USPTO administers the nation's patent and trademark laws to protect inventions, encourage innovation, and advance science and technology through the preservation and dissemination of patent information. The principal effect of patent law in a market economy is that it provides the economic incentive for inventors to devote resources to technological innovation. Granting the inventor exclusive rights to control the use of the patented invention produces this effect. Patent rights do not rise automatically, however. Inventors who seek patent protection must first prepare applications that fully disclose and clearly claim their inventions. Before issuing a patent, USPTO examines the application to verify that the patent is new, useful, and nonobvious. See figure 1 for a description of the application examination and publication process. If the agency issues a patent, the inventor has, in most instances, exclusive rights to the invention until 20 years from the date the application was first filed. Patents typically fall into one of three categories: (1) utility--for useful inventions, such as processes, machines, articles of manufacture, or composition of matter; (2) design--for changes in configuration, shape, or surface ornamentation that do not involve changes in function; or (3) plant--for asexually reproducible plants. The publication provisions of the American Inventors Protection Act apply only to applications for plant and utility patents, which constitute most of the applications filed. Until 1999, USPTO was required to keep in confidence submitted patent applications, and applicants had no enforceable patent rights before the issue date of the patent. The American Inventors Protection Act of 1999 removed this confidentiality, so that, with certain exceptions, such as applications subject to a secrecy order for reasons of national security, patent applications filed on or after November 29, 2000, will be published 18 months after they are first filed. In exchange for the loss of confidentiality and the public dissemination of this proprietary information, the applicant may be able to obtain compensation retroactively to the date of publication from those who use an invention without approval. USPTO may publish some applications earlier than 18 months. Some inventors, for example, request that their applications be published early. Applications that are first filed abroad will also normally be published in fewer than 18 months after being filed in the U.S. This is because USPTO designates an application's publication date as 18 months from when it was first filed, regardless of whether that occurred in the United States or abroad. Applicants who file first in another country and wish to obtain a patent in the U.S. must file with USPTO within a year. If such an applicant took 12 months to file with USPTO, the agency would then publish the application within 6 months. If, for example, such an application was abandoned 9 months after it was published, then USPTO's database would show that the application was abandoned in 15 months--the number of months that had passed since the application had been filed in the U.S.-- rather than the 27 months that had passed since the application had been first filed anywhere. Proponents of the act believe that the changes brought U.S. patent policy into greater harmony with the policies of nearly all other nations and will increase the rate at which dissemination of new technology occurs, thus speeding the diffusion of knowledge and avoiding the duplication of research expenditures by competing firms. Some inventors, however, objected to the early disclosure requirement of the act. For example, a group of 26 Nobel laureates claimed that this practice would be most harmful to small inventors and would discourage the flow of new inventions. They pointed out that the patents most affected by early disclosure would likely be breakthrough inventions, often made by independent inventors, that take time to progress from application to an issued patent. Independent inventors and smaller entities have also expressed concern that the new law aids larger entities that have greater resources, at the expense of smaller entities. They contend that smaller entities are less able to obtain legal redress if larger firms use their inventions without approval, and are less able to keep pace if a larger firm attempts to invent around the patent--that is, to improve the patented device enough to apply for a separate patent. The 1999 act allows all inventors not intending to seek patent protection abroad to request that USPTO publish the application only when it issues the patent. Such inventors also have the option of rescinding the original request before USPTO issues a patent and asking the agency to publish the application as it would other applications. USPTO's database does not provide information for many applications regarding whether the applicant intends to file only in the United States or in both the United States and abroad. Our analysis of USPTO's database indicates that of the approximately 805,000 applications USPTO received, applicants certified they would apply for a patent only in the United States in about 80,000 applications. Although about 88,000 applications originally included this certification in their applications, about 8,000 applicants later rescinded this certification. Consequently, these 80,000 applications are exempt from the publication provisions of the American Inventors Protection Act because they are filing for patent protection only in the United States. In about 275,000 applications, the applicants indicated they had applied for a patent in another country. As a result, these applications are subject to the publication provisions of the American Inventors Protection Act, and USPTO will publish these applications within 18 months of when they were originally filed. USPTO's database does not provide the information needed to determine definitively whether the applicants for the remaining 450,000 applications intended to apply for a patent only in the United States or in both the United States and abroad. However, USPTO officials estimated that for about one-third of such applications, the applicants generally seek patent protection in both the United States and abroad. Applying this proportion to the 450,000 applications for which no information is available, about 300,000 were likely to seek patents only in the United States and about 150,000 were likely to seek patents in both the United States and abroad. By combining these estimates with the data for the applications that we could definitively identify from the database, we calculated that about 380,000 applications (about 47 percent) likely were filed only in the United States, and about 425,000 (about 53 percent) likely were filed in both the United States and other countries. See figure 2. We found four differences between the published and unpublished applications filed with USPTO between November 29, 2000, and November 28, 2003. First, USPTO published, or plans to publish, applications filed by inventors qualifying as large entities at a somewhat higher rate (85 percent) than those filed by inventors qualifying as small entities (74 percent). Of the approximately 580,000 applications filed by large entities, USPTO published about 60 percent and listed another 25 percent as eligible for publication--that is, the applications will be published 18 months after they were first filed. About 12 percent of the applications filed by inventors qualifying as large entities are ineligible for publication--typically because the applicants certified that they will file only in the United States. USPTO's database does not provide the information needed to determine the publication status for the remaining 3 percent. For the approximately 225,000 applications filed by inventors qualifying as small entities, USPTO published about 46 percent and lists another 28 percent as eligible for publication. About 22 percent of the applications filed by inventors qualifying as small entities are ineligible for publication. USPTO's database does not provide the information needed to determine the publication status for the remaining 4 percent. See figures 3 and 4. Second, although the rate at which USPTO issued patents to published and unpublished applications differed only slightly, the rate at which applicants abandoned published applications and unpublished applications differed significantly. Of the approximately 456,000 applications USPTO published, about 70 percent are still pending, about 22 percent were issued patents, and 8 percent were considered abandoned. Similarly, of the approximately 117,000 applications USPTO did not publish, about 56 percent are still pending, about 25 percent were issued patents, and 19 percent were considered abandoned. For a summary of these differences, see table 1. Third, USPTO took longer to issue patents that had been published (a median time of about 20 months) than those that had not been published (about 15 months). According to agency officials, the difference occurs primarily because examiners sometimes complete their review and decide to issue a patent in fewer than 18 months. In these cases, USPTO does not publish the application because the issued patent will itself be published and become public information. As a result, the median length of time for unpublished patents is less. Fourth, for applications considered abandoned, the median length of time between filing and abandonment was longer for published applications (about 18 months) than for those not published (about 8 months). According to USPTO officials, this difference occurs primarily because nearly all patent applications abandoned within about 18 months of filing are not published. In commenting on a draft of this report, USPTO provided technical comments that we have incorporated, as appropriate. We are sending copies of this report to the appropriate House and Senate committees; interested Members of Congress; the Secretary of Commerce; the Director, USPTO; the Director, Office of Management and Budget; and other interested parties. We are also providing copies to others upon request. In addition, the report is available at no charge on GAO's Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3841. Key contributors to this report are listed in appendix II. To provide information on the patent applications affected by the American Inventors Protection Act of 1999, we analyzed data obtained from the U.S. Patent and Trademark Office's (USPTO) Patent Application Location and Monitoring system (PALM). We used these data to determine the number of applications USPTO received, the number of applications certifying that they would be filed only in the United States, and the number that rescinded this certification. PALM also contained data we used to determine whether applicants had filed an application for the same invention in another country before filing with USPTO. In addition, we used PALM data to analyze whether differences existed between published and unpublished applications in terms of the relative size of the applying entity, the length of time USPTO reviewed the application before it was issued or abandoned, and the rate at which applications were issued or abandoned. In about 44 percent of the cases, the USPTO data provided information about whether applicants sought patent protection only in the United States or in both the United States and elsewhere. For the remaining 56 percent of the cases, USPTO's database does not provide the information needed to determine whether the applicants have filed or intend to file in the United States alone or also in another country. We discussed other possible sources of information about these cases with USPTO program officials, attorneys, and economists. These USPTO officials noted that while they had conducted one study that provided some data as to whether applicants filed in the United States alone or also in another country, the limitations of the study's methodology and results precluded any statistically valid use of the information. Three other studies we examined had similar methodological limitations that precluded their use. The USPTO officials with whom we discussed these issues estimated that, based on their professional experience, for about one-third of the applications filed in the United States, applicants may subsequently file in another country after filing with USPTO. Although we used this estimate to determine the potential number of applications that may have been filed in the United States only and in both the United States and abroad, use of this estimate should be considered in light of the limitation that it could not be corroborated by other methodologically sound independent sources. We assessed the reliability of USPTO's PALM data that we used in our analysis by (1) performing electronic testing of relevant data elements, (2) reviewing existing information about the data and the system that produced them, (3) interviewing agency and contractor officials knowledgeable about the data, and (4) reviewing audit and system reports on accuracy of data entry performed by contractors. We determined that the data were sufficiently reliable for the purposes of this report. To determine if studies analyzing the impact of the American Inventors Protection Act had been conducted by any other entity, we interviewed officials from the Intellectual Property Owners Association, the American Intellectual Property Law Association, and the National Intellectual Property Researchers Association. To explore the practicality of conducting a survey of patent attorneys to determine how many patent applications were filed only in the United States or in both the United States and abroad, we contacted patent attorneys around the United States representing private legal firms, corporations, academia, and government. After discussions with these officials, we concluded that a survey was not feasible because of concerns about attorney/client confidentiality. We conducted our work from June 2003 through April 2004 in accordance with generally accepted government auditing standards. In addition to those named above, Oliver Easterwood, Judy Pagano, Elsie Picyk, Paul Rhodes, Stuart Ryba, Carol Herrnstadt Shulman, and Mindi Weisenbloom made key contributions to this report. 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Summary:
The U.S. Patent and Trademark Office (USPTO) receives over 300,000 patent applications each year. Before the American Inventors Protection Act of 1999, USPTO was required by law to keep the information on patent applications confidential until a patent was granted. The act modified this requirement and mandated that USPTO publish most patent applications 18 months after filing. One exception to this requirement is available to patent applicants filing only in the United States. These applicants can request that their application not be published. The act required GAO to provide information on how patent applications have been affected by the 18-month publication provisions. GAO was required to determine (1) the number of patent applications filed only in the United States, and (2) whether certain differences exist between published and unpublished patent applications. Specifically, GAO examined differences relating to whether the applicant was a large or small entity, the percentage of patents issued by USPTO and applications abandoned by the applicants, and the length of time between filing an application and when USPTO issued a patent or the application was abandoned. Of the approximately 805,000 patent applications USPTO received between November 29, 2000, and November 28, 2003, about 88,000 were filed by applicants certifying they would apply for a patent only in the United States. Subsequently, 8,000 of these applicants rescinded this certification. For about 275,000 applications, the applicants indicated they had already applied for a patent abroad. For the remaining 450,000 applications, USPTO's database does not provide the information needed to determine whether the applicants intend to file in the United States alone or also abroad. GAO found four differences between the published and unpublished patent applications that USPTO received between November 29, 2000, and November 28, 2003. USPTO has published or plans to publish applications from about 85 percent of the applicants qualifying as large entities compared with only about 74 percent of those qualifying as small entities. USPTO issued patents to about 22 percent of the applications it had published and considered about 8 percent abandoned, although resolution for most of the approximately 456,000 published patent applications is still pending. For applications it did not publish, USPTO issued patents to about 25 percent and considered about 19 percent abandoned, although resolution for most of these approximately 117,000 applications is also still pending. The median length of time for the agency's review of an issued patent was about 20 months for those applications that had been published and about 15 months for those not published. The median length of time between filing and abandonment of an application was about 18 months for published applications and about 8 months for those not published.