This is the accessible text file for GAO report number GAO-05-336 
entitled 'Intellectual Property: Key Processes for Managing Patent 
Automation Strategy Need Strengthening' which was released on June 17, 
2005. 

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Report to Congressional Committees: 

June 2005: 

Intellectual Property: 

Key Processes for Managing Patent Automation Strategy Need 
Strengthening: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-336]: 

GAO Highlights: 

Highlights of GAO-05-336, a report to congressional committees: 

Why GAO Did This Study: 

The volume and complexity of patent applications to the U.S. Patent and 
Trademark Office (USPTO) have increased significantly in recent years, 
lengthening the time needed to process patents. Annual applications 
have grown from about 185,000 to over 350,000 in the last 10 years and 
are projected to exceed 450,000 by 2009 (see figure). Coupled with this 
growth is a backlog of about 750,000 applications. 

USPTO has long recognized the need to automate its patent processing 
and, over the past two decades, has been engaged in various automation 
projects. Accordingly, GAO was asked to, among other things, assess 
progress to date and any problems facing USPTO as it develops the 
capability to efficiently handle patent information electronically. 

What GAO Found: 

As part of its strategy to achieve a paperless, electronic patent 
process, USPTO had planned to deliver an operational patent system by 
October 2004. It has been able to deliver important capabilities, such 
as allowing patent applicants to electronically file and view the 
status of their patent applications and the public to search published 
patents. Nonetheless, after spending over $1 billion on its efforts 
from 1983 through 2004, the agency’s existing automation has not 
provided the fully integrated, electronic patent process articulated in 
its automation plans, and when and how this process will be achieved is 
uncertain. Key systems that USPTO is relying on to help reach this 
goal—an electronic application filing system and a document imaging 
system—have not provided capabilities that are essential to operating 
in a fully electronic environment. Contributing to this situation is 
that the agency took an ad hoc approach to planning and managing its 
implementation of these systems, in which it lacked effective analysis 
of system requirements, alternatives, and costs; made acquisition 
decisions based on management judgment; and acquired software that did 
not meet its needs. 

USPTO’s ineffective planning and management of its patent automation 
initiatives, in large measure, can be attributed to enterprise-level, 
systemic weaknesses in its information technology investment management 
processes. Although the agency had begun instituting essential 
investment management mechanisms, such as its enterprise architecture 
framework, it had not yet finalized its capital planning and investment 
control process nor established necessary linkages between the process 
and its architecture to guide the development and implementation of its 
information technology. The Under Secretary of Commerce for 
Intellectual Property and USPTO’s chief information officer 
acknowledged the need for improvement, but specific plans for resolving 
problems have not yet been developed. 

Actual and Projected Patent Applications, Fiscal Years 1994–2009: 

[See PDF for image]

[End of figure]

What GAO Recommends: 

To better position USPTO to improve its patent process through the use 
of automation, GAO is making recommendations to the Secretary of 
Commerce that address the agency’s management of its patent automation 
strategy and related information technology investments. In commenting 
on this report, USPTO generally agreed with our findings, conclusions, 
and recommendations. However, the agency only partially agreed with 
several material aspects of our assessment. 

www.gao.gov/cgi-bin/getrpt?GAO-05-336. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Linda Koontz at (202) 512-
6240 or koontzl@gao.gov. 

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

USPTO Continues to Pursue a Fully Automated Patent Process, but Is Not 
Effectively Managing Its Strategy for Achieving This Capability: 

USPTO's Patent Automation Is Not Supported by Essential Information 
Technology Investment Management Processes: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the U.S. Patent and Trademark Office: 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Figures: 

Figure 1: USPTO Actual and Projected Patent Applications, Fiscal Years 
1994-2009: 

Figure 2: USPTO's Patent Process: 

Figure 3: USPTO's Patent Automation Progress: 

Abbreviations: 

APS: Automated Patent System: 

OCIO: Office of Chief Information Officer: 

OCR: optical character recognition: 

PDF: portable document format: 

SIRA: Search and Information Resources Administration: 

TEAM: Tools for Electronic Application Management: 

USPTO: United States Patent and Trademark Office: 

Letter June 17, 2005: 

The Honorable Frank R. Wolf: 
Chairman: 
Subcommittee on Science, the Departments of State, Justice, and 
Commerce, and Related Agencies: 
Committee on Appropriations: 
House of Representatives: 

The Honorable F. James Sensenbrenner, Jr.: 
Chairman: 
Committee on the Judiciary: 
House of Representatives: 

The United States Patent and Trademark Office (USPTO) helps to promote 
industrial and technological progress in the United States and to 
strengthen the national economy by administering the laws relating to 
patents and trademarks. A critical part of the agency's mission is to 
examine patent applications and issue patents. However, the rapid 
growth in both the volume and complexity of applications to USPTO has 
lengthened the time necessary to process patents and raised concerns 
about the quality of the patents that are issued. The number of patent 
applications filed annually has increased 91 percent over the last 10 
years, from about 185,000 in 1994 to over 350,000 in 2004. Coupled with 
this growing workload is a 28-month backlog of approximately 750,000 
applications. 

USPTO has long recognized the need to improve its patent processing 
capability and, for the past two decades, has engaged in various 
efforts to automate its patent process. In light of the agency's 
actions, at your request, this report describes USPTO's strategy for 
automating its patent process and assesses its progress and any 
problems faced in developing and using electronic information and 
systems to achieve this capability. We plan to issue a separate report 
that will address the agency's progress in achieving its strategic 
milestones and maintaining a qualified workforce.[Footnote 1]

To accomplish this objective, we reviewed USPTO's current and selected 
past initiatives to develop and implement automated patent processing 
capabilities. We analyzed programmatic and technical documentation 
describing the agency's patent process, current electronic processing 
capabilities, and plans for future automation. We also evaluated 
available project management documentation, such as project plans, time 
lines, and status reports, to determine its progress in implementing a 
fully automated patent process. In addition, we assessed the agency's 
consideration of key information technology investment management 
processes and practices in planning and managing the patent automation 
initiatives. Further, we reviewed agency information on the cost of its 
automation efforts; however, we did not verify the accuracy of the cost 
data. To supplement our analysis, we interviewed senior patent 
officials, including the Deputy Commissioner for Patent Resources 
Planning and the USPTO chief information officer and, as part of a 
series of focus groups, selected patent examiners regarding the 
implementation and use of the systems supporting USPTO's patent 
process. We also discussed the patent automation efforts with the Under 
Secretary of Commerce for Intellectual Property (who serves as the 
director of USPTO). We conducted our study from June 2004 through April 
2005 in accordance with generally accepted government auditing 
standards. Appendix I contains a detailed discussion of the scope and 
methodology of our review. 

Results in Brief: 

USPTO is pursuing a long-standing strategy to implement a paperless, 
electronic patent process, with the goal of replacing the manual 
processing of applications with capabilities for electronically 
researching patent information and viewing and manipulating application 
text throughout all processing phases. To achieve this electronic 
process, the agency plans to integrate its existing systems that enable 
capabilities such as electronic filing of applications with new 
document imaging and text processing and sophisticated document 
management and workflow capabilities. As part of its 21st Century 
Strategic Plan, issued in 2002, the agency announced an acceleration of 
its goal of delivering an operational system to electronically process 
patents--from fiscal year 2006 to October 1, 2004. 

USPTO has made progress in delivering functionality through information 
systems that it has implemented, such as electronic filing and patent 
application classification and search, as well as Internet access for 
patent applicants and the public, respectively, to view the status of 
their applications and to search existing published patents. 
Nonetheless, collectively, these automated functions have not provided 
the fully integrated end-to-end patent processing capability 
articulated in USPTO's automation plans. Two of the primary systems 
that the agency is relying on to enhance its capabilities--its 
electronic filing system and a document imaging system that it acquired 
from the European Patent Office called Image File Wrapper--have not 
yielded processing improvements that the agency had deemed essential to 
operate successfully in an electronic environment. Specifically, patent 
filers have stated that the electronic filing system is cumbersome, 
time-consuming, and costly, and does not meet their business and 
technical needs; thus, fewer than 2 percent of all patent applications 
are submitted to USPTO electronically. In addition, the Image File 
Wrapper has experienced performance problems and, according to patent 
officials, has not provided many of the capabilities deemed essential 
to eliminating manual actions and improving worker productivity. 
Contributing to this situation is that the agency took an ad hoc 
approach to planning and managing its implementation of these systems. 
Information technology best practices emphasize the need for agencies 
to undertake projects in a disciplined manner based on well-established 
business cases that articulate agreed-upon business and technical 
requirements; include analyses of project alternatives, costs, and 
benefits; and include measures for tracking project costs, schedules, 
and performance through their life cycle. However, patent officials did 
not rely on such critical measures to guide their implementation of 
these key initiatives. 

USPTO's ineffective planning and management of its patent automation 
projects, in large measure, can be attributed to enterprise-level, 
systemic weaknesses in the agency's overall information technology 
investment management processes. A key premise of the Clinger-Cohen Act 
of 1996[Footnote 2] is that agencies should have established processes, 
such as capital planning and investment controls, to help ensure that 
information technology projects are implemented at acceptable costs and 
within reasonable and expected time frames, and contribute to tangible, 
observable improvements in mission performance. In addition, as our 
Enterprise Architecture Framework[Footnote 3] stresses, information 
technology projects should show evidence of compliance with the 
organization's architecture. Although USPTO had begun instituting 
certain essential information technology investment management 
mechanisms, it had not yet finalized its capital planning and 
investment control process nor established necessary linkages between 
the process and its enterprise architecture to ensure that projects 
will comply with the architecture. Further, a study commissioned by the 
agency in 2004 found that its Office of Chief Information Officer was 
not organized to help accomplish the automation goals set forth in its 
strategic plan and that the agency's investment management processes 
did not ensure appropriate reviews of automation initiatives. As a 
result, USPTO had not rigorously assessed its patent systems' 
compliance with the enterprise architecture, and it lacked reliable 
experience-based data to consistently demonstrate the costs and 
benefits of its systems. 

In light of the problems that USPTO has encountered with its existing 
capabilities, we are recommending that the agency, before proceeding 
with any new patent automation initiatives, (1) reassess, and, where 
necessary, revise its approach for implementing and achieving effective 
uses of information systems supporting a fully automated patent 
process; (2) establish disciplined processes for planning and managing 
the development of patent systems based on well-established business 
cases; and (3) fully institute and enforce information technology 
investment management processes and practices to ensure that its 
automation initiatives support the agency's mission and are aligned 
with its enterprise architecture. 

In its written comments on a draft of our report (reprinted in app. 
II), USPTO generally agreed with our findings, conclusions, and 
recommendations. The agency acknowledged weaknesses in its processes 
used to manage patent automation and agreed with the need for key 
improvements, such as (1) developing architectural linkages to the 
planning process, (2) implementing a capital planning and investment 
control guide, and (3) completing planned organizational changes. 
Nonetheless, the agency stated that it only partially agreed with 
several material aspects of our assessment. For example, the agency 
pointed to our awareness of it having initiated a review of the 
architectural linkages to its investments and key decision-making 
processes. However, during our study, agency officials did not inform 
us of any specific actions that had been taken in this regard. As the 
agency moves forward with actions to improve its patent automation, 
having firmly established and enforced investment management practices 
will be essential to achieving more effective use of its information 
technology. 

Background: 

A patent is a property right granted by the U.S. government to an 
inventor who secures, generally for 20 years from the date of initial 
application in the United States, his or her exclusive right to make, 
use, offer for sale, or sell the invention in exchange for disclosing 
it.[Footnote 4] As indicated in figure 1, the number of patent filings 
to USPTO continues to grow and, by 2009, the agency is projecting 
receipt of over 450,000 patent applications annually. 

Figure 1: USPTO Actual and Projected Patent Applications, Fiscal Years 
1994-2009: 

[See PDF for image] 

[End of figure] 

USPTO has repeatedly cited the growing workload of patent applications 
and the difficulty in managing the volumes of paper associated with 
patent processing as impediments to carrying out its mission. 

Patent processing essentially involves three phases: pre-examination, 
examination, and post-examination. The process begins when an applicant 
files a patent application and pays a filing fee. As part of the pre- 
examination phase, USPTO staff document receipt of the application and 
process the application fee, scan and convert the paper documents to 
electronic format, and conduct an initial review of the application and 
classify it by subject matter. During the subsequent examination phase, 
the application is assigned to a patent examiner with expertise in the 
subject area,[Footnote 5] who searches existing U.S. and foreign 
patents, journals, and other literature (called "prior art") and 
sometimes contacts the applicant to resolve questions and obtain 
additional information to determine whether the proposed invention can 
be patented.[Footnote 6] Examiners document their determinations on the 
applications in formal correspondence, referred to as office actions. 
Applicants may abandon their applications at any time during this 
process. After the examiner has determined that a patent is warranted, 
a supervisor reviews and approves the determination and the applicant 
is informed of the outcome. The application then enters the post- 
examination phase. Upon payment of an "issue fee," a patent is granted 
and published. To keep the patent active, the patentee must pay 
maintenance fees at 3.5 years, 7.5 years, and 11.5 years. Historically, 
the time from the date that a patent application is filed to the date 
that the patent is either granted or the application is abandoned has 
been called "patent pendency." Figure 2 summarizes USPTO's patent 
process. 

Figure 2: USPTO's Patent Process: 

[See PDF for image] 

[End of figure] 

In 1999, Congress gave USPTO broad responsibility for managing its 
operations and controlling its budget allocations and expenditures, 
personnel decisions and processes, procurement, and information 
technology operations.[Footnote 7] USPTO's Search and Information 
Resources Administration (SIRA) within the Office of Patent Resources 
Planning, along with its Office of Chief Information Officer (OCIO), 
are responsible for ensuring that the agency's goal of providing an 
automated patent process is met. SIRA is responsible for identifying 
patent processing business needs, ensuring that the systems developed 
meet those needs, and providing program resources. OCIO determines how 
best to use information technology to fulfill the identified business 
needs and is responsible for the acquisition, development, and 
integration of the information systems. 

Because of long-standing concerns about the increasing volume and 
complexity of patent applications, USPTO has been undertaking projects 
to automate its patent process for about the past two decades. One of 
the agency's most substantial undertakings was the Automated Patent 
System (APS)--a project begun in 1983 with the intent of automating all 
aspects of the paper-intensive patent process. With this system, USPTO 
anticipated significant improvements in patent quality and 
productivity. APS was to be deployed in 1990, maintained through 2002, 
and, when completed, consist of five integrated subsystems that would 
(1) fully automate incoming patent applications; (2) allow examiners to 
electronically search the text of granted U.S. patents and access 
selected abstracts of foreign patents; (3) scan and allow examiners to 
retrieve, display, and print images of U.S. patents; (4) help examiners 
classify patents; and (5) support on-demand printing of copies of 
patents. 

In reporting on APS more than 10 years following its inception, we 
noted that USPTO had deployed and was operating and maintaining certain 
parts of the system, supporting text search, limited document imaging, 
order-entry and patent printing, and classification 
activities.[Footnote 8] However, it had not yet developed the system 
that was expected to fully automate incoming applications and the 
management of these applications as they moved through USPTO, and the 
estimated date for full deployment of APS had been delayed 7 years, to 
1997. 

Our report raised concerns about USPTO's ability to adequately plan and 
manage this major project, pointing out that the agency's processes for 
exercising effective management control over APS were weak. We noted 
that the agency lacked reliable, experience-based data to show that 
patent quality had improved and expected benefits were being achieved 
and its officials were relying on management judgment alone in setting 
APS development and deployment priorities. In light of these concerns, 
we recommended to the Secretary of Commerce that USPTO establish a 
process for identifying and measuring expected benefits to users of the 
system, implement a systematic and repeatable process for estimating 
the system's costs, and monitor progress against baselines. USPTO 
agreed with the need for such measures. 

Through 2002, the agency continued to enhance its capabilities enabling 
examiners to search patent images and text, and upgraded its patent 
application classification and tracking systems.[Footnote 9] It also 
began providing electronic bibliographic information from patents to 
the public. Nonetheless, USPTO never fully developed and deployed APS 
to achieve the integrated, end-to-end patent processing system that it 
envisioned. The agency reported spending approximately $1 billion on 
the initiative from 1983 through 2002.[Footnote 10]

In 1998, the agency added to its automated capability by implementing 
an Internet-based electronic filing system, enabling applicants to 
submit their applications online. It further enhanced the electronic 
filing system in 2002, and again in 2004. USPTO reported spending a 
total of $10 million for this system. 

USPTO Continues to Pursue a Fully Automated Patent Process, but Is Not 
Effectively Managing Its Strategy for Achieving This Capability: 

Recognizing that growth in the number and complexity of patent 
applications has outpaced its ability to meet demands and effectively 
manage its workload in a paper-based environment, USPTO has continued 
to pursue a strategic agenda emphasizing paperless, end-to-end, 
automated patent processing, as was its intent with APS. However, while 
progress has been made, the agency has not yet achieved a fully 
electronic patent processing capability. Key systems that USPTO is 
relying on to help achieve this capability have not yielded essential 
processing improvements, in part resulting from the agency's ad hoc 
approach to planning and managing their implementation. Contributing to 
this situation is that USPTO has not yet fully instituted disciplined 
processes and practices for managing its information technology 
investments. 

USPTO's Strategy Called for a Fully Electronic Patent Process: 

As part of its automation strategy, USPTO planned to develop and 
integrate multiple systems that are intended to move all of its 
critical patent processing components to an electronic business 
environment. To support this strategy, in 2001, the agency undertook 
its Tools for Electronic Application Management (TEAM) automation 
project with the intent of delivering an end-to-end capability to 
process patent applications electronically by fiscal year 2006. TEAM 
was to support the entire patent application process in electronic 
mode, beginning with the filing of an application and proceeding 
through pre-examination, examination, and post-examination to 
electronic records archiving. 

Under the TEAM concept, the agency had planned to integrate its 
existing electronic filing system and the classification and search 
capabilities from the earlier APS project with new document management 
and workflow capabilities, and with image-and text-based 
processing[Footnote 11] of patent applications to achieve a 
sophisticated means of handling documents and tracking patent 
applications throughout the examination process. By implementing image- 
and text-based capabilities, USPTO had anticipated that patent 
examiners would be able to view and process applications online, as 
well as manipulate and annotate text within a patent application, thus 
eliminating manual functions and improving processing accuracy, 
reliability, and productivity, as well as the quality of the patents 
that are granted. 

In 2002, USPTO altered its approach to accomplishing the patent 
automation with the issuance of its 21st Century Strategic 
Plan.[Footnote 12] Developed partly in response to a recognized need to 
improve patent quality, aggressively implement electronic 
government,[Footnote 13] and reduce the number of patent applications 
pending at any one time, the strategic plan identified, among other 
factors, the agency's high-level information technology goals for fully 
automating the patent process as part of an aggressive 5-year 
modernization effort. The plan incorporated the automation concepts 
from the TEAM project, but announced an accelerated goal of delivering 
an operational system to electronically process patent applications 
earlier than had been scheduled under TEAM--by October 1, 2004. 

Progress Made, but Ad Hoc Implementation of Key Systems Has Prevented 
Achieving Full Electronic Processing of Patent Applications: 

In carrying out its patent automation plans, USPTO has made progress 
toward delivering important processing capabilities through the various 
information systems that it has implemented. For example, an automated 
search capability, available since 1986, has eliminated the need for 
patent examiners to manually search for prior art in paper files, and 
the classification and fee accounting capabilities have helped with 
assigning applications to the correct subject areas and with managing 
collections of applicable fees. In addition, using the electronic 
filing system that has existed since 1998, applicants can file their 
applications with the agency via the Internet. Also, using the 
Internet, patent applicants can review the status of their applications 
online and the public can electronically access and search existing 
published patents. Further, as a result of an imaging system 
implemented in August 2004, known as the Image File Wrapper, USPTO 
currently has the capability to scan patent applications and related 
documents, which can then be stored in a database and retrieved and 
reviewed online. Figure 3 illustrates the agency's progress in 
implementing its automated patent functions. 

Figure 3: USPTO's Patent Automation Progress: 

[See PDF for image] 

[End of figure] 

Nonetheless, even with the progress that has been made, collectively, 
USPTO's automated functions have fallen short of providing the fully 
integrated, electronic patent processing capability articulated in the 
agency's automation plans. Two of the key systems that it is relying on 
to further enhance its capabilities--the electronic filing system and 
the Image File Wrapper--have not yielded the processing improvements 
that the agency has deemed essential to successfully operate in a fully 
integrated, electronic environment. 

Specifically, in implementing its electronic filing system in 1998, 
USPTO had projected significant increases in processing efficiencies 
and quality by providing patent applicants the capability to file 
online, thus alleviating the need for them to send paper applications 
to the agency or for patent office staff to manually key application 
data into the various processing systems. However, even after 
enhancements in 2002 and 2004, the electronic filing system has not 
produced the level of usage among patent filers that the agency had 
anticipated. While USPTO's preliminary justification for acquiring the 
electronic filing system had projected an estimated usage rate of 30 
percent in fiscal year 2004, patent officials reported that, as of 
April 2005, fewer than 2 percent of all patent applications were being 
submitted to the agency via this system. As a result, anticipated 
processing efficiencies and quality improvements through eliminating 
the manual re-keying of application data have not yet been realized. 

In September 2004, USPTO convened a forum of senior officials 
representing the largest U.S. corporate and patent law firm filers to 
identify causes of patent applicants' dissatisfaction with the 
electronic filing system and determine how to increase the number of 
patents being filed electronically. According to the report resulting 
from this forum, the majority of participants viewed the system as 
cumbersome, time-consuming, costly, inherently risky, and lacking a 
business case to justify its usage. Specifically, among the barriers to 
system usage that the participants identified were (1) users' lack of a 
perceived benefit from filing applications electronically, (2) 
liability concerns associated with filers' unsuccessful use of the 
system or unsuccessful transmission of patent applications to USPTO, 
and (3) significant disruptions to filers' normal office/corporate 
processes and workflow caused by factors such as difficulty in using 
the automated tools and the inability to download necessary software 
through firewalls. 

Further, forum participants identified features that they considered 
critical to increasing their use of the electronic filing system. These 
included implementing a more user-friendly system supported by Web- 
based processes; introducing a system that accepts portable document 
format (PDF) files;[Footnote 14] and enabling electronic filing of all 
documents, versus requiring paper filings of certain parts of the 
application, as is necessary with the current system. As incentives to 
increasing system usage, the participants suggested, among other 
strategies, that USPTO make electronic filings of applications a 
priority over paper filings, reduce the fee for electronic filings, and 
confirm the date on which the agency receives electronic applications. 

Several concerns raised during the forum mirrored those that USPTO had 
earlier identified in a 1997 analysis of a prototype for electronic 
filing. However, as of April 2005, the agency had not yet completed 
plans to show how they would address the concerns regarding use of the 
electronic filing system. 

Beyond electronic filing, the Image File Wrapper also has not resulted 
in critical patent processing improvements. Patent officials explained 
that, to meet the accelerated date for delivering an operational system 
as outlined in the strategic plan, the agency had decided in 2002 to 
acquire and use a document-imaging system owned by the European Patent 
Office, called ePhoenix, rather than develop the integrated patent 
processing system that had been described in the agency's automation 
plans. The officials stated that the director, at that time, had 
considered ePhoenix to be the most appropriate solution for further 
implementing USPTO's electronic patent processing capabilities given 
(1) pressures from Congress and from customers and stakeholders to 
implement an electronic patent processing system more quickly than 
originally planned and (2) the agency's impending move to its new 
facility in Alexandria, Virginia, which did not include provisions for 
transferring and storing paper patent applications.[Footnote 15]

Accordingly, in November 2002, patent officials had signed a memorandum 
of agreement with the European Patent Office, in which that office 
agreed to provide USPTO with a license to use its patent processing 
software and to provide technical assistance in customizing the 
software to meet USPTO's needs. In turn, USPTO agreed to reimburse the 
European Patent Office for the cost of modifying the software. It began 
deploying the system--which it renamed Image File Wrapper--in July 2003 
and completed implementation in August 2004, at a reported total cost 
of approximately $14 million.[Footnote 16]

The system includes image technology for storage and maintenance of 
records associated with patent applications and currently provides the 
capability to scan each page of a submitted paper application and 
convert the pages into electronic images. According to comments made by 
patent examiners in a majority of the focus groups that we conducted, 
the system has provided them with the ability to easily access patent 
applications and related information. In addition, patent officials 
stated that the system has enabled multiple users to simultaneously 
access patent applications. 

However, patent officials acknowledged that the system has experienced 
performance and usability problems. Specifically, in speaking about the 
system's performance, patent officials and agency documentation stated 
that, after its implementation, the Image File Wrapper had been 
unavailable for extended periods of time or had experienced slow 
response times, resulting in decreased productivity. In commenting on 
this matter, the USPTO director stated that the system's performance 
has improved over the last 6 months. Further, in discussing the 
system's performance, OCIO and patent officials acknowledged this 
system problem, and told us that they had recently taken measures to 
alleviate its impact by, for example, developing a backup tool, which 
can store images of an examiner's most recent applications so that the 
applications can be accessed when the examiner cannot use the Image 
File Wrapper. However, given the recent (February 2005) implementation 
of this tool, the officials were not able to show any quantitative 
benefits from its use. 

Regarding the usability of the system, patent officials and focus group 
results indicated that the Image File Wrapper does not fully meet 
processing needs. Specifically, the officials stated that, as an image- 
based system, the Image File Wrapper does not fully enable patent 
examiners to electronically search, manipulate, or track and log 
changes to application text, which are key processing features 
emphasized in the agency's automation plans. The agency's documentation 
also indicated that patent examiners have to print images to paper to 
perform certain functions such as signing their names to office 
actions. The examiners commented that a limited capability to convert 
images to text, which was intended to assist them in copying and 
reusing information contained in patent files, is error-prone, 
contributing to their need to download and print the applications for 
review. In addition, examiners in the focus groups expressed concerns 
about the Image File Wrapper's capability to manage their workload and 
route documents to and from examiners, noting that these capabilities 
are confusing and difficult to use. Further, because the office's 
legacy systems are not integrated with the Image File Wrapper, 
examiners are required to manually print correspondence from these 
systems, which then must be scanned into the Image File Wrapper in 
order to be included as part of an applicant's electronic file. 

Patent and OCIO officials largely attributed the system's performance 
and usability problems to the agency's use of the software that it 
acquired from the European Patent Office. They indicated that the 
original design of the ePhoenix system had not been compatible with 
USPTO's technical platform for electronic patent processing. 
Specifically, they stated that the European Patent Office had designed 
the system to support only the printing of files for subsequent manual 
reviews, rather than for electronic review and processing. The 
officials also stated that the system had not been designed for 
integration with other legacy systems or to incorporate additional 
capabilities, such as text processing, with the existing imaging 
capability. Further, an official of the European Patent Office noted 
that ePhoenix had supported their office's much smaller volume of 
patent applications.[Footnote 17] Thus, with USPTO's patent application 
workload being approximately twice as large as that of its European 
counterpart, the agency placed greater stress on the system than it was 
originally designed to accommodate. OCIO officials overseeing the Image 
File Wrapper told us that, although they had tested certain aspects of 
the system's capability, many of the problems encountered in using the 
system were not revealed until after the system was deployed and 
operational. 

The European Patent Office official serving as liaison to USPTO 
identified similar technical problems with the Image File Wrapper. The 
official acknowledged that the version of the ePhoenix software that 
USPTO had acquired did not provide some of the capabilities that the 
agency wanted, such as text processing. He added that the European 
Patent Office was developing a newer version of the software that would 
include text-and image-based processing capabilities. At the time of 
our discussion, the official said that USPTO officials had not informed 
them of their plans to use the newer version of the software. 

Patent and OCIO officials acknowledged the problems with the Image File 
Wrapper and that the agency had acquired ePhoenix, although senior 
officials were aware that the original design of the system had not 
been compatible with USPTO's technological platform for electronic 
patent processing. They stated that, despite knowing about the many 
problems and risks associated with using the software, the agency had 
nonetheless proceeded with this initiative because senior officials, 
including the former USPTO director, had stressed their preference for 
using ePhoenix in order to expedite the implementation of a system. The 
officials also acknowledged that management judgment, rather than a 
rigorous analysis of costs, benefits, and alternatives, had driven the 
agency's decision to use the system. 

In January 2005, patent officials told us that, given the performance 
and usability problems, they planned to begin replacing the Image File 
Wrapper in September 2005 with a system that would provide the 
capabilities, including text-and image-based processing, that were 
outlined in the agency's automation plans. Preliminary information that 
the agency provided about the replacement system indicated that it 
would cost approximately $56 million over 6 years, and would not 
include continued use of the European Patent Office's software. 
However, while having made this determination about a new system, the 
agency had not developed a supporting business case--based on 
requirements, cost/benefit, and alternatives analyses--to justify this 
particular acquisition, or a project plan to guide the system's 
implementation. Thus, it is difficult to gauge the soundness of this 
planned investment or how it will enable USPTO to accomplish its 
automation plans. In response to our concerns about the lack of project 
documentation to support the planning and management of this 
initiative, the officials stated that they would reconsider their 
approach to planning and carrying out this project. 

USPTO's difficulty in realizing intended improvements through its 
electronic filing system and Image File Wrapper can largely be 
attributed to the fact that the agency has taken an ad hoc approach to 
planning and managing its implementation of these systems, driven in 
part by its accelerated schedule for implementing an automated patent 
processing capability. The Clinger-Cohen Act, as well as information 
technology best practices and our prior reviews, emphasize the need for 
agencies to undertake information technology projects in a disciplined 
manner, based on well-established business cases that articulate agreed-
upon business and technical requirements; effectively analyze project 
alternatives, costs, and benefits; include measures for tracking 
projects through their life cycle against cost, schedule, benefit, and 
performance targets; and ultimately, provide the basis for credible and 
informed decision making and project management. Yet, patent officials 
did not rely on established business cases to guide their 
implementation of these key automation initiatives. 

With its ad hoc approach to implementing the electronic filing system 
and the Image File Wrapper, USPTO has continued a practice of 
ineffective project management that characterized its implementation of 
APS of two decades ago. The absence of sound project planning and 
management for these initiatives has left the agency without critical 
capabilities, such as text processing, and consequently, impeded its 
successful transition to an integrated and paperless patent processing 
environment. By continuing to implement information systems in this 
manner, USPTO undermines the intent of its patent automation strategy 
and jeopardizes its credibility regarding improving the efficiency of 
the patent process. At the conclusion of our review, the Under 
Secretary of Commerce for Intellectual Property, who also serves as the 
director of USPTO, stated that he recognized and intended to implement 
measures to address the weaknesses in the agency's planning and 
management of its automated patent systems. 

USPTO's Patent Automation Is Not Supported by Essential Information 
Technology Investment Management Processes: 

USPTO's ineffective planning and management for its patent automation 
projects, in large measure, can be attributed to enterprise-level, 
systemic weaknesses in the agency's information technology investment 
management processes. A key premise of the Clinger-Cohen Act is that 
agencies have established processes, such as capital planning and 
investment control, to help ensure that information technology projects 
are implemented at acceptable costs and within reasonable and expected 
time frames, and contribute to tangible, observable improvements in 
mission performance. Such processes guide the selection, management, 
and evaluation of information technology investments by aiding 
management in considering whether to undertake a particular investment 
in information systems and providing a means to obtain necessary 
information regarding the progress of an investment in terms of cost, 
capability of the system to meet specified requirements, timeliness, 
and quality. 

Further, as emphasized in our Enterprise Architecture Framework, 
information technology projects should show evidence of compliance with 
the organization's enterprise architecture, which serves as a blueprint 
for systematically and completely defining an organization's current 
(baseline) operational and technology environment and as a roadmap 
toward the desired (target) state. Effective implementation of an 
enterprise architecture can facilitate an agency by serving to inform, 
guide, and constrain the decisions being made for the agency, and 
subsequently decrease the risk of buying and building systems that are 
duplicative, incompatible, and unnecessarily costly to maintain and 
interface. 

At the time of our study, USPTO had begun instituting certain essential 
information technology investment management mechanisms, such as a 
framework for its enterprise architecture and components of a capital 
planning and investment control process. However, it had not yet 
established the necessary linkages between its enterprise architecture 
and its capital planning and investment control process to ensure that 
its automation projects will comply with the architecture or fully 
instituted enforcement mechanisms for investment management. For 
example, USPTO drafted a capital planning and investment control guide 
in June 2004 and issued an agency administrative order requiring unit 
heads to use the guide in February 2005. However, according to senior 
agency officials, many of the processes and procedures in the guide had 
not been completed and fully implemented. In addition, while the agency 
had completed the framework for its enterprise architecture, it had not 
aligned its business processes and information technology in accordance 
with the architecture. Also, according to OCIO officials, the 
architecture review board responsible for enforcing compliance with the 
architecture was not yet in place; thus, current architecture reviews 
are only of an advisory nature and are not required for system 
implementation. Our analysis of architecture review documents that 
system officials provided for the electronic filing system and Image 
File Wrapper confirmed that the agency had not rigorously assessed 
either of these systems' compliance with the enterprise architecture. 

Beyond these concerns, USPTO lacked reliable, experienced-based data 
and a process for consistently demonstrating that expected benefits of 
the systems are being achieved. As noted in our prior work, key system 
development decisions should be based on reliable data showing that 
resource investments will produce commensurate value, and as systems 
are developed, expected benefits and estimated costs should be 
periodically validated through actual experience. Although patent 
officials asserted that processing improvements had resulted from the 
automation that had been implemented, they acknowledged that the agency 
had not established performance metrics to aid in measuring the impact 
of the automation or validated actual experiences against established 
baselines. Rather, patent officials told us, they had based their 
accounts of performance improvement, such as reductions in the number 
of lost or destroyed paper patent applications as a result of the Image 
File Wrapper, largely on ad hoc occurrences and/or feedback from patent 
examiners and clerical and administrative staff. As a result, the 
agency lacked a basis for substantiating benefits from its automation 
efforts. 

In addition, USPTO lacked reliable cost data for the patent automation 
initiatives due to weaknesses in the agency's processes for tracking 
and reporting project expenses. Our guide on agencies' information 
technology investment decision-making stresses the need for reliable 
and current project cost data to aid management in making critical 
investment decisions.[Footnote 18] While the agency had systems in 
place to track the costs of specific tasks, particularly those assigned 
to its contractors, it did not have an effective means of providing 
aggregate cost information for its overall patent automation effort. 
Patent officials stated that they faced difficulties in accessing and 
providing comprehensive cost information for the patent systems because 
the agency had modified its approach to capturing and reporting cost 
information, along with the information systems containing this 
information. The difficulty that USPTO management faced in providing 
comprehensive information on its patent automation costs could 
compromise the agency's ability to provide a credible accounting for 
its investments and make informed management decisions about them. 

Adding to these conditions, a study commissioned by USPTO's senior 
management in 2004 found that OCIO was not organized to help USPTO 
achieve its mission or accomplish the goals set out in its automation 
strategy.[Footnote 19] The study, undertaken by an independent 
contractor, noted that the agency's investment management processes did 
not ensure appropriate reviews of automation initiatives and that the 
chief information officer's organization lacked sufficient credibility 
with its business units to ensure an effective partnership. During our 
review, USPTO's director made changes in key leadership positions 
within OCIO and the Patent Resources and Planning Office, which he 
considered essential to defining and implementing the patent automation 
strategy and bringing stability to the agency's operations. However, 
officials had not yet begun to improve the investment management 
processes to ensure appropriate reviews of the agency's automation 
initiatives. 

USPTO has an explicit responsibility for ensuring that the automation 
initiatives that it is counting on to enhance its overall patent 
process are consistent with the agency's priorities and needs and are 
supported by the necessary planning and management to ensure that they 
are successfully accomplished. USPTO's 21st Century Strategic Plan was 
intended to help the agency accomplish a smooth transition to 
performance-based operations, and having firmly established and 
enforced investment management practices will be crucial to achieving 
this. At the conclusion of our review, USPTO's director and the new 
chief information officer, appointed in February 2005, told us that 
they were aware of organizational and management weaknesses within OCIO 
and acknowledged the need to strengthen the agency's investment 
management processes and practices and effectively apply them to 
USPTO's patent automation initiatives. 

Conclusions: 

USPTO has been attempting to implement an integrated, paperless patent 
process for about two decades and, in the process, has delivered 
important automated capabilities. Nonetheless, after spending over a 
billion dollars on its efforts, the agency is still not yet effectively 
positioned to process patent applications in a fully automated 
environment; moreover, when and how it will actually achieve this 
capability remains uncertain. System performance and usability 
problems, resulting largely from ineffective planning and management of 
its automated capabilities, have limited the effectiveness of key 
systems that the agency has implemented to support critical patent 
processes. USPTO's director and new chief information officer have 
recognized the need to improve the agency's planning and management of 
its automation initiatives. However, weaknesses in key information 
technology management processes needed to guide the agency's 
investments in patent automation, such as incomplete capital planning 
and investment controls and a lack of reliable cost data, could 
preclude its ability to successfully accomplish this. Under such 
circumstances, USPTO risks continuing to implement information 
technology that does not support the agency's needs, and that threatens 
its overall goal of achieving a fully electronic capability to process 
its growing patent application workload. 

Recommendations for Executive Action: 

To more effectively position USPTO to achieve key patent processing 
improvements through the use of information technology, we recommend 
that the Secretary of Commerce direct the Under Secretary of Commerce 
for Intellectual Property to take the following actions before 
proceeding with any new patent automation initiatives: 

* reassess, and where necessary, revise the approach for implementing 
and achieving effective uses of major information systems to support a 
fully automated patent process, including electronic filing and image- 
and text-based patent processing capabilities;

* establish disciplined processes for planning and managing the 
development of patent systems based on well-established business cases 
that articulate agreed-upon business and technical requirements; 
include analyses of project alternatives, costs, and benefits; and 
include measures for tracking projects through their life cycle against 
cost, schedule, benefit, and performance targets; and: 

* fully institute and enforce at the enterprise level, information 
technology investment management processes and practices to ensure that 
automation initiatives support the agency's mission and are aligned 
with the agency's enterprise architecture, to include (1) finalizing 
and implementing a capital planning and investment control guide, (2) 
establishing an architecture review board and requiring its oversight 
of major information technology investments, (3) establishing a process 
to identify expected benefits to internal and external users of 
information systems and to measure performance against expected 
benefits, and (4) establishing a process for tracking and reporting 
aggregate cost information for automation initiatives. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, the Under Secretary of 
Commerce for Intellectual Property and Director of USPTO generally 
agreed with our findings, conclusions, and recommendations. The agency 
acknowledged weaknesses in its processes used to manage patent 
automation and agreed with the need for key improvements, such as (1) 
developing architectural linkages to the planning process, (2) 
implementing a capital planning and investment control guide, and (3) 
completing planned organizational changes. The Under Secretary 
emphasized that USPTO had already initiated reforms to ensure more 
effective implementation of its automation projects, including 
personnel changes in key patent-management positions, and indicated 
that the agency would rely on the results of our study in conjunction 
with other assessments that have been conducted to further improve 
management processes guiding the agency's use of information 
technology. 

Nonetheless, the agency only partially agreed with several specific 
aspects of our assessment. The Under Secretary pointed out, for 
example, that in February 2005, USPTO had issued an agency 
administrative order covering its information technology investment 
review board and reemphasizing its commitment to integrated investment 
decision practices. In addition, the agency pointed to our awareness of 
it having also initiated a review of the architectural linkages to its 
investments and key decision-making processes being implemented. 
Further, it stated that it had instituted investment decision papers to 
provide its investment review board members with improved 
documentation, including more thorough financial, technical, and 
alternatives analyses, to assist in making appropriate investment 
decisions. 

The actions that USPTO stated that it has taken could help to improve 
its overall investment management and decision making. In mid-April 
2005, patent officials provided us with a finalized copy of the agency 
administrative order requiring unit heads to use the capital planning 
and investment control guide in selecting, controlling, and evaluating 
information technology investments. However, they stated that the 
agency had not yet completed the capital planning and investment 
control processes and procedures. Nonetheless, we have revised our 
report to reflect the agency's issuance of this order. Further, during 
our study, agency officials did not inform us of any specific actions 
that had been initiated to review architectural linkages to investments 
and gave no indication that the agency had instituted investment 
decision papers to improve information technology investment 
documentation and related decision making. Therefore, we lack a basis 
for evaluating and/or commenting on these particular actions. 

USPTO also provided comments on the recommendations contained in our 
report. Specifically, regarding our recommendation to reassess, and 
where necessary, revise the approach for implementing and effectively 
using information systems to support a fully automated patent process, 
the agency commented that it was changing the method of implementing 
and achieving effective use of its information technology. The agency 
stated that it had chosen to follow a more systematic and phased 
approach to using information technology, in which alternatives are 
thoroughly considered and evaluated against architectural standards, 
implementation costs, and the ability to effectively meet users' needs, 
and that detailed investment decision papers are being prepared for all 
major investments. It added that future patent development initiatives, 
including those for electronic filing and text-based processing 
capabilities, would be subjected to this approach to ensure that 
automated systems are used most effectively to achieve patent program 
goals. As the agency takes action to achieve more effective use of its 
information technology, we look forward to monitoring its use of these 
measures to successfully implement future patent automation 
initiatives. 

Regarding our recommendation to establish disciplined processes for 
planning and managing the development of patent systems based on well- 
established business cases, USPTO stated that it was in the process of 
improving its capital planning and investment control process. For 
example, it stated that an already-established committee had proposed a 
format for developing improved business cases that would articulate 
business needs and expected benefits, require consideration of 
alternative solutions, and reflect compliance with the agency's 
enterprise architecture. As stressed in our report, such measures are 
essential to ensuring effective management of the agency's information 
technology initiatives and to achieving patent processing improvements 
through the use of information technology. 

Finally, in commenting on our recommendation that the agency fully 
institute and enforce information technology investment management 
processes and practices at the enterprise level, USPTO (1) reiterated 
its actions toward improving its capital planning and investment 
control process; (2) stated that its Office of Applications 
Architecture and Services functions as the agency's architectural 
review board with responsibility for ensuring that information 
technology systems' designs comply with the enterprise architecture; 
(3) stated that it would, upon completion of its capital planning and 
investment control guide, formally establish procedures for reviewing 
its investments' performance against expected benefits; and (4) stated 
that it is refining its tools to more completely capture the total cost 
of its information technology investments. 

Such measures, if successfully applied, could substantially improve 
USPTO's accountability for its information technology investments. 
However, it is important to note that, during our study, the agency 
could not provide evidence of a functioning architecture review board. 
Patent officials told us that such an organization had not been 
established and that reviews had not been required to ensure that 
planned information technology projects were consistent with the 
enterprise architecture. As stated earlier in this report, our analysis 
of documentation supporting the electronic filing system and Image File 
Wrapper determined that the agency had not rigorously assessed either 
of these systems' compliance with the enterprise architecture. Given 
this finding, we continue to stress the need for the agency to enforce 
its architecture review board's oversight of major information 
technology initiatives. 

Beyond these points of discussion, USPTO offered detailed comments on 
its Image File Wrapper. While agreeing with the need for more rigorous 
decision making to support its implementation of this system, the Under 
Secretary nonetheless believed that moving forward with this initiative 
was an appropriate step that had fulfilled the agency's promise to 
provide electronic (paperless) processing of patent applications, and 
that had provided numerous benefits for the agency in a short period of 
time. For example, the Under Secretary stated that the Image File 
Wrapper had eliminated the agency's need for space to house paper 
patents and, in conjunction with Internet access to patent 
applications, had alleviated problems associated with lost application 
files and file integrity. As such, the agency did not see a need to 
assess the key management processes guiding its decision to undertake 
this investment. 

As reflected in this report, we recognize that the Image File Wrapper, 
along with Internet access to patent applications, has provided USPTO 
with important capabilities to support the processing of patents. 
However, patent officials and examiners acknowledged that performance 
and usability problems had rendered the system incapable of fully 
meeting processing needs. Further, patent and OCIO officials had 
largely attributed the system's problems to known limitations in the 
design of the software that the agency had acquired from the European 
Patent Office. They added that, given the performance and usability 
problems, the agency planned to replace the Image File Wrapper. Thus, 
while certain benefits should be inherent from having this system in 
place, in our view, the agency could nonetheless take important lessons 
from the ad hoc approach in which this investment was undertaken. USPTO 
opted to undertake this initiative in a manner that did not ensure that 
it had fully evaluated its patent processing requirements against the 
most cost-efficient and effective solution for addressing its needs. 
Moreover, in undertaking the initiative without full consideration of 
potential alternatives, costs, and benefits, the agency put itself at 
risk of not fully realizing desired outcomes in terms of improved 
processing of patent applications. 

Appendix II contains the text of USPTO's comments on our draft report. 
The agency also provided technical comments, which we have 
incorporated, as appropriate. 

We are sending copies of this report to the Secretary of Commerce, the 
Under Secretary of Commerce for Intellectual Property, and the 
Director, Office of Management and Budget. Copies will also be 
available at no charge on our Web site at [Hyperlink, 
http://www.gao.gov]. 

Should you have any questions on matters contained in this report, 
please contact me at (202) 512-6240. I can also be reached by email at 
[Hyperlink, koontzl@gao.gov]. Contact points for our Office of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. Key contributors to this report are listed in 
appendix III. 

Signed by: 

Linda D. Koontz: 
Director, Information Management Issues: 

[End of section]

Appendixes: 

Appendix I: Scope and Methodology: 

To accomplish our objective, we reviewed USPTO's 21st Century Strategic 
Plan, Tools for Electronic Application Management project 
documentation, and related information technology plans to determine 
the agency's vision for and approach to automating its patent process. 
We also assessed current and selected past initiatives that USPTO has 
undertaken to develop and implement its automated patent processing 
capabilities. Specifically, we analyzed programmatic and technical 
documentation describing the agency's patent process, current 
electronic patent processing capabilities, and plans for future 
automation. We evaluated available project management documentation, 
such as project plans, time lines, and project status reports to 
determine the agency's progress in implementing a fully automated 
patent processing system. In addition, to assess key decisions and 
actions related to the USPTO's development and use of specific 
electronic information and systems to support patent processing, we 
examined the agency's consideration of key information technology 
investment management procedures and practices, such as capital 
planning and investment control, enterprise architecture, and risk 
management, in planning and managing the patent automation initiatives. 
Further, we examined cost information for USPTO's patent automation 
initiatives, as provided by the agency; however, we did not verify the 
accuracy of this reported information. 

As part of our review, we also examined internal reports documenting an 
independent contractor's assessment of USPTO's information technology 
organization. We did not independently validate the findings contained 
in the reports; however, in discussing their contents with us, USPTO's 
chief information officer generally concurred with the findings. In 
addition, we reviewed relevant reports discussing the patent operations 
that had been prepared by the Department of Commerce's Office of 
Inspector General. 

To supplement our analysis, we interviewed senior patent officials, 
including the Deputy Commissioner for Patent Resources Planning; the 
Administrator, Search and Information Resources Administration; and the 
USPTO chief information officer, who was appointed in February 2005. We 
also discussed the agency's patent automation efforts with the Under 
Secretary of Commerce for Intellectual Property, who serves as the 
director of USPTO. In addition, we met with relevant systems officials 
who were involved in or knowledgeable about the development and 
implementation of the automated patent capabilities and with patent 
managers in charge of the systems' operations. We also interviewed 
officials of the European Patent Office who worked with USPTO on its 
implementation of the Image File Wrapper and representatives of the 
patent examiners union. In these interviews, we discussed USPTO's 
strategy and supporting plans for automating the patent processes and 
elicited their views about and understanding of key management 
decisions and challenges associated with the automation initiatives. 

Further, as part of a series of 11 focus groups undertaken by GAO, we 
obtained patent examiners' views of and experiences with the automated 
patent processes. The focus groups consisted of from 6 to 11 employees 
each and included supervisory patent examiners (3 groups) and patent 
examiners (8 groups). In total, 91 examiners participated in the focus 
groups. The 91 participants were randomly selected from the seven 
technical areas at USPTO's two locations (in Crystal City and 
Alexandria, Virginia), and all participants had been employed at the 
agency for at least 9 months. A GAO facilitator led each focus group. 
The responses were then systematically analyzed using a content 
analysis. 

We conducted our study from June 2004 through April 2005, in accordance 
with generally accepted government auditing standards. 

[End of section]

Appendix II: Comments from the U.S. Patent and Trademark Office: 

UNITED STATES PATENT AND TRADEMARK OFFICE: 

UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF 
THE UNITED STATES PATENT AND TRADEMARK OFFICE: 

JUN 2 2005: 

Ms. Linda D. Koontz:
Director, Information Management Issues: 
U.S. Government Accountability Office: 
441 G Street, NW:
Washington, D.C. 20548: 

Dear Ms. Koontz: 

Thank you for the opportunity to comment on the Government 
Accountability Office (GAO) draft report titled, "Intellectual 
Property: Key Processes for Managing Patent Automation Need 
Strengthening." We very much appreciate the effort your team made in 
reviewing the United States Patent and Trademark Office's (USPTO) 
processes for managing patent information technology (IT) initiatives. 

When I became the Acting Under Secretary of Commerce for Intellectual 
Property and Director of the United States Patent and Trademark Office 
in January 2004, I was fortunate to have had exposure to the management 
culture of the USPTO. Since joining the USPTO in 2002 as the Deputy 
Under Secretary, I observed the way in which USPTO's Patent management, 
Office of the Chief Information Officer (OCIO) management, and other 
senior managers handled decisions on IT investment and planning. 

I first came to the USPTO as the Deputy Under Secretary. Then Under 
Secretary James Rogan made clear that a critical priority was to re- 
establish USPTO's reputation as an agency that makes promises and keeps 
promises. A key aspect of re-establishing credibility was fulfilling 
the commitment, made almost thirty years ago, that the USPTO would 
electronically process patent applications. Begun during Under 
Secretary Rogan's tenure in 2002, I was proud to announce fulfillment 
of the electronic-processing promise in August 2004 with the 
availability of Internet access to patent application files, just two 
years after beginning this historic project. 

For me, an unanticipated aspect of the IFW process was exposure to the 
deeper issues that had prevented USPTO from fulfilling its promises and 
achieving its potential. During the planning and implementation of IFW, 
and other IT-related Strategic Plan initiatives, I better understood 
what needed to be changed, and why. 

Based on my observations and experience, when I became the Acting Under 
Secretary, I was determined to make changes to comport with my personal 
commitment to accountability, transparency, and results, as a steward 
of the USPTO on behalf of the American people. 

Initially, I worked with the existing Patent and OCIO management, to 
encourage "change from within." However, as the head of an agency that 
is the repository of great technical expertise, I soon appreciated that 
expert advice of a different nature was necessary. Therefore, in April 
2004, I directed my personal staff in the Office of the Under Secretary 
to conduct, using an outside, independent consulting firm with a 
national reputation for excellence in the field of IT organizational 
analysis, a complete review of USPTO's IT operations, with a focus on 
delivery capability to our business areas: Patents; Trademarks; Office 
of General Counsel; Office of the Chief Financial Officer; and Office 
of the Chief Administrative Officer. 

As Deputy Under Secretary, I had directed an independent review of a 
discrete IT project --the electronic filing forms for the Madrid 
Protocol (a trademark treaty). The results of that review were 
magnified in the larger OCIO assessment, which was formally concluded 
in early 2005, but whose significant findings were available to me as 
early as July 2004. 

Based both on the earlier, discrete review, and the comprehensive 
organizational assessment I requested, it was clear to me that 
significant management changes were necessary. By October 2004, USPTO 
was conducting a nationwide search for a new CIO, and by early December 
2004 we had identified an experienced candidate, who ultimately became 
our new CIO. 

The OCIO organizational assessment pointed out challenges in the 
business areas as well. Again, based in part on information received 
from that comprehensive study, as well as on my observations of certain 
executives' responses to the GAO's own efforts, I realized that wider 
management changes were necessary. Therefore, in January 2005, I made 
personnel changes in key Patent-management positions, including the SES 
position responsible for Patent IT projects. 

When GAO's study was announced, I was grateful because I was certain 
the study would function as yet another independent assessment of the 
USPTO's patent IT management practices, giving us even more useful data 
with which to work. Based on my own reform efforts, I am fully aware 
that our current team of managers is faced with the challenging, but 
achievable, task of rebuilding confidence in the USPTO's IT systems, 
its methods of implementation and expenditure, and its relationship 
with the user community. I am proud that we have in fact changed our 
approach. 

Specifically, I have put in place managers who are committed to 
service, to accuracy, to integrity, and to transparency. Further, I am 
confident that our new CIO and our Acting Commissioner for Patents are 
fully committed to my vision of a USPTO that is completely accountable. 
They are already implementing reforms, mindful of the risk that too 
much change too quickly can lead to its own set of problems. 

Based on my comments above, it will come as no surprise to find that we 
agree with GAO's conclusion that there have existed weaknesses in the 
management process used to direct patent automation, especially when 
viewed in the broad time frame from GAO's last review of the process in 
the early 1980s. However, we can only partially agree with several 
material aspects of GAO's assessment. 

As noted above, I directed a comprehensive assessment of the Office of 
the CIO, one result of which was the hiring of our new CIO. In February 
2005, we issued an Agency Administrative Order (AAO) covering the IT 
Investment Review Board. The AAO reemphasizes the agency's commitment 
to integrated investment decision practices. As you know, we have also 
initiated a review of the architectural linkages to investments, and 
the key processes for decision-making, which is currently under way. 
Further, we have instituted Investment Decision Papers (IDP) to provide 
the Investment Review Board members with improved investment 
documentation. The IDPs give the board members more thorough financial 
and technical analysis, and offer a variety of viable options and 
alternatives, to help the Board make appropriate investment decisions. 

The following are our comments on the specific recommendations 
contained in the Draft Report: 

Recommendation 1- "reassess, and where necessary, revise the approach 
for implementing and achieving effective uses of major information 
systems to support a fully automated patent process, including 
electronic filing and image-and text-based patent processing 
capabilities;" 

The USPTO is changing the method of implementing and achieving 
effective use of IT. We have elected to follow a more systematic, 
phased implementation, rather than the prior holistic approach. 
Alternatives are being thoroughly considered, and evaluated against 
architectural standards, costs of implementation and support, and the 
ability to effectively deliver an IT solution that meets the needs of 
the users. Detailed Investment Decision Papers are being prepared for 
all major IT investments. These papers are being reviewed by USPTO's 
Management Council, which sits as the Investment Review Board (IRB). 
The Management Council/IRB approves all major IT investments. Any 
future patent development initiatives, including those for electronic 
filing and text-based processing capabilities, will be subject to this 
more systematic, phased implementation in order to ensure that 
automated systems are used most effectively to achieve patent program 
goals. 

Recommendation 2 - "establish disciplined process for planning and 
managing the development of patent systems based on well-established 
business cases that articulate agreed-upon business and technical 
requirements; include measures for tracking projects through their life 
cycle against cost, schedule, benefit, and performance targets;"

A committee has been established to improve the Capital Planning and 
Investment Control (CPIC) process at the USPTO. This committee has 
already proposed a format for business cases that recites the business 
need and expected benefits; that requires the consideration of at least 
three viable alternatives, and the total cost of each alternative; and 
that indicates compliance with the enterprise architecture, including 
whether the investment is based on current, emerging, twilight or 
sunset architecture. The business case must be accompanied by an 
investment schedule that includes a list of milestones with dates; a 
listing of assumptions, constraints, and a risk assessment with 
mitigation strategies; and a list of critical success factors for the 
project. Finally, the investment schedule must explain how the proposed 
approach aligns with the USPTO's 21st Century Strategic Plan, and with 
the President's Management Agenda (PMA). 

Following approval of the business case and selection of the preferred 
alternative, project plans will be developed, and schedules, costs and 
progress will be managed against these plans, using Earned Value 
Management (EVM). All investments will also be evaluated against the 
proposed benefits. 

As a result of the independent assessment conducted at my direction, we 
realized the need to strengthen our IT planning and management 
processes. Our new CIO is engaged in implementing organizational 
improvements that will focus on Quality Management and overall IT 
process improvements. 

Recommendation 3 - `fully institute and enforce at the enterprise 
level, information technology investment management processes and 
practices to ensure that automation initiatives support the agency's 
mission and are aligned with the agency's enterprise architecture, to 
include (1) finalizing and implementing a capital planning and 
investment control guide, (2) establishing an architecture review board 
and requiring its oversight of major information technology 
investments, (3) establishing a process to identify expected benefits 
to internal and external users of information systems and to measure 
performance against expected benefits, and (4) establishing a process 
for tracking and reporting aggregate cost information for automation 
initiatives."

In reference to item 1, as noted in our response to the previous 
recommendation, the USPTO is addressing its CPIC process. Once this is 
made final, the existing capital planning and investment control guide 
will be updated to reflect the enhanced procedures. 

Concerning the second item, IT project architectures are currently 
reviewed by the Office of Applications Architecture and Services. This 
office is responsible for ensuring compliance of IT systems' designs 
with the USPTO Enterprise Architecture. This group executes the 
functions performed by an architectural review board. 

Regarding item 3, as the committee completes the CPIC guide, it will 
formally establish the procedures for review of the expected benefits 
from an IT investment and the evaluation of the performance of the 
investment against providing those expected benefits. 

Finally, concerning item 4, the USPTO has the tools in place to 
aggregate the cost information for automation initiatives, and is 
refining use of those tools to more completely capture the total cost 
of any IT investment. 

Image File Wrapper (IFW): 

Given the importance of IFW to the USPTO, it is appropriate to offer 
detailed comments on this undertaking. 

We agree that the IFW decision-making and implementation process could 
have been more rigorous, and would have benefited from more rigor. 
However, we are certain that both GAO and Congress recognize the very 
positive results, for our examiners and the public, which resulted from 
the timely deployment of the IFW system. 

First, in 2004, the USPTO fulfilled a decades-old promise to the public 
by finally providing a working paperless system for processing patent 
applications. In the space of two years, USPTO concluded an effort that 
had been promised since the 1980s. Second, at a very practical level, 
lFW eliminated the need for USPTO to retain space to house the patent 
paper collection stored at the USPTO's Crystal City campus. Because of 
the IFW system, the USPTO did not have to relocate paper patent 
application files to our Alexandria headquarters. Third, both examiners 
and the public have seen the benefits of IFW since multiple users can 
access the same file at the same time. There is no need to wait to see 
an electronic file. 

In addition, our Public PAIR tool offers Internet access to published 
patent applications, allowing users around the globe the ability to 
review information. Private PAIR offers patent applicants the same type 
of access to their unpublished application files, in a secure Internet 
environment. It goes without saying that the issue of lost papers or 
application files has been monumentally reduced. Further, problems with 
file integrity, that is, problems created when papers were returned to 
a file out of order, ripped or otherwise degraded through wear, or even 
lost completely, have been virtually eliminated. As a practical matter, 
the need to photocopy has been greatly reduced, since files can be 
printed directly. 

To reiterate, in the space of two years, the USPTO presented the public 
and our examiners with historic electronic access. The manifold 
benefits of IFW would almost certainly not be available today had USPTO 
moved at a more traditional pace. 

As a lesson of IFW, USPTO fully appreciates that implementation of 
automation and additional automated tools for both our examiners and 
public users must be preceded and accompanied by careful planning and 
documentation. But we make no apologies for having fulfilled promises 
and provided access and convenience for customers and employees alike. 

In light of the progress that the USPTO has made even during the period 
of GAO's assessment, we do not believe that such significant gaps exist 
as to warrant a pause and reassessment of our key management processes. 

We have also included an enclosure with a list of specific comments 
that clarify and/or correct certain points covered in your report. 

We do agree with GAO's finding that key improvements need to be made, 
such as: 

* Improving architectural linkages to the planning process;

* Making final and implementing the draft Capital Planning and 
Investment Control (CPIC) Guide; and: 

* Completing planned organizational changes. 

Before concluding this letter, I would like to express personal thanks 
to GAO, and to mention Mary J. Dorsey, Vijay D'Souza, Valerie Melvin, 
Evan Gillman, Nancy Glover and J. Michael Resser. I understand that Ms. 
Dorsey and Mr. D'Souza, in particular, spent many hours talking to 
USPTO employees, conducting interviews, and of course, reviewing 
documents and writing the draft report itself. We are fortunate to have 
had the opportunity to work with such dedicated fellow civil servants. 

Actions speak louder than words. As Under Secretary, I have taken the 
painful measures necessary to correct problems I saw with our patent 
automation strategy, including making personnel changes in key USPTO 
management positions. However, difficult as an organizational 
assessment and resulting personnel changes have been, they were and are 
the correct course of action and will result in a USPTO that is able to 
deliver and support, in a timely and cost-effective manner, the 
electronic tools that will see our Nation's patent and trademark office 
through the 21st Century. 

Again, we appreciate this opportunity to comment on the GAO's draft 
report. 

Signed by: 

JON W. DUDAS:
Under Secretary and Director: 

Enclosure: 

[End of section]

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Linda D. Koontz (202) 512-6240: 

Staff Acknowledgments: 

In addition to the individual named above, Valerie Melvin, Mary J. 
Dorsey, and Vijay D'Souza made significant contributions to this 
report. Evan Gilman, Nancy Glover, and J. Michael Resser also 
contributed to this report. 

(310720): 

FOOTNOTES

[1] GAO, Intellectual Property: USPTO Has Made Progress in Hiring 
Examiners, but Challenges to Retention Remain, GAO-05-720 (Washington, 
D.C.: June 17, 2005). 

[2] 40 U.S.C. sec. 11312. 

[3] GAO, Information Technology: A Framework for Assessing and 
Improving Enterprise Architecture Management (Version 1.1), GAO-03- 
584G (Washington, D.C.: April 2003). 

[4] According to 35 U.S.C. sec. 154(a)(1), a patentee may also exclude 
others from importing the patented invention into the United States. 

[5] USPTO has eight technology centers that define its subject areas as 
follows: Biotechnology and Organic Chemistry; Chemical and Materials 
Engineering; Computer Architecture, Software, and Information Security; 
Communications; Semiconductors, Electrical and Optical Systems and 
Components; Designs for Articles of Manufacture; Transportation, 
Construction, Electronic Commerce, Agriculture, National Security and 
License and Review; Mechanical Engineering, Manufacturing, and 
Products. 

[6] A proposed invention is patentable if it is a new or useful 
process, machine, manufacture, or composition of matter, or any new and 
useful improvement thereof. 

[7] The American Inventors Protection Act of 1999, 35 U.S.C. sec. 1(a) 
gave USPTO greater flexibility and independence for decisions regarding 
the management and administration of its operation, while the Secretary 
of Commerce retained policy direction. In addition, 35 U.S.C. sec. 
2(b)(2)(F) empowered the USPTO director to establish regulations that 
provide for the development of a performance-based process that 
includes quantitative and qualitative measures and standards for 
evaluating cost-effectiveness and is consistent with principles of 
impartiality and competitiveness. 

[8] GAO, Patent and Trademark Office: Key Processes for Managing 
Automated Patent System Development Are Weak, GAO/AIMD-93-15 
(Washington, D.C.: Sept. 30, 1993). 

[9] The initial deployment of USPTO's patent tracking system occurred 
in 1980. This system provides workflow tracking, status reporting, and 
examiner production information. 

[10] The reported cost included system enhancements and maintenance 
through the end of the project's life cycle in 2002. 

[11] Image-based processing uses a graphic representation of documents 
produced by scanning paper documents or by converting electronic 
documents into images. To transform image content into text, optical 
character recognition (OCR) software is used to derive text from the 
image. OCR can convert image documents to hidden text, which is 
searchable. In text-based processing, the words and sentences in the 
document are retained as text and can be stored, processed, and 
retrieved by a document management system. Unlike image-based 
processing, text-based processing allows the text to be searched and 
extracted. 

[12] USPTO's 21st Century Strategic Plan was originally released in 
2002 and updated in 2003. 

[13] Electronic government refers to the use of information technology 
to enhance the access to and delivery of government information and 
service to citizens, business partners, and employees, and among 
agencies at all levels of government. 

[14] PDF is a file format that helps reduce errors when files are 
transferred from one user to another. A PDF file can contain fonts, 
images, printing instructions, keywords, and other information related 
to document production. 

[15] In December 2003, USPTO began relocating its headquarters from 
Arlington (Crystal City), Virginia, to Alexandria, Virginia, with the 
intent of consolidating all of its major operations in a central 
facility. The agency anticipates completing this move in approximately 
July 2005. 

[16] The $14 million represents a compilation of costs--provided by 
USPTO--for the Image File Wrapper system. 

[17] Over the past 2 years, the European Patent Office reported 
processing about 160,000 to 170,000 patent applications per year using 
ePhoenix. 

[18] GAO, Assessing Risks and Returns: A Guide for Evaluating Federal 
Agencies' IT Investment Decision-making, GAO/AIMD-10.1.13 (Washington, 
D.C.: February 1997). 

[19] We did not independently assess the results of this study, but 
USPTO's chief information officer generally concurred with its 
findings. 

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