try to make sure that 

backlog can be relieved? 

Judge ROGAN. Ms. Hart, you’re referring to the business method 

patents? 

Ms. HART. Yes. 

Judge ROGAN. As a politician, I love to take credit for things over 

which I have absolutely no control, but on this one, I’m afraid I 

can’t. My predecessor under President Clinton, Todd Dickinson, I 

think did a superb job. And I think it actually started under Bruce 

Lehman, who is well-known to this Committee. 

When business method patents were first coming through after 

the Supreme Court ruled—and I think it was the State Street Bank

case—that that essentially was something that we had to patent, 

we had somewhere around a dozen to 15 or 20 examiners, many 

of whom were not versed in the arts. A lot of patents were coming 

through that the user community and the courts were complaining 

about. 

And so under Mr. Dickinson, he became very aggressive. He not 

only hired I think upwards of 100 examiners in that area, he instituted a very rigorous training process for them, bringing in private 

59

industry, bringing in people who were versed in the arts, to help 

educate our examiners on what art is out there. 

He implemented what I think has been very productive, what 

has shown to be productive, a second look on those applications. 

From the user community that I’ve spoken with, and I’ve spoken 

to thousands of lawyers since I took this job, I’ve spoken to thousands of users, what I hear is the problem in that area—the problem stories tended to be earlier not now, that in fact the satisfaction level is much higher now under what was done under the previous Administration than when State Street Bank first came down. 

Right now, those filings have leveled off a bit. I think we’re at 

somewhere around 5,000 to 6,000 a year. Our core of examiners 

who are assigned to handle those can handle about 6,000 a year. 

We think that filings in this area, because they’ve leveled off—— Ms. HART. Excuse me for a second. When you say they can handle that many a year, does that mean that they’re actually approving them in fewer than 5 years, as my information suggested? 

Judge ROGAN. Well, I can’t tell you what the average turnaround 

time is in that particular art unit. Overall, it’s running about 27 

months. But in some art units, it’s much more. In the electrical 

arts—it may well be that business methods is running higher also. 

What I can tell you is that the filings have leveled off to the 

point now where we are able to handle right now slightly more 

than are coming in. And there is a backlog. And so our examiners 

are trying to go through them. 

I think we just hired another 12 to 15 examiners in that particular area. 

Ms. HART. So there are probably about 120 there now? 

Judge ROGAN. I think we have a little more than 120 right now, 

125. 

Ms. HART. So you’re under the impression then that sort of the 

negative picture that was painted for me is probably improved? 

Judge ROGAN. I don’t have the average time on a business method patent for you. I can get that information for you. That wouldn’t 

be hard to obtain. 

Ms. HART. That would be great. Thanks. 

Is there anybody else that has a comment on that particular sector? Mr. Kirk? 

Mr. KIRK. Ms. Hart, I would agree with Undersecretary Rogan. 

I think the business method patent area is not unlike the situation 

that existed with the biotech area in the mid-1980’s. When there 

was an explosion of biotechnology applications following the 

Chakrabarty case from the Supreme Court, the office got caught 

way behind the 8 ball on that. But it reorganized all of the biotechnology arts into one group. It hired a number of examiners, 

over half of whom have advanced degrees, master’s and Ph.D.s. I 

think that they have, by and large, gotten control of the biotech. 

I think the same phenomenon is occurring in the business method 

patent area. 

Ms. HART. How long over the past what period would you say 

that that’s occurring? 

Mr. KIRK. Which is occurring? 

Ms. HART. The sort of reorganization and focus on that as a sector has occurred? 

60

Mr. KIRK. With business method or biotech? 

Ms. HART. I don’t care about biotech; within the business method. [Laughter.] 

Ms. HART. I do care about it, but not for this question. [Laughter.] 

Ms. HART. It’s big back home, but they’re not complaining, fortunately. 

Mr. KIRK. Okay. The business method, it is my sense that that 

has been roughly about 3 years, because the State Street Bank case 

was 1998, if I recall correctly, and that tended to open the flood 

doors to business method patent applications and problems about 

quality et cetera were starting to be made, and the lack of resources to handle those cases. I think the Office has moved aggressively and appropriately to address those issue. 

Ms. HART. Okay. 

Judge ROGAN. May I just add a quick point to that? 

Mr. COBLE. The gentlelady’s time has expired. Hold that thought, 

Jim, and we’ll get you on the second round. 

Ms. HART. Thank you, Mr. Chairman. 

Mr. COBLE. The gentleman from Alabama. 

Mr. BACHUS. I thank the Chairman. 

Would you like to be addressed as Secretary, as Congressman, or 

as Director? What would be——

Judge ROGAN. How about ‘‘Jim’’? 

Mr. COBLE. Judge. 

Mr. BACHUS. Judge, okay. Judge, and that’s the right—I had 

heard ‘‘judge.’’ Is that because of your present position? 

Judge ROGAN. No, it’s because people are much nicer to folks 

called ‘‘judge.’’ [Laughter.] 

Mr. BACHUS. Is that right? Now, I know you were a municipal 

court judge in California. 

First of all, I want to express my gratitude for your service here 

in Congress and would ask that you convey to Cris and the twins 

Linda’s and my affection. And we very much miss you up here. I’m 

glad to see your service continued. 

I’ll follow up on Ms. Hart’s questioning, because she and I are 

both Members of the Financial Services Committee, so we do have 

financial services companies that are very interested in business 

methods, both in patenting them but also in being sued by their 

competitors who claim that they have a business patent for what 

they’re doing. 

So I suppose my question would be—I’m sure you’re already 

aware of this, but companies are being forced to settle lawsuits 

over business methods, as opposed to go to trial, because—sometimes because of the backlog at the patent office. They simply can’t 

get those issues disposed of. 

What do you suggest we do to improve maybe patent office procedures by way of reexamination and opposition to invalidate what 

may be invalid patents, to avoid this high cost of litigation, what 

I call questionable patents? 

Judge ROGAN. If I understand the question, Mr. Bachus, it’s really two parts. 

Mr. BACHUS. Yes. 

61

Judge ROGAN. Number one, how did we get the backlog? The 

backlog occurred because when the State Street Bank case first 

came down—— Mr. BACHUS. Right. And I think that was 1998, so your business 

methods is about 3 years old. And you had the Amazon case, which 

I guess is a prodigy of that. 

So you’ve been kind of caught shorthanded, I know. And I think 

the former line of questioning sort of addressed that. 

Judge ROGAN. And when that case came down, we had about a 

dozen or so examiners. I think we had about a dozen in that area. 

Now we’ve increased it tenfold. And we’re able now to start not 

only moving the cases in appropriate time but also attack the backlog. But it required having the manpower, if you will, to address 

those. 

With respect to reexamination, we believe there should be a vigorous reexamination process. There is a proposal within the strategic plan, a recommendation to Congress, on that. I know that this 

is an issue that the Subcommittee has been engaged in for a long 

time. 

The problem with the post-grant examination we have right now 

on inter partes examination is when Congress passed at the time 

the AIPA we thought we were providing a cheaper alternative to 

expensive litigation. Unfortunately, because there was no appeal to 

the court of appeals from an adverse patent office decision, if somebody went through our reexamination process—last year we had, 

I think, four people use it—it was anticipated to be an alternative 

to expensive litigation. It ends up being something that is just simply not being used, among third parties, because they just don’t 

view it as a worthwhile—— Mr. BACHUS. I think it’s very important, because we’ve got this 

new State Street Bank decision, that we do two things. One is we 

establish a way to reexamine and invalidate some of these questionable patents. The second thing, the financial services companies have expressed an interest in aiding the patent office by establishing a ‘‘library’’ of I think it’s called prior art in—I think these 

are class 705 patents. 

Anybody like to comment on that? Is there any progress being 

made? Are you aware of that? 

Judge ROGAN. The only comment that I would make is that they 

have been, from 1998 on, extremely helpful in already doing that 

and in educating our examiners. The concern that the Committee 

had, particularly Mr. Berman, who has authored bills on this, was 

to make sure that people weren’t submitting patent applications 

that were being granted based upon simple business practices that 

have been out there forever are now just being digitized. 

Mr. BACHUS. Well, that’s exactly my point in all this, is that it 

is creating quite a burden on industry, I mean, particularly I know 

the financial service industry. I know you had that Amazon decision that came down. That’s a little different. But it came down 

right before a busy sales time. 

But what happened, they’re settling these cases because they 

can’t get a reexamination or a decision. They’re just going ahead 

and paying off. And it’s encouraging frivolous lawsuits. It’s encouraging a lot of these patents. 

62

And let me just say—I know my time has expired. 

Mr. COBLE. The time has expired. 

Mr. BACHUS. But I would like to associate myself with the gentleman from California in saying that we’ve talked a lot about 

funny accounting, but this putting a surcharge on and then diverting $126 million or whatever the figure is to homeland security is 

funny accounting. I think that the surcharge ought to be used; it 

ought to be used by the patent office. But it shouldn’t be used as 

a new tax and masqueraded as something else. 

Mr. COBLE. The gentleman’s time has expired. You can pick up 

on that especially in the second round. 

You mentioned your immediate predecessor, Mr. Rogan. 

Todd, it’s good to have you in the audience. 

I don’t see Bruce Lehman here, but if Bruce is here, we’re glad 

to have him as well. But I don’t think he’s present. 

The gentleman from California. 

Mr. BERMAN. Thank you, Mr. Chairman. 

I just want to pick up on the line of questioning not directly related to the issues presented by the hearing but on business method patents that Ms. Hart and Mr. Bachus addressed. One is to see 

if I perhaps could persuade them to associate with the legislation 

of another Member from California, myself, who is concerned about 

the conceptual questions raised by business method patents. 

Are we now at a point—I mean, this is different than biotechnology, in one sense. Biotechnology was something new, scientific, technical, and appropriately patentable. 

There are more serious questions raised about being able to patent a method, a business method. Is it technical? Is it science? Is 

it novel? Is something done in the computer world that is a method 

done through computers, as opposed to patenting a particular kind 

of software, something that should be subject to patents? 

And I have introduced some legislation which doesn’t directly 

undo the notion of patenting business methods but raises the bar 

for qualifying for that patent. And I just wanted to suggest 

that——

Mr. BACHUS. Would the gentleman yield for just 10 seconds? 

Mr. BERMAN. Sure. 

Mr. BACHUS. I’m not sure that—if we had started patenting innovative methods of doing things, I’m not sure that we would be 

where we are today, because there’s a certain amount of just natural innovation involved. And I think that I totally agree with you. 

It’s stifling innovation out there. 

Mr. BERMAN. Just reclaiming my time, I mean, people have patented a golf swing, a way of high jumping, the Fosbury Flop. 

Priceline.com, the idea of the reverse auction—well, before there 

ever was an Internet, there were reverse auctions. Was this something novel and new? 

So there is some legislation on that. We’ve had some hearings 

and discussions on it. And I just throw that out for you. 

On the fee issue, there’s some confusion over whether these fees 

are to be applied retroactively to any pending application as of last 

October 1st. These are large, behavior-modifying fees. One can discuss the wisdom of moving in that direction for the future, but I 

think the notion that people who went in under the existing procVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00066 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
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ess will now—because of our desire to modify behavior in the future, and change the fee structure, should they be swept in under 

that, Mr. Director-Judge-Congressman? 

Judge ROGAN. I appreciate the question, because it gives me an 

opportunity to clarify the record. It was not our intent in submitting the proposed language that those fees be retroactive for the 

very reason that you suggest, Mr. Berman. It would not be behavior modification. 

I’m told by a number of people who have looked at our draft subsequently that there is some ambiguity in that. And so for whatever legislative history that this record can be made a part of, it 

was not the intent of our office in submitting that. 

Mr. BERMAN. I have no further questions. 

Mr. COBLE. I thank the gentleman. 

The distinguished gentleman from Utah. 

Mr. CANNON. Thank you, Mr. Chairman. 

I apologize for being here late. I had to be in a markup in the 

Parks and Public Lands Subcommittee, where we were trying to 

consolidate the public children’s school trust lands, and my bill was 

there, and I had to move it through that Committee. I apologize. 

I welcome—I was just thinking of all these titles, Jim, and some 

oddball ones came to mind. I won’t go through those. [Laughter.] 

Mr. CANNON. I prefer the title ‘‘friend.’’ But it is nice to have you 

back here again. 

Let me first of all say that I associate myself with the gentleman 

from California on this difficult issue that we’re going to have to 

confront in the next Congress or in the near future about the proliferation of patents in ways—patents, trademark, and other protections that inhibit creativity and impede progress. That’s an issue 

that we’ll have to come back to. And my good friend Mr. Berman 

is right on that. We need to deal with that. And you, of course, are 

in the vortex of that issue, and so I suspect we’ll spend some more 

time on that. 

There’s been a lot of talk about rates going up. It seems to me 

you’re in a real box here. You have to come back and ask for rate 

increases and then our—you can’t agree with this, I know, because 

of your position—but our appropriators then take that money and 

divert it to other purposes, which means you get to be the bad guy 

and come back here and ask for increases in the authorization, for 

increased rates. And then we suspect that the appropriators will 

continue to divert that. 

I appreciate the fact that you commented that you’re making 

progress on your backlog and that sort of thing. I think it is deplorable that you don’t have the resources to move more quickly. But 

I do congratulate you on the carefulness and the continuity of the 

progress that you’re making in your backlog. 

I do have a question first for you and then for other members of 

the panel, if they wish to comment. 

I have several constituents who are small-business men who 

have complained about the fact that once they file a patent fee and 

pay the initial registration fees, they still pay maintenance fees on 

those patents. They’re charged after 7 and a half years and again 

after 11 years. They complain, and we’ve had a number of these, 

that when they must defend their patents against some very big 

64

companies—these tends to be small companies where patents ought 

to be effected—they don’t get any help from PTO. They’re essentially on their own. 

So the question they have, and my question to you is, what are 

they getting from the PTO in exchange for these maintenance fees? 

And what can I tell them? First of all, Mr. Undersecretary, and 

then other members of the panel, if you wish. 

Judge ROGAN. Well, Mr. Cannon, what you could tell them is 

that Congress sets those fees. But I’m not sure that’s an answer 

you want to give. 

The maintenance fee is statutory. It’s set by Congress. And it is 

precisely what it calls itself, to maintain the patent. 

A lot of people choose not to maintain their patent because the 

economic viability of their patent in the first year is no longer the 

same as it is in the fifth, the 10th, the 15th, or the 20th year. That 

is particularly true, I think, in software, where something that 

comes out today may be the latest innovation, but in 2 or 3 years, 

we’re four or five generations away from it. 

So in a lot of those areas, maintenance fees aren’t being paid. It 

really is the choice of the applicant to decide if they still want to 

maintain that patent and still have patent protection. But that’s a 

fee set by Congress. 

Once we issue the patent, we no longer have any meaningful jurisdiction over that patent. 

Mr. CANNON. But essentially what you’re saying is this is just 

another way to gouge people in the public for fees that come in—

you don’t have to say this. You don’t even have to nod in agreement. But the fees come back in and then they get appropriated 

for other purposes, and then you don’t have much to do with that, 

with challenges in the future. 

Judge ROGAN. I’m holding my head as still as possible at invitation of the question. [Laughter.] 

Mr. CANNON. Thank you, Congressman. 

Anyone else on the panel? 

Mr. BAKER. I would just comment briefly that, leaving the diversion issue aside, assuming that all the moneys that users pay went 

to the patent office for its purposes, there are reasons to keep the 

fees at the beginning low and pay more in the maintenance as the 

patent goes along, because you want to encourage filings. 

So if I had to pick a way I want the pain, I would rather have 

the pain at the end where the patent is out there, you know you’re 

making money on it, you know what it’s worth. Charge me the fees 

there, but don’t charge me the fees at the beginning. Let me get 

it in the door. 

That’s good for the public. The more disclosure, the better. 

Mr. CANNON. That’s a great idea. In other words, the ones that 

continue carrying the burden or the cost of the office are those who 

actually have a patent that has had some meaning and some financial success. That’s a great idea. Thank you very much. 

Mr. Chairman, I yield back. 

[The prepared statement of Mr. Cannon follows:]

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Cannon1.eps
66


Cannon2.eps
67

Mr. COBLE. I thank the gentleman. 

Round 2, Ms. Barrett Park, place your trademark cap on, if you 

will. 

In your written statement, you addressed the recent PTO notice 

in the Federal Register regarding the agency’s desire to raise the 

trademark fees by $50. If you would, summarize this issue and explain INTA’s objection to it. And I was going to ask you if the increase is needed, but I think I know what your answer to that 

would be, but you can still respond. And should we in the Congress 

be evaluating its propriety along with the proposed fee schedule? 

Ms. BARRETT PARK. Mr. Chairman, the issue is that the PTO 

has, as you said, a rulemaking notice in the Federal Register in 

which it proposes to raise fees for trademark-related submissions 

on paper, for which there is an electronic version available, by $50. 

We have two objections to this. One is budgetary, and the other is 

statutory. 

On the budgetary side, the current fee structure which became 

effective in January 2000 raised trademark fees, including the 

basic filing fees, to fully cover the costs of trademark operations. 

These increases were clearly premised on a paper-based system, 

since at that time not even 20 percent of filings were being made 

electronically. We’ve seen no evidence that the current cost of processing paper applications and the like requires additional fees. 

While there may be a differential between the actual cost of processing paper versus electronic, there isn’t any evidence that the 

cost-recovery model that is currently in place is not working. 

If that were the case, since 70 percent of trademark applications 

are still filed on paper, we’d see the trademark side of the PTO operating at a severe deficit, and we have no evidence of that. 

On the statutory side, this is a fee increase. It’s a fee increase 

over CPI, and that is Congress’s prerogative to do that. 

Mr. COBLE. Then let me put this question to you, Judge Rogan 

and other members, why is it imperative to enact the fee schedule 

changes prior to 1 October? By that I mean, could not the Subcommittee, could not the agency, could not the user groups, sort 

through the fee schedule and other proposals more thoroughly, you 

know, without a stopwatch being held upon us, and perhaps build 

a greater consensus for reform? 

Who wants to respond to that? 

Judge ROGAN. Well, Mr. Chairman, I guess I can start. 

Congress can do that. But the same status quo that this Subcommittee correctly has derided for years continues for another 

year. And as the Chairman and the Members of this Committee 

know, hiring examiners in and of itself is not a fix, because bringing in 750 untrained examiners does not allow us to meaningfully 

attack the backlog at all. It takes years to train an examiner. 

If Congress were to feel, if the user community were to feel that 

the status quo is acceptable, that pendency can continue to go up, 

that we’re not going to begin the investment right now in trying 

to turn it around, then industry is hurt, jobs are hurt, the economy 

is hurt, technology is hurt, and all of the pathologies that go along 

with it are hurt. 

Mr. COBLE. Mr. Kirk? 

68

Mr. KIRK. Mr. Chairman, given the stage of the Congress that 

we’re at, I think that we do have time to reflect upon what an appropriate fee schedule should be and to try to refine the plan. We 

received information that the Senate Appropriations Subcommittee, 

CJS Subcommittee, has tentatively marked up PTO’s appropriation for fiscal year 2003 at a level we believe of approximately $1.145 

billion. Now, that is considerably less than the $1.527 billion in the 

President’s and now in the PTO’s fee bill, if that is an accurate 

number, and I stand to be corrected, because it’s very difficult to 

get this information out of the appropriators, as you can imagine. 

Nonetheless, this would represent a very significant amount of 

money out there to be grabbed, to be used elsewhere. So we think 

we’ve got the time to look at this fee bill, to look at the plan, to 

try to determine what’s appropriate, to try to fund and to move forward, and to ask this Subcommittee to work with the appropriators 

to try to get them not to divert additional funding that we might 

send to the PTO. 

And I emphasize again that AIPLA would support a reasonable 

statutory fee increase. We’re not against any fee increase. 

Judge ROGAN. Mr. Chairman, may I just briefly comment on 

that? 

Mr. COBLE. Sure. 

Judge ROGAN. Because diversion is on everybody’s mind. 

One of the fundamental reasons that the appropriators have always used for diverting PTO funds is that they don’t think the 

PTO is aggressive, that they work off the same model, and they, 

therefore, are not using the fees wisely. 

And so if we delay this program for another year—if you accept 

that argument, doesn’t that just allow the argument for diversion 

to remain for another year? 

Mr. COBLE. Mr. Baker, I cut you off before. I’m not going to cut 

you off again. If Howard will let me—— Mr. BAKER. I will be brief, since the red light is on. 

We believe that we should take the time needed to build a consensus, which certainly does not exist for this schedule, and get it 

right. While President Roosevelt said we should do something, I 

don’t think we should do something wrong, and there are some serious things wrong with this bill. I don’t think that we preclude 

some of the things in this plan from being implemented as promptly as possible, like his electronic filing matters and quality issues. 

Mr. COBLE. Do you want to be heard, Ms. Barrett Park? 

Mr. BAKER. Congressman, the INTA concurs. 

Mr. COBLE. Very well. 

The gentleman from California. [Laughter.] 

Mr. COBLE. I didn’t realize the other gentleman from California 

had arrived. 

Howard, you’re recognized for 5 minutes. 

Mr. BERMAN. Thank you, Mr. Chairman. 

Jim, in a phone conversation I had with you, and then subsequently in a public way, you indicated your intention to lay off 

some attorneys, a large number of attorneys, in the trademark office. on July 11th, just recently, a group of us sent you a letter, 

asking you to, from a business point of view, lay out your thinking, 

the rationale behind the layoffs, the proposed layoffs, and to conVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
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template certain scenarios and the likelihood of scenarios which 

might raise in your mind and in the Congress’s mind questions 

about how extensive should they be and the wisdom of those layoffs. 

I was curious whether you’d be willing to sort of hold off on a 

final decision until you’ve at least responded to the congressional 

letter on this subject. 

Judge ROGAN. Mr. Berman, first, thank you for letting me know 

that letter is forthcoming. I hope you didn’t send it through the 

regular mail. We won’t see it for 3 or 4 months. I have not seen 

your letter. 

Mr. BERMAN. We faxed it. 

Judge ROGAN. Okay. I just haven’t seen it yet. 

Mr. BERMAN. Okay. July 11th. 

Judge ROGAN. Thank you. It’s probably working its way through 

the bureaucracy. 

Mr. BERMAN. The backlog? [Laughter.] 

Judge ROGAN. Maybe. 

As we’ve discussed previously, this is a situation that nobody 

likes but I’ve inherited. Filings have dropped over 2 years on the 

trademark side some 30-plus percent. Hirings were made during 

the dot-com increase. When I came on board almost a year ago, I 

met with our trademark folks informally and formally and told 

them that the recommendations are coming through for a RIF, that 

we have more lawyers than work, and I’m going to hold off RIFing 

anybody until the end of the fiscal year to see if filings do pick up. 

We did that. I kept my word. The filings did not pick up. Filings 

have gone down. They continue to go down. The unanimous recommendation of the trademark commissioner’s office is that the 

RIF be put in place. And the fiscal year is coming to an end. Congress has told us that we have to run the agency like a business. 

And it is regrettable. We’re going to do everything we can to try 

to find places where we can absorb people. But the RIF is set to 

go into effect on September 30th. 

Mr. BERMAN. Could I ask you this—I am advised that actually 

in the last 6 or 7 months, the filings have started to pick up again, 

and that they’re now about, almost 40 percent higher in the month 

of May than they were at their low point in January. Forty percent 

is high; 20 percent higher. 

But could you take a look at the letter a group of us sent you? 

Judge ROGAN. Certainly. 

Mr. BERMAN. And think about just the extent to which—I understand what you’re saying, but think about the extent to which 

issues raised by that letter and information sought in that letter 

could be responded to, so that Congress could have sort of the full 

basis of your thinking and your answers to some of the questions 

raised before you actually undertake them. I just leave you with 

that request. 

Judge ROGAN. You certainly are entitled to that. And now that 

you put it on my radar, I will address that forthwith. 

Mr. BERMAN. Great. My other question is on—and by the way, 

we can provide a copy of the letter. We have it here. 

70

On sort of these behavior-modifying fees, I’m not philosophically 

against behavior modification through financial disincentives. It’s 

called a progressive—no, that’s something else. 

Judge ROGAN. You’re always trying to paint me as a Democrat, 

aren’t you? [Laughter.] 

Mr. BERMAN. Social engineering in the patent office. [Laughter.] 

Mr. BERMAN. I guess that’s the underlying question. In the cases 

where these multiple claims cause much more work for the office, 

is this an effort to have the users really pay for what the office is 

having to do? Or is it to discourage certain practices by so increasing the fees that companies and individuals that are engaging in 

that will no longer want to do it? And if it is the latter, what’s the 

underlying policy that says that’s a bad thing to do and we want 

to discourage you from doing it, rather than we simply want you 

to pay your fair share of our costs? 

Judge ROGAN. It’s both. It’s both. 

Mr. BERMAN. And then what’s the underlying policy for the behavior modification as opposed to the costs of the office in processing those claims? 

Judge ROGAN. Because if we don’t change the system, if we 

allow, particularly in the most complex areas of technology, people 

to submit claims that are not always thought through carefully, 

that are as broad as possible, that are on their face not patentable, 

and do that in multiples of tens and hundreds and sometimes thousands, it makes it I’ll say problematic if not impossible for an examiner to be able to give a meaningful review to that filing. 

I guess if I were to analogize it, if we get a high-tech application 

that comes through with 5,000 claims, which we’ve had, this is 300 

times the size of the average claim application that we get. It 

would be akin to you going to a town hall meeting with 300 constituents and telling 299 of them, ‘‘I can’t answer any of your questions until the first guy gets to ask me 300 questions.’’ I mean, 

that’s what these applications are doing to our examiners. They are 

requiring them to spend an inordinate amount of time on one file 

with claims that are being rejected sometimes by the tens, sometimes by the hundreds, sometimes by the thousands. 

Now, we also think—I’m not saying that the filers are the villains here either, because from their perspective, if it’s not costing 

that much more, and because of court decisions, you’ve learned behaviorally to just cast your net as wide as possible and throw everything against the wall and see what sticks. Were I advising 

them, perhaps from a legal standpoint that might be the way I 

would want to approach it, too. 

What we are also trying to build into the system is giving them 

the opportunity to get that international search report first, to get 

a certified search report first, to look at that search report, and 

have a much better idea of what may or may not be patentable. 

Mr. BERMAN. Well, that has a certain appeal to me. Do some due 

diligence before you file the patent, I guess is what you’re saying 

there, really. 

But is this new structure designed to sort out the nonmeritorious 

from the meritorious claims? 

Judge ROGAN. Well, to the extent that somebody doesn’t want to 

pay fees and, in some cases, exorbitant fees—as I said in my openVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6601 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
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ing remarks, we’re not suggesting this fee structure, particularly on 

the punitive side—I’ve conceded they’re punitive. But we’re not 

suggesting it because we want the revenue. We’re suggesting it because we want it to stop, because it shuts down our system. 

We cannot continue—the system was not designed to handle that 

type of application. And then back that up with thousands more of 

them. 

Mr. BERMAN. Thank you. 

Mr. COBLE. I thank the gentleman. 

The Chair recognizes the other distinguished gentleman from 

California. 

Mr. ISSA. Thank you, Mr. Chairman. 

Mr. Baker, I picked up on something you said earlier, which I 

think is very noteworthy, when you talked about perhaps shifting 

a portion of this rather large increase to the maintenance portion. 

Do you want to expand on that, because I think particularly if the 

Administration is going to take part of the dollars, it has a particular appeal to those of us who look at those as a commerce event 

and potentially taxable, versus the right of the inventor? If you 

want to expand on that? 

Mr. BAKER. Surely. We feel that it’s often easier to decide, from 

the client’s point of view, the patent owner’s point of view, the investor’s point of view—the value of the patent is more clearly 

known after it’s issued, after you’re on the market with your product, after you know what it covers, after you know what business 

it’s protecting. 

Therefore, to pay $1,000 maintenance fee or to pay a $2,000 fee 

is not a big deal because you’re probably making many more thousands than that. 

On the other hand, a filing fee, it’s an infant; you don’t know 

what it’s going to grow into, what the business is going to grow 

into. And so, to put the fees up there discourages the filing. And 

looking at it from the public’s point of view, you’d rather have more 

things filed and more things publicly disclosed. 

So we would rather put the pain toward the end than toward the 

beginning. That’s assuming no diversion. Or, if we have to put up 

with diversion, the answer is still the same. 

Mr. ISSA. Thank you, Mr. Baker. 

Secretary Rogan, if you could do me the great favor, because I 

don’t know that it can easily get the figure, if you could give us the 

breakdown of revenues from maintenance fees, both trademarks 

separately from patents, so that perhaps we could make an educated decision. If this Committee were to make the bold presumption that maintenance fees were less constitutionally protected 

than the right of the inventor, to perhaps find a justification for 

some portion of diversion, but link it to that revenue source rather 

than the whole enchilada. 

Judge ROGAN. If I can answer your question——

Mr. ISSA. Yes, thank you. 

Judge ROGAN. If I can answer your question, I think maintenance fees run about half of all PTO revenues. And in the plan, 

what we’re suggesting is, the farther out the patent goes, the higher the fee. If maintenance fees were to be abolished, and if it’s half 

the revenues, and if we’re going to run the office—I mean, if people 

72

are complaining about filing fees now, you would end up with a situation where independent inventors, people in the garage were 

having to double or triple——

Mr. ISSA. Actually, Jim, we’re doing the opposite. What I’m suggesting is that maintenance fees be the source of revenue that is 

extracted for the Government’s overhead and that, if anything, that 

maintenance fees from companies who have obviously made a profit on their invention, and they’re getting a return, help subsidize 

the small inventor and those costs of evaluating four or more 

claims, because it does seem to be legitimate to say, ‘‘You’re benefiting from your patent. Perhaps you can, in the process internally, 

give back to making sure the cost of a patent is lower for those who 

don’t know yet whether they’re going to make a profit.’’

Judge ROGAN. That’s what we’ve recommended. That’s what we 

have and what we recommended. 

Mr. ISSA. Okay. And I think that’s want Mr. Baker was implying. 

Perhaps we could do even more in dealing with your fee structure. 

And I’m certainly not opposed to your point that when you look 

at 5,100 claims—it is only possible because of the nature of word 

processors and computers and laser printers. It would not have 

been done in earlier times, in order to get a fair and just patent. 

Judge ROGAN. The airplane patent from the Wright brothers I 

think had a total of about 15, and Edison’s light bulb was two or 

three. 

Mr. ISSA. Of course, the Wright brothers has a lot of improvement to do, so they figured they would just move on quickly. 

[Laughter.] 

Mr. ISSA. The other area of my greatest concern—I think we’ve 

beat money to death here. But I am more concerned than anything 

else—I believe that novelty searches or searches for prior art 

should be done by every inventor, and that a responsible attorney 

would recommend that highly, because sometimes $10,000 or 

$2,000 or, these days, some searches that can be done almost for 

free, will tell you how little inventive genius there really is in your 

great invention. And that would be wonderful for all of us. 

But I’m concerned at the proposal, which would outsource this. 

And I might ask the question somewhat rhetorically, Jim, if I 

could, but maybe not. Isn’t this a business that instead of 

outsourcing, the Patent and Trademark Office should offer more as 

a service? 

In other words, you need to have expertise in-house. You need 

to have people that know about the prior art, if anything, instead 

of saying we’re going to get rid of the search and then ask people 

who don’t do searches to take somebody else’s search, which may 

or may not be thorough, and say we’re going to grant these claims. 

Isn’t, in a sense, being the devil’s advocate, that the opposite of 

what we want to do? We really want to say, ‘‘We’ll charge for you 

for searches.’’ The Patent and Trademark Office, whether they use 

a sub or do it in-house, they’re the most efficient place to do it, and 

retain the expertise, but strongly suggest some mechanism for, if 

you will, novelty searches to be done so that people can hone their 

patents. 

73

That type of proposal would retain in your offices the expertise 

you have today, which is people who really understand a particular, relatively small part of the patent world or of technology. 

You know, I’ve been up to your offices. I’ve met with examiners 

personally on some of my patents in the past. These folks are 

amazing in knowing so much about such a small area. You know, 

just in car alarms, you have multiple people who understand the 

auto and home security business. That could be lost if you give up 

so much of the background searching. 

Judge ROGAN. Well, if I thought it was going to be lost, we 

wouldn’t be recommending competitive sourcing of the searching. 

Sitting in front of a modern computer terminal and watching images flash on the screen in front of an examiner isn’t what is going 

to teach them the prior art. What teaches them the prior art is 

reading and studying the application, the claims disclosures, looking at and being able to review all of those. 

In essence, we’re already certifying searchers. We hire people. 

We train them. When we think that they are qualified to do the 

job, we informally certify them by letting them do the job. 

We’re talking about giving other people the opportunity to obtain 

the same degree of certification. Foreign offices, like Japan and Europe, we already know they’re qualified searchers. In Europe for 20 

years examiners demonstrated that they could be versed in the 

prior art, learn the prior art by reading search reports, by reading 

in the claim applications, because they didn’t do the searches themselves. 

There are a lot of former, retired examiners that would love to 

be able to do what they did at the PTO only get paid a private sector salary rather than a public sector salary. 

Mr. ISSA. And I appreciate that. But I still go back to the same 

point, which is, your agency has an absolute belief and obligation 

that they need to do a thorough search. They need to find the prior 

art. 

It sounds terrible, but I think the practical reality is that a less 

than best search allows you to get the patent if you just want the 

patent. And there is a natural adversary relationship that should 

exist, which is the inventor wants the patent and the patent office 

wants to give them the minimum that they’re entitled to. You’re 

going to lose a little of that expertise to provide the minimum if, 

as you said, they stop looking at the flashing screens and they only 

look at the search report that I went out and shopped for the 

search report that would be most favorable to my getting a patent, 

not the most favorable to may getting a narrow patent. 

And that’s where I see the conflict. Do we get the most narrow 

patent, which is in the court’s best interests? And we have obligation to not let the courts get swamped with patents that are not 

as well researched and limited, versus, yes, we outsource that and 

a lot of private sector people are very happy, but we might be 

granting quicker, less valid patents. 

And I’m concerned, as you know, that the vast majority of your 

patents—let me rephrase that—the majority of your patents, when 

taken to Federal Court, do not prevail intact. That’s already a situation. I’d like to make it to where they prevail at least the majority 

of the time intact. 

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We give a presumption—I know I’m overstepping—but we give 

a presumption of validity, and yet, when we actually go to court, 

and we actually test them, the presumption doesn’t end up being 

that good. 

I’m of the opinion that, if anything, we need to make our patents, 

even if it costs more money, more rigorous at your level, because 

it saves millions of dollars by plaintiffs and defendants later if 

these patents ultimately are overturned or reduced in their scope. 

Judge ROGAN. Mr. Chairman, does time allow me to respond? 

Mr. COBLE. Let me——

Mr. ISSA. I’m done asking. 

Mr. COBLE. The gentleman’s time has expired. I will let you respond, Mr. Rogan. 

Until the gentleman from California mentioned this, this is a salient plank in the strategic plan platform, the outsourcing issue, 

and it had not been mentioned until the gentleman discussed it. I 

was going to conclude by inserting my oars into these outsourcing 

waters. 

Now, many people, when they hear the term outsourcing, ‘‘Oh my 

gosh, we’re going to compromise quality.’’ Well, that may or may 

not be the case. 

But let me hear from the other three, and then I’ll come back to 

you, Jim. And then we’ll conclude. 

Ms. Barrett Park? 

Ms. BARRETT PARK. Thank you, Congressman. I’ll address the 

outsourcing of course from the trademark perspective only. 

We have numerous concerns about this, and I’m glad to give you 

something in writing, but I will hit a couple of the main concerns 

now, since time is short. 

First of all, we think that this is not likely to really provide a 

cost saving to the applicant. In the four tiered fee structure set up, 

this would be the least expensive way to proceed, the most expeditious. However, I’m sure that whatever the savings in PTO fees—

I think it’s a $50 differential—we will more than match this savings by the certified search service fee. And as a practical matter, 

we don’t think many applicants will use it. 

We’re also concerned that courts are very deferential in litigation 

to the thorough vetting of an impartial, professional examiner in 

granting a trademark application to registration. We think that if 

there is this sense that people can go out and work with essentially 

a business to get a search that serves their results, that it will undermine the validity of the trademark application. 

And so there’s clearly room for trademark owners to establish relationships with someone who wants that trademark owner to be 

their customer in providing these searches. 

We also question whether the search will ultimately result in 

true productivity for the PTO. The examining attorney is still going 

to have to look at the search, re-work may be necessitated if they 

feel the search isn’t indeed thorough enough. And we predict, if 

this goes into effect, there will be many more challenges to trademark registrations, both in the opening stage and, potentially, in 

the cancellation stage. 

Mr. COBLE. Mr. Kirk? 

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Mr. KIRK. Mr. Chairman, we have to address the proposal by the 

PTO in the world in which we find ourselves. The PTO has been 

told by the appropriators that they have to come up with bold, 

imaginative new ways of doing business. The proposal is to 

outsource searches as one way of offloading some of the work, so 

that the examiners can focus on the core issue of examination. 

This is not the most efficient way to proceed. The European Patent Office, which has been doing this since its inception, is moving 

in exactly the opposite direction. They are consolidating search and 

examination rather than having it separate. 

As Ms. Park said, it’s inefficient because now two people have to 

read and understand the invention. They have to understand everything in it. The search may not be adequate to the needs of the 

examiner. The examiner will have to go back and do some more. 

So it’s not an optimal solution, let’s put that out first. However, 

trying to deal with the situation that we have, to accommodate the 

needs and the demands placed on the Office by the appropriators, 

we think it is possible for the Office to outsource certain aspects 

of its work. 

For example, using the search results obtained under the Patent 

Cooperation Treaty from quality examining offices, like the European office, that search can be utilized by the examiner, not totally, 

not exclusively, but as an effective starting point to get some efficiencies and to make some gains. 

But we shouldn’t kid ourselves; this is a second best solution, but 

one that’s foisted on us. Thank you. 

Mr. COBLE. Mr. Baker? 

Mr. BAKER. I won’t repeat the things which these two people 

have said already very well. Let me just make a couple of distinctions. 

One is between private search firms and between searches of foreign governments. Some of the issues go away when you’re talking 

about foreign governments, because they are government employees. You get away from what I would call the Andersen-Enron factor of having a private organization do monitoring for the public 

good. Maybe it’s a stretch, but I think there’s that issue there, notwithstanding whatever certification processes the patent office 

might go through. 

So I think, with respect to foreign searches, our statement draws 

a distinction. But with respect to private searches, we’re quite 

strong on it, that we think this will affect the presumption of validity and the confidence investors have in patents before they invest. 

And so that we feel strongly about. 

One more comment, Mr. Issa make statements about court statistics and about validity. And I think that we should be cautious 

about generalizing from those. A patent which is in litigation has 

already sort of got something wrong with it or somebody has looked 

at it. 

I consider looking at patents in litigation and generalizing on the 

whole population of patents like looking at a hospital and generalizing that the whole population is 50 percent sick. [Laughter.] 

Mr. BAKER. A patent litigation is like a person in a hospital. 

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Just, you know, all your consideration of this, I would flatter 

Judge Rogan and his office. They’re doing a much better job than 

50 percent. Thank you. 

Mr. ISSA. And so noted, Mr. Chairman. I’m only asking that we 

do our best to increase the validity of those which are challenged. 

I fully expect that, as you say, only those that are suspect or disproportionately those that are suspect end up in court. 

Mr. COBLE. The customary cast of characters, in other words, to 

coin a phrase of a well-known movie. 

Jim, you’ve been holding a thought. You may release it. 

Judge ROGAN. Mr. Chairman, thank you. 

First, if I may, I really do want to thank all of the panelists, because all of them have been very generous with their time, their 

organizations, and others who are in the audience not represented 

here at the table. We have made them work nights and weekends 

with us, innumerable meetings, countless hours. We really do appreciate all of their input and their help in trying to craft this. 

I didn’t expect to have unanimity. I couldn’t get unanimity from 

my District when I was on the ballot. I certainly didn’t expect to 

get it from private industry back here in the patent world. 

I just want to conclude on this issue, and of course taking any 

questions if there are any, on a couple of points. 

Number one, we intend to establish the most rigorous standards 

possible to ensure that any entity doing a search is qualified to do 

it, not only qualified to present it under international search report 

standards, but qualified to do it to the satisfaction that the United 

States Patent and Trademark Office, which views itself on the 

front line of protecting American intellectual property, can meet 

our standards, which are even higher. 

If a foreign government, such as Japan or Europe or any other 

country, wishes to be considered through a bilateral agreement, 

they will have to meet those standards. If a private industry thinks 

they can meet those standards, we would at least like to give them 

the opportunity to do so. It may well be, Mr. Chairman, that no 

private industry is capable of meeting that standard. But if they 

are, doesn’t it make sense to give applicants the choice to go that 

route, particularly by increasing competition and making qualified 

search authorities, whether private or public, compete for those dollars? 

Finally, I just want to say that Mike Kirk is right; it is not the 

optimum solution. In a perfect world, our examiners would also do 

the searches. That being the case, why segregate them? Because we 

anticipate that by removing the search function from our examiners, and letting them focus on the core function, making that 

quasi-judicial determination of patentability or no patentability, we 

can free up about 20 to 25 percent of our examiners’ time. 

And Congress has told us: Don’t come to us anymore and just tell 

us to give you more money to hire more examiners. 

I read you the Senate report language. I read you the House report language. You are more familiar, Mr. Chairman, than anybody 

else in Congress with the complaint. 

So on the one hand, we’re being told, ‘‘we’re not going to give you 

the money to hire more examiners.’’ There aren’t many other options. If not the search, what else do we competitively source? 

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There isn’t—would you rather see the examination? Would you 

rather see the determination of patentability? The answer clearly 

from everybody is no. 

So we’re hamstrung on this, Mr. Chairman. If we don’t have the 

opportunity and the ability to outsource the one area where we 

know from experience and from world commerce that we can have 

a degree of trust in those searches—and still give our examiners 

the right to review those searches, make a determination if those 

searches have any kind of faulty strategy behind them. If they do, 

talk to their supervisor. Do a supplemental search. We don’t want 

them rubberstamping bad searches. 

But if we don’t have the opportunity to do it in this fashion, we 

don’t have the opportunity to free that period up and move those 

resources toward quality and pendency. 

Mr. COBLE. My red light now appears. 

Let me conclude by saying this: Jim, thank you and your people 

at PTO, and convey our thanks to them for what they do. 

These three witnesses, they represent agencies and people who 

contribute very significantly to the well-being of the economy of 

this country. I didn’t fully appreciate what the intellectual property 

community contributes to our economic well-being until I assumed 

the chairmanship of this Subcommittee. 

I thank you very much for what you all have done today. This 

has been a meaningful hearing. 

I thank those in the audience who hung with us as well. I did 

see many people nodding as we were going along, so apparently 

you all were interested in this. 

We thank you very much for your contribution. 

This concludes the oversight hearing on the U.S. Patent and 

Trademark Office fee schedule adjustment and agency reform. 

Now, I repeat, the record will remain open for 1 week. If anyone 

wants to submit anything, any information regarding this issue, it 

will be embraced very warmly and very enthusiastically. 

[The information referred to follows:]

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Mr. COBLE. Thank you again for your attendance. The Subcommittee stands adjourned. 

[Whereupon, at 11:57 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD


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PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN

It is nice to have PTO Director Jim Rogan, a former member of this Committee, 

back again. He was appointed to a position that would bring anyone’s legal, management, and political skills to task, namely because of the various issues facing the 

PTO. 

This user-funded agency is plagued with a diversion of its fees ($162 million this 

coming year), a 400,000 patent application backlog, and patents being granted on 

inventions that would not have received such protection if they were subjected to 

more rigorous examination. Under Director Rogan’s stewardship, the PTO has done 

a commendable job of facing these issues head-on and coming up with a proposal 

it believes could resolve them once and for all. 

At the same time, I do have concerns with how the PTO proposes to fix the problems. For instance, the PTO wants to raise patent and trademark fees, even doubling patent filing and examination services from $740 to $1550. The impact of this 

high increase is magnified by some of the PTO’s other proposals. 

First, the impact of the increases is multiplied by the fact that the PTO does not 

address the fee diversion issue. In the past, the PTO—with the help of this Committee—has addressed fee diversion by trying to end the practice. Now, unfortunately, the PTO wants to take diversion as a given and factor into new fee amounts. 

I understand that our efforts to stop diversion have been unsuccessful, but the 

agency is trying to solve its budgetary problems by making its customers pay more. 

Not only does this ignore the rights of the customers, but it also gives the diversion 

the imprimatur of the PTO, making unlikely the diversion will ever cease. 

Second, the PTO plans to combine the fee increase with a proposal to perform less 

work in-house; more specifically, the PTO wants to outsource its patent search responsibilities. It seems to me that conducting thorough searches is an integral part 

of the PTO’s examination role; we would be outsourcing how the PTO obtains some 

of information it relies upon when examining patents. At the same time, I am not 

certain how we would ensure that every search on every application was thoroughly 

done by the contractors. 

Finally, the PTO would like to impose a reduction-in-force on its trademark side, 

and I am worried about the impact that such a reduction would have not only on 

the workers but also on the people and companies that rely upon the PTO’s trademark examinations. 

These are just some of the issues I hope we can consider as we move forward.

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PREPARED STATEMENT OF RONALD J. STERN

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 21st 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 ‘‘21st 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 21st 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 farreaching 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 21st 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 21st 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 

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amination 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 

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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 21st 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 21st 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. 

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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 21st 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 21st 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 21st 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 

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ment 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 21st 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. FurtherVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00096 Fmt 6601 Sfmt 6621 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
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more, 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-thejob 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 21st 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.

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PREPARED STATEMENT OF INTELLECTUAL PROPERTY OWNERS ASSOCIATION

SUMMARY

• IPO congratulates the Patent and Trademark Office (PTO) on putting forward a 

creative, bold, and comprehensive strategic plan for improving its operations, and 

heartily endorses many of the proposals. IPO finds, however, that it must oppose 

the Administration’s draft fee bill and some key elements in the plan.

• The draft fee bill raises patent and trademark fees partly for the purpose of diverting $162 million to unrelated government programs in 2003. The Administration is favoring a deplorable tax on innovation that will harm the PTO and our 

members at a time when the Administration should be concerned about renewed 

economic growth that innovation can help foster.

• Deferred examination of patent applications, which is required by the fee bill, will 

add to and institutionalize uncertainty over patent claims. Deferred examination 

diminishes the ‘‘public notice’’ function of claims, interferes with commercialization of new products, and makes litigation more likely. The perceived benefits of 

deferred examination to the PTO in our view are illusory.

• The ‘‘Four Tracks’’ examination system would permit or require patent applicants 

to pay private contractors directly for official searches and have the PTO base its 

examination primarily on the results of such searches. The cost to applicants likely would be greater than for searches performed by the PTO or its own contractors, and applicants might be accused of manipulating the system.

• The size of the 50 percent-plus fee increase is not linked to the cost of operating 

the PTO or to the improvements proposed in the strategic plan. Moreover, the levels of fees such as excess claim fees are not in proportion to the cost of extra work 

required to examine the application. Excess claim fees now in the bill rise exponentially with the number of claims. IPO members report that some applications 

would cost more than $100,000 per application. 

INTRODUCTION

IPO is an association of U.S.-based owners of patents, trademarks, copyrights, and 

trade secrets. Our members include about 100 American corporations that are 

among the largest patent filers in the United States and worldwide from all major 

industries. Our members file about 30 percent of the patent applications that are 

filed in the U.S. Patent and Trademark Office (PTO) by U.S. nationals, and pay 

about $200 million a year in fees to support PTO operations. 

IPO congratulates the PTO on putting forth a creative, bold, and comprehensive 

plan that seeks to tackle seemingly intractable problems of the PTO relating to patent examination quality, speed, and cost effectiveness. We heartily endorse many 

proposals in the plan, and we support all of the broad objectives of the plan. In this 

statement we identify proposals that IPO endorses, those that we believe need further study, and those that we oppose. We strongly oppose the Administration’s legislation for increasing patent and trademark fees effective October 1, 2002, for reasons we explain. 

First we review IPO’s perspective on PTO reform. The stakeholders outside the 

PTO who are most important are the users or customers of the PTO and the public 

at large. Our members, as both patent owners and manufacturers, find themselves 

placed firmly in both camps. When we are in the patent-obtaining camp we want 

patents to be valid and enforceable and to issue promptly from a cost efficient process. When we are in the other camp we want those patents that issue to other parties to be valid and enforceable and to issue promptly. 

From our perspective, there are three key elements or ‘‘filters’’ for the stakeholders in the patent process. It is helpful in analyzing the many ideas for patent 

reform to pass them through the three filters to assess their desirability. The filters 

are:

• Quality—Only valid and enforceable patents issued;

• Speed—Rights are clarified early; and

• Cost-effectiveness—Inefficiencies and duplication are excised and operational 

excellence prevails. 

I. WE SUPPORT MANY OF THE PROPOSALS

We support many of the proposals called for in the detailed 21st Century Strategic 

Plan documents that were posted on the PTO web site on July 5, 2002, because we 

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believe they will improve quality, speed, and cost-effectiveness. IPO has a strong interest in patent quality—our highest priority—and agrees that the PTO needs more 

resources to do its job adequately, so we support a major funding increase for 2003. 

More specifically:

1) IPO enthusiastically supports the 22.2 percent increase in funding proposed 

in the President’s budget, which would raise spending to $1.365 billion in 

2003, a level that for the first time in many years actually would be somewhat higher than projected fee income, if fees remain at their current levels. 

The extra money is needed to ensure patent quality, speed up the examination process, and implement improvements proposed in the strategic plan. 

Congress should draw on previously withheld fees to meet the PTO’s needs.

2) We endorse in principle the proposed actions relating to improved hiring and 

training of examiners as well as recertification and salary improvement for 

examiners. These actions should improve quality, reduce time and provide a 

more efficient process, even with additional costs in salaries and training, 

since they would likely result in a retained, improved workforce.

3) We support various aspects of the plan that would better align U.S. patent 

law and practice with the ‘‘best practices’’ of patent offices, including features 

of patent laws outside the United States that represent ‘‘best practices.’’ We 

agree that these efforts should permit greater ‘‘work sharing’’ and mutual 

recognition of certain aspects of patent examination work. Greater substantive patent harmonization, done on a best international practices basis, 

should produce quality, speed and efficiency improvements for the PTO, as 

well as make it easier for U.S. firms and inventors to obtain and enforce patents abroad.

4) We support in principle statutory changes to simplify patent procedures. The 

PTO plan proposes, for example, to allow an assignee to make an application 

for a patent application and file the oath, and to allow assignees to file 

broadening reissue applications.

5) As a general proposition, we support competitive outsourcing of selected PTO 

technical functions such as pre-examination processing, reclassification, and 

even the technical aspects of patent searching. However, that support is conditioned on the ability of a contractor to deliver on the quality, speed, and 

cost effectiveness objectives.

6) In principle, we very strongly support accelerating the introduction of ‘‘e-government’’ into the PTO. We are not supporting e-government for its own 

sake, but because—in the context of overall process reengineering and other 

initiatives—the specific e-government initiatives will enhance the quality, 

speed and cost-effectiveness of PTO operations. From a user perspective, it 

is crucial that the private sector investment in IT be leveraged in any e-government initiative at the PTO, i.e., the PTO should not adopt expedients 

that appear cost-effective from an internal perspective but substantially burden the user community with the need to acquire and implement ‘‘start from 

scratch’’ IT systems to be able to take advantage of e-filing.

7) Post-grant review or oppositions for patents, if done effectively, may improve 

patent quality. Since the PTO does not have the capability of locating some 

prior art, the participation of opposers who have an interest in removing or 

amending patents in an opposition process would be useful. Making such a 

process an efficient, quick, and quality program would require that the decision makers be highly trained and that the process be tightly time and subject matter controlled so that litigation-type diversions and costs do not creep 

into oppositions. Reexamination or other post-grant review is not ‘‘getting it 

right the first time.’’ Thus we believe post-grant review should be viewed as 

separate from examination reform.

With our shared goals of enhancing quality, speed, and cost effectiveness of patent 

and trademark processing, we believe a plan will emerge that we can fully support. 

II. WE SUPPORT SOME PROPOSALS SUBJECT TO MODIFICATION OR FURTHER STUDY

Level of Fees 

We categorically oppose the current fee bill because it is designed to divert $162 

million in fees to unrelated government programs (see later section of this statement) and it requires a system for deferred examination of patent applications (see 

later section of this statement). If these obstacles are overcome we would support 

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legislation to make reasonable increases in fees for the purpose of improving quality, speed, and cost effectiveness. This leads to a discussion of what fee levels are 

reasonable. 

The Administration’s bill raises patent fees by 51 percent for a patent owner who 

pays all basic fees and keeps the patent in force for its life. The increase is 59 percent for a patent owner who pays the basic application fees but does not pay any 

maintenance fees to keep the patent in force. The increases for patent owners who 

are subject to excess claim fees, related application surcharges, and other extra fees 

in the bill can be dramatically greater than 51 or 59 percent. 

These levels are arbitrary. The fees in the Administration’s bill must be recalculated based on the latest and best estimates of how many patent applications will 

be filed in 2003 and later years and what the 21st Century Strategic Plan will cost. 

The fee levels proposed in the Administration’s fee bill were calculated by working 

backwards from the total PTO income projected in the President’s original 2003 

budget, which would have been $1.527 billion including fee surcharges. The rate of 

increase in patent filings has been dropping, however, and the assumptions in the 

President’s budget are badly outdated. 

The President’s budget projected 2003 patent filings that are 20 percent higher 

than the filings now projected for 2002—a totally unrealistic estimate. Funds needed to work off the backlogs and implement the strategic plan are likely to change 

significantly with changes in the assumptions about filings. In any event, the fees 

must be calculated based on what an acceptable five-year strategic plan will cost, 

including funding for ongoing operations and improvements the plan proposes to 

make in quality, speed, and cost effectiveness. 

Fees for Extra Claims, Extra Pages, and Related Applications 

We also oppose the bill because the fees are unnecessarily harsh that are intended 

to modify the ‘‘behavior’’ of patent applicants by discouraging the filing of large or 

unnecessary applications. 

Fees in the bill for excess independent claims and excess total claims rise exponentially as more claims are added. We do not understand the basis for exponential 

fee increases. Our members have reported that under the bill excess claim fees in 

a significant number of cases would be more than $100,000 per application. The bill 

should not arbitrarily prohibit claim writing practices that companies believe are 

necessary to protect their technology. The bill must be amended so that excess claim 

fees bear a rational relationship to the cost to the Office of examining excess claims. 

We do not object to reasonable fees for extra sheets of specification and drawing 

in excess of 50 or reasonable fees for filing an application that contains or is amended to contain a specific reference to an earlier-filed application, but these fees need 

clarification. The fees for excess pages should reflect the cost of examining applications with excess pages. For example, appendices to applications such as sequence 

listing that are not reviewed in detail should be treated differently from pages of 

specification. Fees for referring to earlier filed applications should not apply to applications that have been subjected to restriction requirements. We recommend that 

Congress establish the levels of these fees by statute, with annual cost of living increases, in the same manner that other fees are set by Congress. 

We oppose any fee for claims that are not patentably distinct from claims in another application or patent. This fee would give the PTO an undesirable incentive 

to make double patenting rejections in applications when not warranted and serves 

no apparent purpose except to raise additional revenue. 

For many years, incidentally, IPO as well as other organizations have supported 

use of the unity of invention standard for determining the scope of the rights examined in a particular patent application. We believe that if that standard is utilized 

and costs are properly determined and charged to applicants, the standard will pass 

the quality, speed and cost effectiveness tests. 

As indicated, our support for any of the above fees is subject to eliminating diversion of fees to unrelated government programs and linking the fees to PTO costs. 

‘‘Four Tracks’’ Examination Process 

We can support some features of the ‘‘four-tracks’’ patent examination process, but 

others we find ill advised or in need of further study. We agree with the objectives 

for the process except for ‘‘leveraging greater participation from the applicant community and public,’’ which should be qualified. Processes that merely shift work outside of the PTO and into the hands of the applicant will not necessarily produce 

work that is more efficient or of higher quality. 

A patent owner’s view of the process is from cradle to grave, i.e., from conception 

of the inventions to expiration of the patent. The PTO is directly involved in only 

a short segment of this time period, but the PTO’s actions can affect the patent apVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00126 Fmt 6601 Sfmt 6621 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
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plication and patent during almost the entire time period. For example, the PTO’s handling of searching and unity of invention affect pre-filing activity and its performance on examination and post-grant processes affect the patent for its life. 

From the applicant’s and public’s point of view, the process should be considered 

from conception to expiration. 

We do not currently have enough information to either support or oppose the proposal for separating the functions of searching and examining. Separation of searching and examining introduces a potential inefficiency by requiring two individuals 

instead of one to become familiar with the claims of the application and the reasoning behind potential rejections of claims. If two skilled professionals would separately and sequentially vet the application (skilled searcher and skilled examiner), 

it must be determined whether there is likely to be an improvement in quality (‘‘two 

eyes are better than one’’) or a potential loss of quality (i.e., diminished finesse of 

the patent examiner in understanding and applying prior art). 

As we understand it, the European Patent Office may be abandoning its longstanding separation of search and examination. This gives us some pause in supporting moving to the former EPO approach without a better grasp of where the 

‘‘best practice’’ lies on the issue of separated search and examination. On the other 

hand, we can see huge potential benefits in relying on searches performed by international and foreign patent offices (Tracks 2 and 3) from a cost standpoint. In addition, shared searching activity with other patent offices may enable a greater degree 

of specialization of searchers in particular technologies, leading to higher quality 

searching. 

We need more information, however, before offering an opinion on Track 3. It appears that this track could lead to substantial deferred examination of the U.S. application, which the IPO strongly opposes. Track 3 requires that the applicant request expedited examination in the office of first filing, but there appears to be no 

ongoing requirement that the applicant take all steps necessary to expedite the 

prosecution of the application on an ongoing basis. Filing requests for expedited examination is easy to do; taking all steps necessary to expedite the prosecution is not. 

Since Track 3 permits the applicant to delay examination of the counterpart U.S. 

application until examination is completed by the other IP office, a long pendency 

period in the other IP office would result in a long delay, or deferral, of examination 

of that application in the PTO. The applicant in Track 3 would usually be a nonU.S. applicant, so Track 3 could give foreign competitors of U.S. companies a distinct advantage. 

We also need more information before offering an opinion on moving official 

searching to private outside contractors (Track 1). As explained later in this statement, we oppose permitting or requiring patent applicants to purchase the official 

searches that are to be used by the PTO directly from private contractors. We have 

not studied the four-track examination system for trademarks, but we question 

whether trademark applicants should buy their official searches directly from private companies either. 

We recommend further study of a Track 1 that would have the PTO contract with 

private companies to perform searches, with the PTO, not the applicant, paying the 

company for the searches. Such a system appears to have several benefits. Private 

contractor searching for the PTO, together with appropriately crafted Tracks 2 to 

4, could give the Office flexibility to rely on contractor searches, international or foreign patent offices searches, or examiner searches. It would enable management to 

make marketplace judgments on which source the PTO should use for searches to 

achieve quality, speed, and cost-effectiveness in particular circumstances. As explained in the discussion of deferred examination later in this statement, such a 

four track system would not require deferred examination or charging separate filing and examination fees, and might not require legislation. 

III. WE ABSOLUTELY OPPOSE SOME PROPOSALS

Fee Increase Legislation That Facilitates Withholding or Diversion of Fees 

The President’s 2003 budget proposes to withhold or divert to unrelated government programs $162 million in patent and trademark fees. We explained the reasons for our opposition to withholding or diversion of fees in our testimony before 

the House Subcommittee on Courts, the Internet and Intellectual Property on April 

11, 2002. We continue to strongly oppose withholding or diversion of fees. 

By the end of 2003, according to current projections, nearly $1 billion dollars will 

have been withheld or diverted. The practice of withholding or diverting fees has 

been a major factor contributing to the large and growing backlog of applications 

the PTO faces. A five-year strategic plan for improving the PTO cannot succeed 

until the PTO can obtain a financing system that will let the PTO know how much 

124

money it can count on. The PTO should have access to all of its fees collected in 

the current year and previous years. 

The Administration’s fee bill is calculated to produce the same amount of income 

projected in the President’s budget, which calls for withholding or diversion of another $162 million. We take this as confirmation by the Administration that it is 

still urging Congress to withhold or divert $162 million. 

By making more money available, the fee bill would make it easier for the Appropriations Committees to divert money. The Administration’s policy is a deplorable 

tax on innovation at a time when the Administration should be concerned about renewed economic growth that innovation can help foster. In the absence of some solution to the diversion problem, the Administration’s fee bill is simply unacceptable. 

IPO will oppose any fee increase bill designed to make it easier to withhold or divert 

fees. 

Deferred Examination 

As we indicated in our letter on May 16, IPO believes deferred examination does 

not pass the filter for speedy examination of patent applications, which is important 

to the public. We have consistently opposed deferred examination as a general proposition even though it exists to limited degrees today. With deferred examination, 

the public must contend with a growing, large inventory of unexamined patent applications, thus adding to the uncertainty of the overall system. 

It is important to understand that deferred examination and separation of search 

and examination are separate concepts. We do not oppose separation of search and 

examination if such separation can pass the quality, speed, and cost effectiveness 

filters. 

A procedure similar to the Four Tracks examination process could be devised 

under which a search would be performed by the PTO or an outside source, followed 

promptly by a separate PTO examination. The applicant could be notified of the 

search results immediately on completion of the search, if desired. Separate fees for 

search and examination would be unnecessary. Implementation of such a separate 

search and examination might not require legislation. The PTO could have flexibility to separate search and examination in some cases and not others, and flexibility to hold up examination to wait for search results from foreign patent offices, 

within reason. 

To go beyond separation of search and examination, however, and defer examination for the purpose of delay, would add to and institutionalize uncertainty over the 

patentability of claims. Delay in examining patent claims is contrary to the ‘‘public 

notice’’ function of claims cited with approval in court opinions. E.g., WarnerJenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17, 21 (1999). While procedures already exist that enable applicants to delay (cf., e.g., Symbol Technologies, 

Inc. v. Lemelson Foundation, 277 Fed. 3d. 361 (Fed. Cir. 2002)), the availability of 

such procedures is not a justification for encouraging or officially sanctioning more 

delay. 

Such delay can stand in the way of commercialization of new products and processes by other parties in an industry. Other parties can be even liable for a royalty 

on the unexamined claims if notice is given and a patent later granted. The ultimate 

result of uncertain patent claims is less competition in industry, fewer choices for 

consumers, and a likelihood of litigation. Furthermore, deferred examination could 

encourage more filings on marginal inventions and discourage applicants from making their own pre-filing searches. 

The benefits of deferred examination for the PTO in coping with its workload in 

our view are illusory. If 10 percent of patent applications drop out of the examination process before the examination fee is paid, as the strategic plan estimates, the 

PTO will receive about 10 percent less revenue. The 21st Strategic Plan falls into 

the trap of claiming as an achievement a 9-month pendency reduction that comes 

merely from measuring pendency from the date when examination is requested instead of the date when the application is filed. (Plan overview, page 3.) The only 

reason to defer examination is to accommodate applicants who wish to delay, but 

that interest is outweighed by the interests of the public at large. 

Deferred examination is implicit in the fee bill, since the bill establishes separate 

fees for filing and examination. Indeed the bill as written authorizes the Director 

to defer examination not only for 18 months as discussed in the strategic plan, but 

permits the Director to sanction deferral for any period. We strongly oppose the Administration’s fee bill because of deferred examination. 

Applicants Buying Official Searches Directly From Private Contractors 

Track 1 of the Four Tracks Examination Process envisions having a patent applicant pay for and submit a certified search report prepared by a private contractor, 

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and have the PTO base its examination primarily on the results of the private contractor search. As indicated, we favor further study of the PTO outsourcing its 

searching to private contractors, but we oppose permitting or requiring the applicant to procure the official search to be used by the PTO directly from a private 

contractor. 

Applicants under Track 1 would be expected to pay contractors for their searches 

and, as we understand it, would receive only a small discount on the examination 

fee paid to the PTO in return. Even the largest patent applicants would not have 

sufficient purchasing power to obtain searches at a cost as low as the cost to the 

PTO of performing a search itself or having a PTO contractor perform the search. 

Moreover, we do not believe individual applicants should be permitted to participate in determining the quality of official searches. To permit the applicant to work 

with a private company in determining the nature and scope of the search to be performed could create opportunities for manipulating the system that would diminish 

the level of public confidence in patents and increase patent litigation. 

Mandatory Information Disclosure Statements 

The strategic plan calls for rule amendments to make it mandatory for patent applicants to explain the relevancy of prior art citations when more than 20 references 

are cited, and to subject parties to a ‘‘duty of inquiry.’’ Based on the information 

available, we cannot support mandatory information disclosure statements. The law 

already requires disclosure of references that are material to patentability and 

makes a resulting patent unenforceable if failure to disclose would justify an inference of intent to mislead. We cannot see any way to avoid an increase in allegations 

of fraud or inequitable conduct if applicants must include a discussion of the relevancy of the prior art that compares the prior art with a claim. 

IPO supports the objectives and many of the proposed actions in the 21st Century 

Strategic Plan. We appreciate the strong interest that Chairman Coble, Ranking 

Member Berman, and other members of the Subcommittee have taken in improving 

the PTO, and we look forward to continuing to work with the Subcommittee on PTO 

issues.

PREPARED STATEMENT OF JOSEPH L. EBERSOLE

I am pleased to have the opportunity to present the views of the Coalition for Patent and Trademark Information Dissemination on ‘‘The U. S. Patent and Trademark 

Office: Fee Schedule Adjustment and Agency Reform.’’ Our statement will be limited 

to ‘‘Agency Reform,’’ detailed in PTO’s ‘‘The 21st Century Strategic Plan’’ and its 

proposed outsourcing of search and classification functions. 

The Coalition for Patent and Trademark Information Dissemination is a group of 

private sector companies that provide value-added services for patent and trademark information users. These companies have been investing in and building 

search services for 50 years with the objective of continually improving the quality 

and efficiency of patent and trademark searching. For patent search purposes, their 

services cover both patent and nonpatent literature; and for trademark searches, 

U.S. pending and registered marks, as well as state, common law, and foreign 

marks. 

The depth of these companies’ experience is illustrated by a few key points in 

their fifty-year history. For example, IFI Claims began building its patent databases 

in 1955, while Derwent traces its first value-added patent service to 1948. In the 

early 1970s, Dialog and Orbit first made value-added patent search services available online, and in the early 1980s, Lexis came out with the first patent full-text 

search service. This was later followed by the introduction of patent information on 

optical disks provided by MicroPatent. Most of the services now cover patents from 

throughout the world, with emphasis on USPTO, EPO, and JPO. The scope of databases available is illustrated by Questel-Orbit, which provides 25 distinct patent 

databases with access to 80 million patent references and 19 trademark databases. 

And in some cases, such as for U.S. patents issued from 1971 to 1974, private sector 

databases are the only complete electronic source. 

Most of the firms, although started for the purpose of providing better quality and 

efficiency for users doing patent and trademark searches, also began providing patent and trademark search services many years ago in response to private sector customer requests. This was because the technical strengths necessary to build and 

continually enhance search tools lend themselves to providing searches for those 

who want to outsource that service. 

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THE 21ST CENTURY STRATEGIC PLAN

We support the plan. Congress criticized PTO for ‘‘not being sufficiently innovative’’ and directed it to improve quality and reduce pendency. Now, Director Rogan 

has proposed an innovative approach to improving quality and timeliness; and given 

the inherent resistance to change among the legal profession, we would expect a 

guarded response to this bold proposal. We are especially impressed by the Plan’s 

emphasis on ‘‘creating a quality-focused, highly-productive, responsive organization 

supporting a market-driven intellectual property system for the 21st Century.’’ Coalition members’ long history of innovation and development in creating and providing quality-enhancing, productivity-increasing services for patent and trademark 

users can, we believe, be effective in helping the U.S. patent and trademark office 

in achieving these goals. 

Indeed, we stand ready to respond when the time comes to assist PTO in such 

major tasks as:

• Classifying patent documents.

• Supporting national application and Patent Cooperation Treaty search activities.

• Transitioning to a new global patent classification system.

• Classifying trademark goods/services and searching design codes.

We agree that greater examiner productivity can be achieved by reducing their 

prior art burden; and as a result of relentless efforts over many years to increase 

quality through better and better search services, and the expertise resulting therefrom, we stand ready to assist PTO in reaching this goal. We welcome and endorse 

the need for PTO to create and establish improved quality assurance techniques 

that will, inter alia, ‘‘ensure that patent searches provided by the private sector or 

other patent offices are complete and of high quality.’’ In this respect, we stand 

ready also to share information with PTO on our quality control and quality assurance techniques developed over many years in order to accelerate the building of 

this capability. 

Outsourcing of searches is a feasible step for a number of reasons. First, for many 

years, major decisions on patentability have been outsourced to private sector search 

firms by applicants, especially for potentially important patents or trademarks. 

Such applications are not filed unless and until a preliminary decision as to probable patentability or registrability is made based on the results of such a search. 

Indeed, examiners will tell you that if the case matters, the applicant will have 

searched more widely and in greater depth than would PTO. 

Second, for many years EPO has conducted searches separately from examination 

and these have been recognized broadly as the best in the world. Thus, the idea that 

a quality search can be conducted only as part of the examination process is erroneous. 

Third, every time a patent is invalidated after issuance, such invalidation occurs 

because of what was found in a private sector search that showed the previous 

search by the patent office was not of adequate quality. 

Although there is ample evidence that private sector searches, separate from examination, can be of equal or even higher quality, there are differences that should 

be recognized as PTO moves ahead with planning for the many details involved in 

assuring a high quality of searching. For example, there is no gainsaying the fact 

that with a staff of 3500 examiners, PTO has the greatest single concentration of 

technical expertise that exists anywhere in the world. And because of this large 

number, individual examiners can develop expertise in very narrow subject areas. 

Indeed, a seasoned examiner with five to ten or fifteen years of experience normally 

develops his/her own special search files focusing only on his/her specialty area. It 

has to be recognized that no private sector organization can muster a staff of specialists in 3500 separate narrow areas of technology. But, that is not a reason not 

to outsource searches; it is merely one of the facts that has to be taken into account 

when planning training, tools to be provided, certification requirements, monitoring, 

quality assurance procedures, etc. 

Further, as with any innovative step, no one can predict with absolute precision 

its eventual detailed contours. Most fears that opponents have will not be realized, 

but unforeseen problems will undoubtedly arise and there has to be a process for 

continuous adjustment along the way. PTO should use a deliberate, phased, stepby-step approach to carefully implement change. Each step will have to be tested 

and validated. 

One advantage of outsourcing is that it would enable some degree of activitybased costing and help PTO move one step closer to full-cost accounting, so as to 

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better respond to the criticisms raised by the appropriations committees. As to the 

potential for cost savings, some evidence is available related to the significant number of patent and trademark applications that today have searches conducted before 

filing. In the future, such searches could become the outsourced search with the results submitted directly to PTO, after filing, by the search firm. There are issues 

to be resolved before implementing this on the patent side. However, discussions between Trademark Operations and private sector search firms indicate that the federal marks reported as a result of a trademark search could be stripped out of the 

search report and forwarded to PTO for slightly less than the $50 difference in fees 

for the Strategic Plan’s Trademark Option 1. Thus, the benefits of the proposed Option 1 process can be realized with no increase in total costs, and possibly a slight 

decrease. 

Outsourcing of searching has one other potential cost advantage for PTO. Each 

year for the past twenty years, private sector patent and trademark information 

companies have invested millions of dollars in technology developments to constantly improve search services so as to provide increased quality and productivity 

to patent and trademark searchers. In a competitive environment, such private sector investments will continue. However, with a reduced need for continual enhancement of internal search systems as a result of outsourcing searches, PTO development funding can be redirected from search systems to ensuring faster implementation of paperless processing as directed by the Congress. 

Mr. Chairman, the patent and trademark information industry which we represent has been built on the raw material supplied by the PTO in the form of bulk 

patent and trademark data. From this, the private sector builds value-added search 

services and databases. The creation of a competitive marketplace for patent and 

trademark information and search services was the result of PTO policies that stimulated creation of a variety of value-added services by the private sector. The Coalition was created to work with your Subcommittee and PTO management to continue 

these policies, and to maintain a balance between PTO’s free services to the public 

and the for-fee value-added services our industry provides to the patent and trademark user communities. As such, we have been partners with PTO in maximizing 

dissemination of patent information as envisioned by the writers of our Constitution. The main thrust of patent and trademark search systems development over the 

years has been continually to increase the quality and the productivity of patent and 

trademark searching. We are confident we can continue to be partners with PTO 

in helping to deliver the high quality of search and classification services demanded 

by The 21st Century Strategic Plan.

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Grantham.eps
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PREPARED STATEMENT OF R. LEE GRANTHAM

INTRODUCTION

On July 5, 2002 the USPTO released ‘‘The 21st Century Strategic Plan. This document is posted on the PTO website. The Plan argues that the Office is tremendously overburdened and that the traditional procedures of filing and examining 

patent applications is a partial source of the problem. Roughly 325 thousand utility 

applications are filed annually. The expanding workload has caused the PTO to propose that it ‘‘transform itself into a quality-focused highly productive, responsive organization supporting a market-driven intellectual property system.’’ The Plan 

(henceforth Proposal) approximately 350 pages, proposes in detail a radical reorientation in the way the PTO conducts business. 

The Proposal is organized around three principles: Agility, Capability, and Productivity. The scope is vast. Everything and anything that impacts the prosecution 

of the application, it seems, has been reviewed. Upon reading the Proposal it is evident that the PTO feels that the biggest obstacles to the patent and the patent examination process is the volume of applications examined coupled with the time consuming task of locating applicable prior art. The necessity of both reducing costs 

and improving quality are the drive behind the plan and the basis of ‘‘the patent 

and trademark systems of the future.’’ This brief essay can not address the comprehensive thrust of the proposal (it does include many changes with positive impacts) but focuses on a single element: the task of locating reliable prior art. 

I first present a summary of key details of the Proposal followed by a discussion 

on the activity of finding prior art. 

THE PROPOSAL REGARDING PRIOR ART SEARCHING

The Proposal recognizes the role of prior art. The Proposal states ‘‘Locating prior 

art is one of the most important aspects of the patent examining process.’’ (P09, p.1) 

A simple count directed to the number of times a concept appears in the document 

shows that patent searching is the one issue receiving significant across-the-board 

consideration. Discussions of the issue appear at least twice under each of the three 

principles. The PTO wants to completely absolve itself from the prior art search activity. According to the Proposal all searching will be done by outside entities. The 

following is a review of the Proposal limited to the function of identifying prior art. 

PRODUCTIVITY

In terms of productivity the PTO isolates two changes that it believes will positively impact the processing of applications. 

A. Pendency 2—Four Tracks Patent Examination Process (P–01) 

An overall new examination framework is presented in this section of the document. Under this scenario a typical applicant has three options in submitting an 

application to PTO for examination. The applicant decides if an examination is 

wanted and is allowed 14—18 months in order to direct the Office to proceed if 

wanted. Applications will not be examined unless the Office is directed to do so. 

Every track requires that a search be submitted with the request for examination. 

(P–07–01) 

Track 1 (the basic track) requires that the applicant submit a Certified Search 

Report in an International Style Search Report format provided by a Certified 

Search Authority at the time a request for examination is made. The actual examination will be based essentially on the prior art provided by the certified searcher. 

If the examiner deems it necessary a supplemental search will be performed. 

Track 2 applies to cases filed as PCT’s in which the United States serves as the 

International Searching Authority. In this situation the PTO takes responsibility for 

the search product but will not actually perform the task. PTO proposes using a 

Certified Search Service as a contractor who will then perform the work. In such 

cases the search product is given full faith and credit. It is anticipated that the PTO 

examiner will accept the results and lacking a egregious error conduct an update 

when needed. 

Track 3 applies when the applicant applies first in a foreign country with which 

the United States has a reciprocal agreement. The applicant request’s that the country of first filing transfer the case to the USPTO at the stage of first action. At this 

point the Office will determine patentabilty based on prior art identified by the 

country of first filing. The search product is given full faith and credit by the PTO 

Track 4 applies to micro-entities defined as having a maximum annual income of 

70K. The Office will secure the prior art search thereby alleviating the applicant 

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of that responsibility. The search will be conducted by an outside contractor. Again, 

the contractor will be given full faith and credit for the search product. 

The goal of the four track approach is to reduce the time and effort devoted to 

searching. (P–01, p.3) 

B. Shared Responsibility 1 (FR–1) 

This section of the proposal is directed to the fee’s associated with a separated 

filing and request for examination sequence. The logic is that the time consuming 

task of locating prior art will be shared by the applicant, either as a separate prosecution charge if outsourced or by the applicant securing a Certified Search by a 

service provider licensed to do so. The Proposal highlights that the PTO incurs 

lower cost by not engaging in the search activity, thereby leading to timely prosecution, resulting in reduced pendency. The PTO furthers argues that the quality of 

issued patents will be improved. (p.9) 

CAPABILITIES

Specific discussion related to quality is made in this section of the document. The 

PTO proposes three changes, one internal and two external, which should result in 

enhanced quality. 

A. Quality 3—Expansion of Patent Application Work Product Reviews (P–17) 

Currently (actually until just very recently) quality review is (was) centralized in 

the Office of Patent Quality Review. The internal change would require a dispersion 

of this function to the Technology Centers, the point of examination. The Proposal 

details the internal mechanisms and structures expected to be employed. This includes an In-Process Review and a Second Pair of Eyes. Presumably, poor quality 

searches and decisions based upon them would be flagged by the extra scrutiny. 

B. Quality 6—Certification of Searching Authorities (P–07–01) 

This section of the proposal assumes that the actual search function is reallocated 

to the private sector. This section describes how that would look. The primary argument is that the private sector can devote more resources to the search function and 

therefore provide quality improvement. (p.1) Suggestions are made regarding necessary criteria for certification, and the appropriate steps regarding the act of 

searching itself; all designed to satisfy quality issues. There is strong emphasis on 

keyword searching using commercial databases. (p.3) Further, awareness by the 

searcher of the U.S. Classification system is expected for those applications requiring this resource. (p.2) 

The development of TEAM is mentioned but no further references to this concept 

could be found elsewhere in the Proposal. 

The Proposal points out that there are ‘‘substantial’’ cost saving benefits involved 

by relinquishing the responsibility of maintaining the tools necessary for in-house 

search capability. This includes the classification system and the automated electronic database search systems. (p.1) and (P09, p.4) 

C. Legislative Rules 1—Mandatory Information Disclosure Statements (IDS) (P–09) 

The proposals made in this very broad section will require legislative action. More 

narrowly, the IDS requirement is tied to the prior art search function as it assumes 

that the Four Track examination framework is adopted. The change will require 

that the applicant provide all information relating to the claimed invention including anything used to draft the application or used in the inventive process. The PTO 

expresses concern with the existence of non-patent information known to the applicant but not widely disseminated. This non-patent information is required on top 

of the Certified prior art search. 

AGILITY

For purposes of prior art searching, agility is directed to enhanced cooperation between the USPTO and the Patent Offices of partnered foreign countries. The discussions herein relate to Track 2 and Track 3 of the Four Track examination process. 

A. Flexibility 2—Support for Patent Cooperation Treaty (PCT) Search Activity. (P– 28) 

This simply states that the search function will be outsourced in situations 

where the U.S. is the Designated Search Authority. 

B. Work Sharing 1—Proposed Procedures to Implement Mutual Reliance of Search 

Results Program. (P–36) 

A chronological implementation sequence addressing enhanced cooperation with 

foreign IP offices is presented It lays out some preliminary ground rules/expectaVerDate Jan 17 2002 12:32 Sep 05, 2002 Jkt 000000 PO 00000 Frm 00134 Fmt 6601 Sfmt 6621 G:\WORK\COURTS\071802\80830.000 HJUD1 PsN: 80830
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1The private sector searcher also engages in non-infringement and validity investigations 

which are more time consuming, comprehensive and have objectives not mirrored by the PTO 

search activity. These prior art searches do involve claim analysis. 

tions for the creation of a ‘‘mutual reliance of search examination results program.’’

(p.1) 

SUMMARIZING

The USPTO has engaged in much thinking justifying why it should not be involved with the task of identifying prior art. With searching abandoned or reallocated as an examination activity then the Examining Corps. can focus on the core 

examination activity, that is, ‘‘concentrating on patentability determinations.’’ (P–

07–01, p.1) The PTO thinks that the activity of identifying prior art will be better 

performed by the private sector as it is argued that quality will improve. There are 

cost arguments made claiming that the Office will benefit by dispensing with a time 

consuming and labor intensive activity and its inherent infrastructure. 

A brief discussion follows regarding the prior art search activity. 

THE ART OF SEARCHING

The Expert 

Since the first Superintendent of Patents, the Office has emphasized the classification of inventions. Further, the very first examiner was hired in 1836 precisely 

so prior art could be applied to deny applications. The young man so hired had been 

around the patent office for several years and was intimately familiar with the extensive prior art collection of that day. Patented prior art and now pre-grant publications accumulate weekly as patent office records. Historically, the examiner in the 

role of public sector prior art searcher acquired recognition as an expert through direct repetitive hands-on contact with the prior art, literally. Senior examiners acquire a feel for patentability based on awareness of the historical aspect of specific 

art. The expert is presented with an application and looks for art directed to a specific claim. Accumulated knowledge of the art, including that which is analogous, 

facilitates that task. The expert lends creditability to the validity of issued patents 

The Generalist 

The private sector searcher is a different character with a different societal role. 

The private sector searcher is mostly a generalist. The generalist learns the broad 

organization (e.g. classification) of at least one wide technology group (e.g. mechanical, electrical, chemical). The generalist looks for broad teachings based on a limited disclosure. The search product is used to facilitate the writing of a patent application or to advise against one. It is called a pre-examination search.1 A contextual 

feel for the notion ‘‘average skill in the art’’ is essential to recognizing germane prior 

art. Generalists provide an IP function that for most applicants is not cost effective 

to employ in-house. This is reflected by the fact that the generalist works for scores 

of clients in dozens of different industries 

Necessary Skills 

It is obvious that within the three broad technology groups specific educational 

backgrounds are needed. The more advanced the basic technology the greater the 

need for specific education. There is, in general, progression from mechanical to 

electrical to chemical in which a requisite degree of knowledge is required. This can 

come from educational programs or be self learned. Interpreting existing prior art 

when searching only requires fundamental understanding of the appropriate technical concepts. The Proposal sort of acknowledges this by stating that ‘‘. . . varying 

degrees of technical expertise are required for searching different technologies.’’ (P–

07–01, p.2) and (P–28, p.1) The #1 required skill is not taught in a book but is a 

personality trait that motivates one to be thorough in the scope of the research 

project and further enables one to recognize quality prior art pertaining to the crux 

of the innovation. The research skill, or ethic, goes hand-in-hand with the quality 

of the search product. Analytical reasoning is the fundamental searchers trait as 

prior art searching is inherently an ambiguous assignment. 

Searching Techniques 

The Proposal provides a discussion directed to the necessary steps of the search 

activity. (P–01, pp. 8, 11) They are: 

1) Identifying a field of search that covers the disclosed invention. 

Note: this assumes that the searcher will utilize the patent classification system, 

and presumably will mine the classified collection to the fullest extent possible. 

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2) Selecting the proper tools to perform the search. 

Note: this includes, firstly, the PTO EAST/WEST system which supports both a 

complete classified search and keyword searching back to approximately 1971—although rumor has it that text searching back to 1920 is coming soon—and, secondly, 

abstract documentation provided by various commercial databases including scientific and technical journals. Commercial patent databases also provide access to 

patented documentation. Also, a manual search of the classified collection for prior 

art that can not be reliably keyword searched and for art older than 1971 is expected. The private sector searcher often consults the experts regarding U.S. classification. 

3) Determining the appropriate search strategy for the search tools. 

Note: This is restricted to the PTO system which has limited nationwide capability and the commercial databases if suitable. I remind the reader the PTO envisions the heavy use of keyword searching techniques. (P–07–01, p.3) 

The sequence is somewhat the same for both the expert and the generalist. Each 

uses the same source material. The searching apparatus beginning with classification and expanding into EAST/WEST was designed for the in-house expert. This is 

a mature functioning system that has served both the public (i.e. PTO) and private 

sectors well. 

Information Sources 

Depending on the technology there are also different non-patent source materials 

affected by access and availability. Historically prior art has consisted of the patent 

office files including U.S. patents, some U.S. classified foreign patents, and limited 

non-patent literature. Prior art in emerging technologies such as bio-tech and telecommunications is often disseminated in published technical literature before a patent application reaches the PTO. Regarding bio-tech, because it’s so new, there is 

limited patented prior art. Business methods have presented a similar dilemma. It 

has become necessary rather recently to look outside the patent collection for prior 

art. This essentially means various databases with vast abstracted information. Despite the development of new scientific and technical fields, the classified patent collection is still the primary and most comprehensive source of technical information 

suitable to enable patentability determination. Some technical fields lend themselves to text searching particularly if the fields evolved during the recent past. Others, particularly the mechanical and electro-mechanical are not suitable at all (except as a final ‘‘cover your butt’’ check) since there is no common nomenclature. This 

is compounded by the fact that mechanical innovations have a longer history in 

comparison to electrical and chemical ones. 

In calendar year 2001, 45% of all patents issued were in the mechanical arts, 30% 

in the electrical, and 25% in the chemical. 

Recent Developments 

The depth of prior art knowledge is a different requirement for the expert in contrast to the generalist. Traditionally, examiners were acknowledged for their expertise. In recent years, unfortunately, PTO has found it necessary and/or expedient 

to put more emphasis on processing applications quickly than on developing future 

experts. The introduction of text searching in the early 90’s provided a short cut for 

performing a prior art search The IP community is aware of a decline in patent 

quality. The private sector searcher regularly encounters established examiners who 

can’t identify classified search fields and are unaware of known classified old art. 

Also, invalid patents, some very simple, have issued because the invalidating prior 

art was invented earlier than 1971. Traditionally, the examiner was involved (in addition to searching) with reclassification thereby reinforcing the learned evolution 

of the old art. As old school examiners retire they are leaving with accumulated historical knowledge that is not being replaced. 

The USPTO is Internationally recognized for the quality of it’s product. Patents 

have been difficult to invalidate. The examiner knew the prior art and was able to 

find additional references directed to claimed subject matter. History has demonstrated that quality—in the core function of making patentability determinations—is directly a result of the expertise derived through both classified searching 

and involvement with reclassification efforts. By gradual erosion the PTO is losing 

its expert edge. 

Summarizing 

For the most part the prior art activity for both sectors is done the same way 

using the same resources and going through basically the same steps, although each 

has a distinctly different objective. The expert looks for focused subject matter directed to claims that are fashioned around prior art found during a search by the 

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2The description fits in an ideal situation. Many applicants realize that filing without a preexamination search enhances the chances of favorable patentability decisions and proceed without them. 

generalist that emphasizes broader teachings.2 Both the expert and generalist use 

and depend on the U.S. Classification collection for prior art. The core skills are essentially the same particularly analytical reasoning, investigative motivation and a 

firm technical understanding. 

CONCLUSION

The PTO’s skill at locating prior art is diminishing. In response the Office wants 

to eliminate the internal search function. Making patentability decisions is the core 

function of examiners. The PTO supposes that the core function is possible when 

the Office itself lacks accumulated knowledge of the prior art. This raises an interesting question. Is prior art the substance of patentability or is it procedural? The 

Proposal further refines the core function as including ‘‘competency in law, regulations and practice and procedures.’’ (P–07A, p.1) Which is more critical to the quality of patents, applying references or awareness of the prior art? The knowledgeable 

expert and the classification system have proven to be pillars for patent quality. The 

in-house databases are unequaled for accessing available patent information. Due 

to the possibility of huge unintended consequences the PTO must engage in more 

deliberative thought and gain insight regarding probable outcomes. To do otherwise 

is reckless. The American Intellectual Property system could actually be worse off 

over the long term due to the loss of in-house expert capability. 

The Proposal is loaded with assumptions regarding the secondary and tertiary impacts of the proposed Plan. (For instance, individual companies will know the prior 

art better than the future experts, or commercial databases will provide the same 

degree of access to the patent collection as does EAST/WEST or keyword style 

searching can reliably replace manual efforts etc. . . .) Starting with the same decisions but making different assumptions the path to a very different outcome is foreseeable maybe even probable. There are analytical tools designed to facilitate strategic/public policy decisionmaking. Techniques such as decision trees, cross impact 

analysis and trend projections are indispensable when attempting to engineer an 

outcome and attach probability to alternative outcomes. The PTO hopes that an improved patent system emerges. It is unclear how the PTO would recognize a low 

quality prior art search if it lacks knowledge of the accumulated history of the art. 

All of this is the subject for a much longer and in-depth analysis. 

Further, there are numerous options regarding prior art searching that are not 

anywhere in the Proposal. It is hard to reconcile the act of divesting expertise while 

at the same time developing better quality. There are ways to keeps expertise inhouse but still reduce the budgetary expense. This too is the subject matter for another paper. 

Two of the biggest questions that I expect to be addressed are, 1) is maintaining 

and housing the knowledge base for IP a necessary government responsibility, and 

2) is reassigning the prior art function entirely to the private sector instrumental 

to the public good? 

Further, questions raised by the prior art activity, in terms of the Plan, impact 

other issues addressed in the Proposal, including post-grant review of issued patents 

and transitioning to an improved International Patent Classification scheme. The 

author hasn’t seen the sections on Global Development. 

The PTO will adapt to the demands of the information age, massive change is unquestionably needed to correct system flaws. But that which was relevant in 1789 

is true today. The Constitution stipulates that Congress has the power ‘‘to promote 

the progress of science and useful arts....’’ Does jettisoning the 170 year history 

of in-house prior art skill detract from or promote the progress of the useful arts?

PREPARED STATEMENT OF THE NATIONAL ASSOCIATION OF PATENT PRACTITIONERS

The National Association of Patent Practitioners (NAPP) is an association of over 

350 members dedicated to supporting patent practitioners and those working in the 

field of patent law in matters relating to patent law, its practice, and technological 

advance. In support of its mission, the NAPP focuses on promoting good patent prosecution practices which will result in the issuance of clear and valid patents. While 

its membership includes patent attorneys, the majority of its members are patent 

agents in corporate or private practice. Many of its members represent individual 

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verely damaged by the USPTO’s 21st Century Strategic Plan, if implemented in its 

present form. However, the NAPP and the USPTO share many common goals. We 

both intend to secure for our inventors the best patent protection they deserve while 

protecting the public from abuses of the patent system and thereby removing obstacles to innovation. 

The NAPP applauds the USPTO’s foresight in many of its suggestions as set forth 

in its 21st Century Strategic Plan. These suggestions reflect that the USPTO realizes that changes are needed in order to improve the US Patent system. 

The NAPP supports the proposal that funding should be increased for the USPTO 

operations. 

The NAPP supports the concept that in order to have quality patent examination, 

the examiners should receive better pay and improved training, provided their accountability is raised commensurately. In particular, the NAPP supports the proposal that examiners be recertified. 

The NAPP supports the continued efforts by patent offices worldwide to share 

their best practices and to learn from each other. Resisting a good practice because 

of a ‘‘not invented here’’ mentality is not acceptable to the patent community. 

The NAPP supports efforts by the USPTO to simplify and reduce costs and fees 

for obtaining and maintaining patents. 

The NAPP supports continued use of private contractors so long as they are held 

to be accountable. 

The NAPP supports electronic filing, prosecution and record-keeping, provided 

that they reduce the overall cost to patent applicants. However, merely shifting expenses relating to other government programs from the public to the inventor sector 

to raise the overall cost to the applicant is completely inappropriate. 

The NAPP supports introduction of post-grant review procedures so long as they 

are correctly implemented and properly controlled. The NAPP is concerned that 

large companies may use these post-grant review procedures to squelch patents of 

emerging entrepreneurs who rely upon these patents to seek and to obtain venture 

capital. 

In view of the NAPP’s agreement with many of the goals of the 21st Century Strategic Plan by the USPTO, we offer the following comments with respect to improving the USPTO’s Strategic Plan. 

Fee Diversion 

The NAPP adamantly opposes the fee increases proposed by the USPTO’s 21st 

Century Strategic Plan and adamantly opposes the continued diversion of fees from 

the Patent and Trademark Office to other federal programs. The United States patent system is the cornerstone of our nation’s ability to remain on the leading technological edge of world commerce. The US patent system provides entrepreneurs, universities, companies and their investors the certainty and security absolutely needed 

to promote investment in new and emerging technologies. The tax on innovation 

caused by fee diversion only diminishes our long-term economic health. If the US 

government absolutely feels compelled to divert funds from the USPTO, at the very 

least these funds should be used to support government programs relating to the 

patent system, such as the courts that are focused on handling these exceedingly 

complex patent litigations. 

Deferred Examination 

The USPTO’s proposal for deferred examination has a number of disadvantages, 

so the NAPP believes further study is needed before this plan is implemented. For 

example, separate examination will result in a number of applications being 

dropped in particular, the applications filed by individual applicants. 

Many of the recent procedural changes by the USPTO, such as doubling the 

amount of work involved in filing an amendment, have resulted in shifting the burden of patent prosecution to the private practitioner. These costs are being absorbed 

by the applicants rather than being passed on to the public. In turn, the number 

of individual applicants has already been reduced because they are not able to afford the costs associated with having an application prepared professionally. The reduction in the number of applications is shown in the USPTO’s report, which documents that the number of applications filed for 2002 is flat rather than reflecting 

the increase expected by the USPTO. Those who can afford professionally drafted 

applications will not abandon them simply because of the imposition of an examination fee. Rather, they will simply file fewer applications and develop fewer and 

fewer new technologies to the detriment of American society. Foreign countries with 

deferred examination have already culled out such innovations. In contrast, US companies have had the advantage that they sometimes held patents to inventions that 

were not highly marketable at the time the applications were filed, but because of 

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unanticipated market changes, later became highly successful and valuable. In such 

cases, the patentees benefited from owning the patents, and the public benefited 

from the disclosure of the technology. Thus, the patenting of unforeseen market successes leads to an overall benefit to society and adds to the storehouse of knowledge 

in the scientific community. 

The present ability to file provisional patent applications already provides applicants with a one-year time frame in which to assess the prospective marketability 

of their inventions. During this one-year period, the applicant’s costs are relatively 

low, and he is afforded time in which to decide whether or not to file a regular patent application. Therefore, the Abenefit@ expressed by the USPTO of deferring examination to conduct a market assessment is really no benefit at all. Moreover, the 

US maintenance fee system also serves as an existing means to cull out non-commercial inventions. Deferred examination is not necessary to achieve this. 

We also note that Japan recently and significantly dropped its time to defer applications down to 3 years. The USPTO is coming late to this party. We find it odd 

that the USPTO is seeking to copy foreign procedures being abandoned or softened 

by foreign countries. The delay caused by deferred examination is undesirable. Examination should be deferred no more than 14 months and an immediate request 

for examination should be likewise met with an immediate examination. Moreover, 

pendency should be measured from the time of filing, not the time of the request 

for examination as a constant reminder to the USPTO that it is delaying the 

issuance of valid patents. 

The Proposals to Increase Fees 

As stated above, the NAPP is adamantly opposed to the USPTO’s proposals to increase fees and to create new fees that are completely out of proportion to the costs 

of the work involved to process these applications. 

We agree that if the USPTO needs more money in order to provide a system that 

grants valid patents in a reasonably timely manner, it should have access to that 

money. However, our primary position is that the USPTO should be able to retain 

and use more of its revenue instead of that money being diverted to unrelated programs. If it is absolutely determined that the fees should be increased to provide 

quality examination and to strengthen the validity of issued patents, we agree, in 

principle, to a fee increase. We also support the USPTO’s efforts at cost cutting and 

simplifying patent procedures, on both the public and private side, to reduce overall 

costs to applicants. However, some of the proposed fee increases are outrageous and 

unrealistic. 

The NAPP agrees with the proposal to increase the excess claim fees relative to 

the number of claims involved based on the presumption that there is more work 

involved in examining very large numbers of claims. However, we do not believe 

that the surcharge should be on an escalating scale and, in any event, the proposed 

behavior modifying surcharge levels should not be imposed after the 3rd independent claim or after the 20th claim. Rather, we favor setting the threshold at a 

level that is more closely aligned with the amount of additional work required for 

examination of the claims. For instance, we believe that the newly proposed 

Apunitive@ claims surcharges should begin after the 5th independent claim and 

after the 40th overall claim. We base our proposal on the fact that recent court decisions place a higher duty on the applicant to adequately claim his invention in order 

to achieve complete patent protection. Our experience as practitioners has shown 

that this kind of rigorous claiming frequently demands presenting up to 5 independent claims and up to a total of 40 claims. Since the vast majority of applications 

now on file fall within these ranges, the NAPP believes that continuing to allow applicants to present this number of claims should not be dissuaded by the claim surcharge structure. In addition, the NAPP suggests that the fee should be based on 

the claims as examined, not as filed. When claims are cancelled because of an examiner’s restriction requirement or requirement for election of species, the applicant 

should automatically receive a refund of any excess claims fees. The NAPP agrees 

that excess pages in an application may require more work by the examiner in the 

examination process, and thus, these applications should be subject to surcharges. 

However, we believe that the threshold of 50 pages of specification and drawings 

as constituting excess pages is too low. Rather, we propose that the excess page fee 

begin after the 80th page. In addition, we propose that a different fee should be 

charged for applications containing computer codes and DNA sequences. The NAPP 

recognizes that it costs more to examine a complex case than a simple case. 

The Related Application Surcharge proposed by the USPTO for claiming priority 

from prior US applications is too high and not related to extra effort required by 

the USPTO. Continuation practice is a great help to the USPTO in several ways. 

For instance, continuing applications typically have a shorter pendency. Also, the 

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continuing application is generally less time consuming than an original application 

because the Examiner has already read the disclosure, been engaged in the same 

or similar issues and has already searched the same or similar invention. In as 

much as continuations are easier to act on and take less time, no surcharge of any 

kind should be assigned to claiming the benefit of priority. If accepted, this excess 

priority fee must not be applied where the priority is claimed from a divisional application caused by an examiner’s restriction requirement or requirement for election of species. 

We agree with the Intellectual Property Owners Association, who in its Statement 

submitted to this Committee at its hearing on July 18, 2002, opposed any Related 

Application Surcharge fee for claims that the USPTO deems not patentably distinct 

from one or more claims in another application. Moreover, the proposed $10,680 fee 

entices the patent examiner to issue an unwarranted double patenting rejection. 

The fee bears absolutely no relationship to the costs of processing applications with 

patentably indistinct claims. Under the current practice, most practitioners receive 

a double patenting rejection and, unless the rejection is outrageous, they typically 

file a terminal disclaimer with a $120 government fee to overcome the rejection. In 

contrast, applicants will be forced to argue and appeal these obviousness-type double patenting rejections. This will result in overburdening the Examiners, the 

USPTO Board of Appeals and ultimately the courts. Also, in view of electronic filing 

it is easy to compare up to five applications by merely using the comparative command available in most software applications. Moreover, if a fee is imposed, it 

should be made clear that the fee only applies to claims that are not patentably distinct from claims in another application owned by the same applicant. It is also critical that this fee not apply where the applications are divisionals of one another necessitated by a restriction requirement or requirement for election of species made 

by the Examiner. Furthermore, the applicant should have the opportunity to amend 

the claims and to argue over the obviousness-type double patenting rejection before 

being required to pay the fee. We recommend (1) that the fee should be due only 

with the issue fee payment and (2) that there be an option to request a refund. Indeed, there should be the option to pay the fee, have the patent issue and afterwards appeal to request a refund. The NAPP welcomes the opportunity to avoid the 

filing an inordinate number of patentably indistinct cases, but only provided that 

the vast majority of applicants are not penalized. Thus, the NAPP is willing to support a reasonable increase in the terminal disclaimer fee to $240, coupled with 

charging a more reasonable fee for patentably indistinct claims only when the examiner asserts that the claims of the application under examination are patentably indistinct relative to 6 (six) other applications/patents. 

Certified Searches 

The NAPP believes the proposed four track examination system has potential for 

improving patent examination but recommends that the USPTO must proceed cautiously. The Examiners already benefit from applicants who submit the results from 

foreign searches. Also the USPTO already has a streamlined issuance procedure for 

applications examined by the USPTO under the Patent Cooperation Treaty for 

which all rejections were overcome during the international stage. However, if use 

of foreign search reports can be improved we support that to the extent that differences in patent laws are taken into account and the Examiner is given time to 

do his or her own supplemental search. However, we are skeptical of any proposal 

to have private parties hired by applicants provide searches to be relied upon by 

the Examiner and believe such proposals should be studied further. We believe that 

searches can be contracted out but that they should be contracted out and paid for 

by the USPTO. Requiring the applicant to request a search from a private contractor is another hidden tax on innovation. The typical applicant already performs 

a patentability search before preparing the application. The USPTO, now in addition to the application fee and the examination fee is requiring the applicant to pay 

a hidden search fee. 

Mandatory Information Disclosure Statements 

The NAPP opposes any changes to patent practice requiring mandatory information disclosure statements. This is another attempt to have applicants do the job of 

the USPTO. No matter what an applicant says in describing a reference, opposing 

counsel in litigation will assert that the applicant did not meet the duty of disclosure. This will burden the courts with unnecessary litigation and drive up already 

skyrocketing litigation expenses. Indeed, this requirement will merely shift expenses 

from the USPTO to the already overburdened courts. 

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Conclusion 

The NAPP favors the USPTO’s goal to improve the patent system and is not opposed to new approaches that clearly benefit the applicant whom the USPTO is obligated to serve. However, we urge this Subcommittee to proceed with caution and 

be aware that some aspects for improvement proposed by the USPTO will have a 

negative impact on the innovative community and our economy as a whole. We appreciate the strong interest this Subcommittee is taking in improving the patent 

system at a critical time when the US is striving to maintain leadership in our global economy and we look forward to working with the Subcommittee and the USPTO 

to achieve these important common goals.

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PREPARED STATEMENT OF LEEARL A. BRYANT

INTRODUCTION

The over 235,000 U.S. members of the Institute of Electrical and Electronics Engineers, Inc. represented by IEEE-USA include inventors, innovators, designers, independent entrepreneurs, small business owners, and employees of firms that acquire, 

license and exploit intellectual property. Their collective efforts promote our nation’s 

prosperity, security, and competitiveness by fostering technological innovation. 

IEEE supports the engineering process of creating, developing, integrating, sharing 

and applying knowledge about electronics, information technologies and physical 

sciences for the benefit of the profession and humanity. 

IEEE’s U.S. members are among the most frequent users of the USPTO, and 

therefore we have a compelling interest in ensuring that legal principles governing 

patent policy are consistent. By virtue of the practical experience of its members, 

the IEEE-USA respectfully believes that its views can assist this committee in evaluating the effect of the strategic plan on technical innovation, especially by independent inventors and small businesses. We are deeply concerned about proposed 

changes in the patent system that could potentially jeopardize our members’ abilities to secure the patent protection they need, the lack of which would affect our 

country’s competitiveness, economy, and technological advancements. 

GENERAL

Intellectual property is a significant and growing component of our national economy. The Information Technology (IT) sector accounts for an estimated 8.2 percent 

of our gross domestic product and accounts for one-quarter of the economic growth 

in the American economy. This is just one of many sectors which rely heavily on 

patent protection and with which many IEEE-USA members are involved. The 

IEEE-USA believes that our nation’s global competitiveness and our economy are 

directly tied to the innovations made by independent inventors and inventors employed by small businesses. The success of many startups can be traced to a handful 

of inventors obtaining funding due in great part to being able to protect their intellectual property. As such, the voice and concerns of the independent inventor and 

of small business entities must be considered at all stages of developing and implementing changes to the patent process. 

The quality of the patents issuing remains an important concern of the IEEEUSA. We appreciate the USPTO staff’s ongoing efforts to continuously improve the 

quality of their work product. We support the Strategic Plan’s principle to improve 

the quality of the USPTO while reducing pendency, such as efforts to enhance successful, appropriate pilot programs and extend them throughout the USPTO. 

The IEEE-USA understands the importance of a global patent classification system and harmonizing our patent system with the rest of the world to gain easier 

and less expensive patent protection around the world. It is important when changing U.S. patent policies for harmonization that we continue to encourage innovation 

and maintain U.S. competitiveness. We support the Strategic Plan’s efforts to 

achieve this. 

Fees and Costs to Obtain Patent Protection 

IEEE-USA believes that the USPTO should be fee-supported, with flexibility in 

setting fees subject to the oversight of Congress and following proper administrative 

procedures. The IEEE-USA has opposed and continues to oppose diversion of fees 

paid to the USPTO for use by other agencies. If all of such monies were used for 

the USPTO, instead of being diverted by Congress as in the past, IEEE-USA believes no fee increase would be necessary. Taxing patentees beyond the costs of the 

USPTO yields results contrary to technical innovation in the U.S. 

If fees need to be adjusted to help support the USPTO’s operation, the IEEE-USA 

believes that Congress must take into account the special circumstances presented 

by the independent inventor and the small business entity when considering 

changes to the fees, the fee structure, and when imposing other costs to receive patent protection. The proposed fee changes will adversely affect individual inventors 

and small business entities to a far greater percent than other businesses. Additionally, we are very concerned that the 4-tier application option proposed would discriminate solely on the basis of one’s wealth. 

The IEEE-USA continues to support reduced fees for the independent inventor 

and small business entity. We believe that all Federally mandated fees and costs 

to file, examine, issue, and maintain patents must be reduced for the independent 

inventor and small business entity. 

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IEEE-USA further believes that the functions of the USPTO that benefit the public, such as making information available to all on the Internet, should be funded 

through general tax revenues as this is a part of the Constitutionally mandated 

function of the USPTO for the public good. 

The Number of Patent Claims 

The complexity of technology has changed dramatically since the first patent was 

issued, let alone over just the last 100 years. Few claims were required by Edison 

in order to obtain patent protection for the light bulb, but today a gigabit Ethernet 

switch that optimizes data transfer could not be adequately protected by just a few 

claims. The complexity of many of today’s discoveries requires far greater skills, 

knowledge and sophistication to delineate and claim an invention. The U.S Supreme 

Court recently recognized in Festo v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 

et al. that Alanguage remains an imperfect fit for invention.@ It is therefore more 

and more difficult to adequately describe today’s complex inventions and to differentiate them from previous inventions without the use of multiple claims. 

Members of the IEEE-USA will find many of their inventions cannot be adequately and fairly claimed for a reasonable fee within the punitive limitations as 

set forth in the proposal. Recent U.S. Supreme Court and lower Federal Court cases 

essentially mandate the use of many diverse forms of claims and claiming strategies. As just one example, an inventor of even a simple software invention must use 

multiple independent claim formats to adequately claim the invention. A typical 

claim, to have adequate commercial coverage in the relevant marketplace, must 

practically be presented as, among other forms, apparatus claims, method claims, 

data structure claims, computer-readable medium claims, user interface claims, 

propagated signal claims, and software-related business method claims. Although 

this multiplicity of claim formats for similar subject matter does not significantly 

increase the examination costs of the USPTO, the current proposal would harshly 

punish, and thus practically limit, the scope of protection available to inventors, especially to those of moderate means. 

The IEEE-USA contends that provisions that discourage inventors from adequately protecting their inventions, such as the proposed punitive fees and a fee 

structure designed to limit the number of claims, would be at odds with the needs 

of entrepreneurs whose livelihood depends on patent protection and this aspect will 

diminish their ability to obtain dependable protection, much less defend it, within 

their budget. 

Outsourcing Searches 

The patent examination process is an ongoing negotiation between the applicant 

and the examiner, often with the examiner refining and re-searching the prior art 

in combination with the applicant making amendments to the claim language. 

The IEEE-USA believes that there are both short and long-term consequences to 

outsourcing searches. In the short term, the IEEE-USA is concerned that financial 

incentives to independent inventors and small businesses will be impacted. Many 

independent inventors also currently prepare and file their own applications, and 

perform all of their own searches at the USPTO, depository libraries and elsewhere, 

all in an effort to save money. Searches through commercial vendors are effectively 

a part of the application costs and it is unlikely that legislation would place pricing 

controls on commercial vendors. 

The IEEE-USA is also concerned that there could be long-term unexpected consequences to outsourcing searches. There may be a discontinuity between the search 

and the examination. Thus, not only might outsourcing affect the quality of patents 

issuing, but it might also have an unanticipated effect years later in the courtroom 

during patent litigation where the third party’s search methods and quality are 

challenged. IEEE-USA recommends that prior to final implementation this be thoroughly investigated via preliminary studies combined with studies of the European 

Patent Office’s results of their outsourcing between offices. Successful outsourcing 

must address these concerns and implement reasonable checks and balances to assure adequate protections to the inventors and the patenting process. 

Other 

Further, IEEE-USA supports efforts to bring the USPTO into the 21st century 

such as electronic filing. We strongly believe that electronic interactions with the 

USPTO (e.g. electronic filing, information disclosures, application tracking, searches, 

etc.) must use open interoperable interfaces and not use closed or proprietary interfaces. We believe that such an open structure and interoperability will allow market 

forces to generate the best and lowest cost solutions. 

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Conclusion 

The IEEE-USA believes that some of the changes in the USPTO’s 21st Century 

Strategic Plan, such as those aimed at reducing cost to the inventor through harmonization and electronic filing, are positive and will improve the system. However, 

some of the other changes could damage the process and particularly could harm 

individual inventors and companies that rely on the protection of patents to maintain competitiveness in the global markets. The IEEE-USA believes that the USPTO 

should continue to find creative ways of distributing their efforts, such as 

outsourcing of searches, while taking into account the issues we raised. 

The IEEE-USA looks forward to assisting the USPTO and Congress in your efforts to improve the efficiency and quality of the patenting process.

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