• Sound Structure: Financially, and Operationally.
• The President and the Congress support full funding of PTO core functions.
• Business is escalating. A sound economy is good news for both patent and trademark customers. State-of-the-art patent and trademark systems contribute to America's economic success, at home and abroad.
• A "Clean Bill of Health" on PTO finances for 4th year in a row will be issued by the Inspector General.

• Reforms under way to benefit PTO Customers: new staffing and training, automation, reengineering, information outreach and dissemination.
• Bottom line is to reduce patent cycle time and trademark pendency time, cost-effectively, for the PTO customer, and ultimately to benefit the American consumer.

Business is Booming!

• Improvement goals have been set and will be met.
• Complaints are down; inquiries are up.
• Outreach: Independent Inventors Conference, Customer Focus Sessions and Surveys, Customer Satisfaction Standards.
• Patent Applications Up: 243,000 in FY 1999.
• Trademark Applications Up: 275,000 in FY 1999.

Innovation for Today and Beyond 2000.

• New on the Internet: Trademark electronic application.
• Automation infrastructure for higher quality products and services.
• Streamlining: Acquisition process and recognition (Hammer Award & Commerce Gold Medal).
• State of the Art Resource Management: Cost accounting, core accounting systems, electronic commerce.
• Performance measurement is in place.

Fee Dollars Being Spent Wisely and Well.

• New state-of-the-art tools and streamlining.
• Well-trained staff.
• Automation for more complex workloads and processes.
• Stronger financial viability.
• Cycle and pendency time reduction and containment of inventory backlogs.
• Greater flexibility to deal with the need for intellectual property protection in a growing economy.
• Aligning fees with fluctuating costs.

PTO will carry forward $66 million to FY 1999.

• Above enacted levels.
• After providing $92 million to the balanced Federal budget initiative.
• From higher workloads, FY 1997 carryover funds, and FY 1997 revenues processed in FY 1998.

Patent Fee Surcharge expires on September 30, 1998.

• Patent Statutory Fees fall to pre-Surcharge levels on October 1, 1998.
• Legislation needs to be passed by the Congress to reset Patent Statutory Fees to current (1998) levels on October 1, 1998.
• $182 million of revenue affected. [Current rate - pre-surcharge rate adjusted by CPI x 1999 workloads = $182 million.]

In FY 1999 PTO rescinds $116 million for deficit reduction purposes, provided patent statutory fees are reset to current levels.

• In support of the bi-partisan effort to balance the Federal budget.
• Consistent with the Administration's FY 1998 policy of contributing $92M for deficit reduction.
• Source: $66 million carried forward from FY 1998 into 1999, and $50 million from earned income in FY 1999.
• When: Effective no later than June 1999.

*Difference between unprocessed prior year payments and payments processed next year.

Patents

• Reduce cycle time to 12 months for 75 percent of original inventions (or an average of 13.8 months for all inventions).
• Continue testing reengineered processes in the Working Lab.
• Complete the evaluation of filing Patent Cooperation Treaty (PCT) applications electronically, automate PCT operations, and use automated classification tools in pre-examination processing.

Trademarks

• Reduce pendency to first action to 3.9 months.
• Replace TRAM, produce the Trademark Official Gazette in house, print registration certificates in house, and provide an option to file trademark applications electronically.

Information Dissemination

• Enable customers to order and receive information products via the Internet
• Provide access to patent and trademark data bases via the Internet from Patent and Trademark Depository Libraries (PTDLs).
• Establish two additional regional partnerships, and designate PTDLs in six metropolitan areas.

Policy

• Partner with the World Intellectual Property Organization (WIPO) to promote international electronic communication in administering the Patent Cooperation Treaty.
• Continue to promote intellectual property protection through domestic legislation and international agreements.

Corporate-wide Activities

• Information Technology Infrastructure - Year 2000 compliance, support for new employees and support for increased workloads.
• Space 2000 - Meet short term space needs and allocate resources for PTO's new facility.

By granting exclusive rights, for limited times, to inventors for their discoveries, the PTO supports the Department of Commerce Strategy to: Provide effective management and stewardship of our nation's resources and assets to ensure sustainable economic opportunities. Following are the Patents Business key goals and commitments:

• Reduce the PTO processing time for patent original inventions to 12 months in 2003. In FY 1999, Patents will:

• Reduce cycle time to 12 months for 75 percent of original inventions.
• Establish fully-supported Industry Sectors

• Test reengineered processes and automated systems, and be ready to deploy electronic processing of patent applications in 2003. In FY 1999, Patents will:

• Continue testing and validating reengineered process changes in the Working Lab.
• Begin accepting electronic application filings from selected participants.
• Reduce pre-examination processing costs and improve quality through the use of automated classification tools.

• Partner with WIPO to achieve electronic filing of PCT applications and, in 2000, electronically receive and process PCT applications at the PTO. In FY 1999, PTO will:

• Evaluate the pilot project of electronic filing of PCT applications.
• Automate PCT operations.
• Begin development of an electronic examination prototype.

Patents will meet its cycle time reduction commitments in the following ways.

During 1998 and 1999, the Patent Business will hire a total of 1,050 patent examiners by:

• Targeting hiring in those technologies with the highest projected growth in application filings - communications, information processing, physics, optics, systems components, and electrical engineering.
• Advertising in targeted technology journals and periodicals.
• Sponsoring and participating in career fairs.
• Offering more competitive starting salaries.
• Partnering with placement offices of colleges and universities.
• Offering recruitment bonuses.

Building a cadre of examining staff with the required competencies by implementing:

• A comprehensive training program that focuses on improving examiner skills that benefit the customer: Legal, Automation, Technology.
• One-on-one coaching and development.
• Team building.
• Partnering with industry in technological information sharing.
• Special training geared to transition the work force to the electronic work environment envisioned for the 21^st century.

Maximizing the aggregate production capacity of the Examining Corps by:

• Increasing overtime in targeted technology units.
• Decreasing the number of office actions thereby reducing first action pendency.
• Increasing direct communication with the customer.
• Streamlining processes.
• Establishing fully-integrated Industry Sectors.

• Patent Image Capturing System (PICS) - will provide timely capture of application images, automatic tracking and routing of patent applications through initial examination, certification, licensing and review functions. Begin deployment in

FY 1999 and complete in FY 2000.

• Application Capture and Review System (ACRS) - maximizes the use of automated tools to accomplish the review and routing of incoming patent applications. Complete deployment in FY 1999.

• Photocomposition, Publishing, Production System (PPP) - provides the functionality necessary to prepare granted patents for hard copy and other media publication, and facilitate the dissemination of electronic patent information in a variety of media (e.g. paper, on-line, CD-ROM). Begin prototype in FY1999. Begin incremental deployment in FY 2001.

• Tools for Electronic Application Management (TEAM) - will receive electronic input from PICS/ACRS, the Electronic Mailroom, and PCT and create the electronic file wrapper. Continue prototype in FY1999. Begin incremental deployment in

FY 2002.

• Automation of Patent Cooperation Treaty (PCT) Operations - will build on previous systems (e.g., PICS) to automate the PCT organization for receipt and processing of electronic applications. Pilot in FY 1999. Begin receipt and processing in FY 2000.

* Includes $13.4 million carried forward from FY 1997 and available to Trademarks in FY 1998. Excluding this amount, the FY 1999 request represents an increase of $8.8 million over FY 1998.

By enhancing Trademark protection, the PTO supports the Department of Commerce Strategy to: Provide effective management and stewardship of our nation's resources and assets to ensure sustainable economic opportunities. Following are the Trademark Business' key goals and commitments:

Reduce trademark processing time to 3 months to first action and 13 months to registration or abandonment. In FY 1999, Trademarks will:

• Reduce pendency to first action to 3.9 months and pendency to registration/abandonment to 15.5 months by increasing Trademark examination staff by 61 FTE

• Implement reengineered processes and transform trademark processing into a fully electronic operation. In FY 1999, Trademarks will:

• Provide an option to file trademark applications electronically.
• Capture application data in electronic form.
• Deploy TRAM replacement.
• Produce Trademark Official Gazette in-house using images in TRAM.
• Replace TRAM dedicated terminals with a personal computer interface.
  • Develop the capability to print registration certificates in-house.
  • Evaluate work-at-home pilot and, if evaluation is favorable, expand to 80 examiners.

Trademark Reporting and Monitoring (TRAM) system - contains bibliographic information for nearly two million applications and registrations. The TRAM replacement system will be operational in early FY 2000 and will resolve century date processing issues.

Trademark Electronic Application System (TEAS) - will support the receipt of all trademark forms electronically via the Internet. The TEAS electronic filing pilot was initiated in 1997. Accept applications over the Internet in FY 1999.

Trademark Information System (TIS) -will electronically process and maintain trademark data (text and image) thereby eventually replacing paper applications. Initiate development activities in late FY 1999.

Trademark Search System (TSS) - The Trademark Business plans to replace the existing aging mainframe text search system with a modern text search product by the end of 1998. The system will expand the systems ability to support a greater number of concurrent users, and provide additional capabilities.

Trademark Work at Home (TWAH) - The Trademark Business deployed its TWAH pilot to 18 trademark attorneys beginning in March 1997. This is a two-year pilot under the National Performance Review. Complete evaluation in FY 1999.

By promoting awareness of, and providing effective access to, patent and trademark information, the PTO supports the Department of Commerce Strategy to: Keep America competitive with cutting-edge science and technology and an unrivaled information base. Following are the Information Dissemination Business's key goals and commitments:

• Develop high quality information products and services which deliver information when, where and in the format needed.

• Promote the use and accessibility of intellectual property information.

• Consistently achieve customer satisfaction by understanding and supporting customer needs.

In FY 1999, the Information Dissemination Business will:

• Enable customers to use the Internet to:

• place orders and receive products, and
• access patent and trademark data when they are in one of 30 Patent and Trademark Depository Libraries.

• Increase customer satisfaction to 90 percent by filling orders accurately and within published time standards.

• Establish two additional regional partnerships

• Complete preliminary designation activities for PTDLs in six metropolitan areas

• Reduce the cost of dissemination over the long-term by investing in current technologies.

• Create products offering a potential increase in information storage equivalent to 21 times current capacity.
• Complete USAPat product backfile using DVD-ROM.
• Automatically provide PTO Call Center customer service representatives with initial customer information.

By helping protect, promote and expand intellectual property rights systems throughout the United States and abroad, the PTO supports the Department of Commerce Strategy: To build for the future and promote U.S. competitiveness in the global marketplace, by strengthening and safeguarding the nation's economic infrastructure. This will be done by:

• Participating in international cooperative arrangements.
  • Cooperating with other government agencies to ensure that intellectual property concerns are adequately addressed.

In fiscal year 1999 PTO will:

• Take a leadership role in the international intellectual property community represented by WIPO to "Wire the World." Wire the World is a PTO-initiated project within WIPO to apply automation technologies for global exchange of industrial property information including international filing and processing of PCT applications. PTO is seeking to have WIPO develop an effective program of activities that will take advantage of the many benefits that information technologies offer in the administration of intellectual property systems.

• Continue to participate at WIPO on the Patent Law Treaty. A Standing Committee on Patent Law meeting under the auspices of the WIPO is developing treaty articles and regulations which will harmonize many of the formal requirements related to patent applications and patents.

• Seek enactment of legislation to implement the Trademark Law Treaty, which requires the harmonization of requirements for acquiring and maintaining a trademark registration in member countries

• Seek enactment of legislation related to the Madrid Protocol, which would permit the owner of a U.S. trademark application or registration to file for registration in any number of member countries by filing a single standardized application, in English, with a single set of fees with the PTO.

• Continue to pursue bilateral and multilateral agreements on the Trademark Mailbox proposal, whereby the date of filing the application in the United States would become the filing date of the application in every "mailbox" designated by the applicant.

• Pursue global electronic commerce by continuing to participate in the Internet Domain Names issue.

• Provide training and technical assistance to developing countries.

Information Technology Infrastructure encompasses all of the hardware, system and database software, communications, and related support services that are integral to all business and corporate operations.

At the PTO, IT infrastructure includes the management of large and continually growing text and image databases, coupled with a requirement to process very large volumes of transactions to support application processing.

PTO is focusing its efforts on merging its current infrastructure to a standards-based open system environment that will allow the addition of new products or infrastructure components or the replacement of existing ones as new technology enter the marketplace.

• Year 2000 Compliance - PTO will assure that its mission critical automated information systems can accommodate the century date change by replacing major components of the information technology infrastructure.

• Increase in Number of Employees - Key components necessary to support an increase of 1,172 employees in FY 1999, such as desktop workstations, office automation, and network access.

• Increased Business Workload - FY 1999 improvements support additional search transactions and office automation workload increases while maintaining reductions in response time.

• Electronic Commerce - Establishment of an electronic mailroom as well as funds transfer and fee receipts under electronic filing.

• Support Business Commitments - Automation development support to meet business goals and objectives.

Provide 99 percent availability for the following systems:

Automated Patent System-Text

Process over 295,000 search transactions per month, on average.

Provide a response time of less than 30 seconds for each transaction.

Classified Search and Information Retrieval (CSIR)

Retrieve over 13.5 million image pages per month, on average.

Provide a response time of less than 1 seconds for all image-page retrievals.

Patent Application Location Monitoring (PALM) System

Process over 3 million PALM transactions per month, on average.

Provide an average response time of 3 seconds for each transaction.

Trademark X-Search

Process over 140,000 million transactions per month, on average.

Provide a average response time of less than 10 seconds for all search requests.

Trademark Reporting and Monitoring (TRAM) System

Process about 1.5 million transactions per month, on average.

Provide an average response time of 3 seconds for each transaction.

Assignments (Information Dissemination)

Process over 95,000 transactions per month, on average.

Provide an average response time of 3 seconds for each transaction.

The General Services Administration, on behalf of the PTO, is seeking to acquire almost two million square feet of space that exhibits design and construction excellence in order to promote a healthy, efficient, flexible and pleasing work environment that results in enhanced worker productivity.

Goals for New Space:

• Provide value to our customers
• Improve efficiency, effectiveness and employee work environment
• Support desired culture change
• Provide flexibility to facilitate organizational change and minimize churn

Two Phase Procurement:

• Phase I, offerors provided basic information about their site.
  • Three in Alexandria City and one in Arlington County

• Phase II, offerors provided an overview of their development plan and detailed information about their site, developer and design team, proposed design and operations and maintenance firms.
  • Submissions currently being reviewed by GSA/PTO team
    • In the Summer of 1998, GSA contracting officer will conduct negotiations,

receive best and final offers, reevaluate proposals and

select the offeror that offers the greatest value to the Government.

Major Milestones:

• Lease award targeted for the first quarter of FY 1999.
• Issuance of first Notice to Proceed (NTP) scheduled for first quarter of FY 1999.
• Phased occupancy of the first block of space anticipated to begin in October 2001.
  • Occupancy expected to be completed in April 2003.

Funding Requirements:

• PTO is responsible for funding "above standard items" which are those elements of initial tenant fit-out (required to prepare space for occupancy).
• Design of all phases of the interior construction at the PTO's consolidated location is scheduled to commence before the end of FY 1999.

• The increase requested for FY 1999 for Space 2000 totals $15,000,000.

Myths and Reality:

• PTO is not contracting for a new $1.3 billion building. It is contracting for a new competitive 20-year lease. It would cost at least $1.3 billion for the PTO to remain where it is for the same 20-year period.

• The "lavish" materials called for in the procurement comply with GSA specifications for similar large projects and are made for reasons of durability and easy maintenance, and common in modern office buildings .

• Two of the three PTO employee unions have already signed a partnership agreement supporting the move; negotiations are ongoing with the third.

• The planned elimination of examiners' paper search files is a result of ongoing automation efforts, not the move.

For FY 1999, the PTO is proposing a rescission of $116 million.

• PTO supports the bipartisan effort to balance the Federal budget.
• The proposed rescission is consistent with the FY 1998 deposit of $92 million for deficit reduction.
• The proposed rescission is based on the assumption that Patent statutory fees will be reset to their current levels in FY 1999.

PTO projects to carry forward to FY 1999 $66 million of fee revenue unavailable for spending. This amount of additional fee revenue is derived from:

• Improved capability to process backlogs.
• Higher fee collections in FY 1998.

PTO expects to collect $50 million of fee revenue above the FY 1999 proposed program level.

• Production geared up to the extent possible for meeting set performance targets.
• Reduced backlogs in fee processing.
• Improved productivity and allowance rate of patents granted results in higher issue and maintenance fees.

• In 1990, OBRA legislation established a surcharge on all patent statutory fees.

• Legislation enacted in December 1991, set base fee amounts for all patent statutory fees that were subject to the surcharge.

• Legislation established specific amounts of surcharge fee income to be deposited into a Surcharge Fund each year.

The patent fee Surcharge is scheduled to expire at the end of FY 1998 and, beginning

October 1, 1998 (absent new legislation), the fee rates will revert to the base fee amount levels as adjusted by CPI since 1992.

• The Administration will submit legislation to reset patent statutory fees to their 1998 level.

• If legislation is not enacted, the PTO projects a loss of $182 million in 1999 as a result of patent statutory fee amounts reverting to their base + CPI level. This is $64 million more than the 1998 surcharge deposit because of:
  • Workload increases
  • Regular fee adjustments for inflation (CPI).