A patent is a grant given by a government to an inventor of the right to exclude others for a limited time from making, using, or selling his or her invention. In the United States, the sole granting authority for patents is PTO. While other countries throughout the world have patent offices of their own, the two largest counterparts to PTO are the patent offices in Japan and Europe. Within PTO, the patent application examination process consists of several progressive phases. An applicant files a patent application with PTO, where it is subjected to reviews for accuracy and completeness during a preexamination phase. Following preexamination, the application is assigned, or “docketed,” to an examiner within an examination group that has expertise in a specific field, such as computer systems or biotechnology. At this point, the examiner begins the process of determining whether the invention is a new and useful process or product that should receive a patent. Usually early in the process, the examiner makes a preliminary decision, or “first action,” which may then be followed by a series of contacts with the applicant to resolve questions and/or obtain additional information. Possibly after a number of actions by the examiner, PTO will decide whether to issue a patent. If PTO decides to issue a patent, termed an “allowance,” then the agency informs the applicant and, upon the payment of the necessary fees, issues a patent. The application may be abandoned during any of these stages. PTO defines pendency as the period from the date when an application is filed until the date when a patent is issued or the application is abandoned. PTO computes average pendency as the total number of months of examination for all patents issued or applications abandoned over a particular period, divided by the total number of applications for that period. As reported by PTO, average pendency varied over the period from fiscal year 1981 through fiscal 1995, peaking at 25.5 months in fiscal year 1983 and reaching a low point of 18.2 months at the end of fiscal year 1991. Since fiscal year 1991, pendency has averaged at least 19 months in each fiscal year. For our May 22, 1996, report, we developed statistics for patents issued or applications abandoned during fiscal year 1994 as well as patents still in-process as of October 1, 1994. We selected fiscal year 1994 because it was the last full fiscal year prior to the change in the patent term law and the last full fiscal year for which complete data were available. In addition, October 1, 1994, was chosen because it provided us with the most recent data available for comparison with data from fiscal year 1994 without including any of the same applications. As a baseline for our analyses, we first computed the overall average pendency for patents issued and applications abandoned during fiscal year 1994. In this regard, we computed an overall average pendency rate of 20.2 months for fiscal year 1994 instead of the 19 months reported by PTO. This variation appears to result from a combination of three factors. First, PTO computed pendency on a quarterly basis, and the 19-month rate reported is the pendency rate for the fourth quarter of fiscal year 1994. Second, unlike PTO, we included design patents. Third, PTO’s automated database continued to be updated between the time when PTO made its computation and when we made ours. PTO officials agreed that these factors accounted for the difference in the computations of pendency for fiscal year 1994. While the difference is slight, we nevertheless believe our computation to be more accurate and complete and used our computed rate of 20.2 months for subsequent analyses and comparisons. The overall average pendency rate computed and reported by PTO does not provide inventors and decisionmakers such as the Congress and the administration with the information they now need to determine the effect of pendency on the patent term and to evaluate PTO’s performance. This is because (1) PTO’s pendency computation method considers both issued patents and abandoned applications but does not consider applications still in-process; (2) pendency can vary widely for individual applications, depending on the type of invention and factors such as whether the application is subject to a secrecy order; (3) pendency is higher when the filing date used is that of the original, rather than the most recent, application for the particular invention; and (4) the applicants themselves are partly responsible for the time taken to examine applications. Pendency is an important factor in any consideration of the patent examination process because it provides (1) the inventor with an estimate of how long PTO is likely to take to issue a patent, (2) PTO with information on how it is managing its workload, and (3) decisionmakers such as the Congress and the administration with a method to measure results. However, we believe that the overall average pendency reported by PTO does not provide inventors and decisionmakers with the information they need because it does not show separate computations for patents issued, applications abandoned, and applications still in-process. Pendency has taken on a new importance to inventors over the past year because, in most cases, the time taken to examine a patent will in effect reduce that portion of the 20-year term in which the invention can be commercialized. The important measurement is pendency for issued patents because it reflects the examination time for the successful applications that have completed the examination process. As shown in table II.1 in appendix II, the pendency for the 113,684 patents issued during fiscal year 1994 was 21.3 months, which is 1.1 months higher than the overall pendency for both issued patents and abandoned applications. Pendency for abandoned applications is also important. While such applications may have limited importance to the inventor, they are important to PTO because they represent a substantial portion of PTO’s overall workload. As shown in table II.1, 73,949 applications were abandoned during fiscal year 1994; their average pendency was 18.3 months. Thus, PTO spends a considerable amount of time examining or awaiting responses on applications that will not result in the issuance of a patent. Pendency as reported by PTO also excludes applications that have been filed but not yet issued or abandoned. At any one time, the number of applications in-process is greater than the number of patents issued or applications abandoned during the previous fiscal year. As of October 1, 1994, 294,565 applications were still in some phase of examination; their average age was 16 months. Of these, 14.8 percent were more than 2 years old, 5.2 percent were more than 3 years old, and 2.7 percent were more than 4 years old. In responding to the results of our analyses, PTO performed its own analysis of work in-process as of October 1, 1994. PTO officials said that their findings were consistent with ours but that their analysis went further in explaining some of the reasons for the older applications. While we did not verify their statistics, the PTO officials said that of those applications that were more than 2 years old, 55 percent had experienced delays because of factors—such as those created by secrecy orders and applicant appeals—beyond PTO’s control. Of those applications more than 4 years old, 82 percent were said to have experienced delays beyond PTO’s control. Patent applications cover a broad range of inventions. To determine whether pendency varies by the type of invention being examined and other factors, we compared pendency in fiscal year 1994 for individual examination groups, applications subject to secrecy orders, and foreign applications. We found that (1) pendency can vary significantly among the examination groups, (2) applications subject to secrecy orders have high pendency themselves but little effect on overall pendency because of their limited number, and (3) pendency for applications from foreign residents is only slightly higher than for all applications. One of the functions of preexamining an application is to determine the examination group within PTO to which the application should be assigned. Each examination group specializes in a broad type of application and is divided into “art units” that have greater degrees of specialization. We found that the type of invention being examined can have a significant effect on pendency. As shown in table II.2, overall average pendency during fiscal year 1994 was highest—at 27.6 months—in the Computer Systems group and lowest—at 16.9 months—in the Solar, Heat, Power, and Fluid Engineering Devices group. As shown in tables II.3 and II.4, these same two examination groups also had the highest and lowest pendency rates for issued patents (29 months for the former compared with 17.8 months for the latter) and abandoned applications (26 months for the former compared with 14.1 months for the latter). The differences by invention type are even more visible when comparisons are made among the nearly 200 individual art units. Again using the data from fiscal year 1994, for example, we found that the 550 patents issued or applications abandoned in Art Unit 2307—Data Base and File Management Systems—had an average pendency of 34.2 months compared with an average pendency of 15.6 months for the 1,426 patents issued or applications abandoned in Art Unit 2404—Special Receptacles or Packages, Shoes and Shoe Making. Comparisons at this level are more difficult, according to PTO officials, because of the frequent shifts that PTO makes in the scope of inventions covered by individual art units and because the number of applications can vary so widely among the units. Nevertheless, PTO officials agree that pendency varies widely among the art units. Patent applications subject to secrecy orders are assigned to a separate examination group. PTO will not issue a patent or permit an abandonment on an application while it is subject to a secrecy order; thus, such applications technically remain under examination until the secrecy order is lifted.