Message from the Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office

Fiscal year 2004 was a year of great challenges for the United States Patent and Trademark Office and a year of important successes. I have been honored and privileged to lead this agency during a time of historic transformation. During the 12 months covered by this report, we began the move to our new state-of-the-art headquarters in Alexandria, Virginia. Over two thousand employees and our public search facility were relocated in a remarkably smooth operation, with minimal disruption for our workforce and customers. When our move is completed in March 2005, over 8,000 employees and contractors will be housed in the Alexandria facility.

During the past year we have begun to realize the goals of the 21st Century Strategic Plan. The plan was developed under the leadership of my predecessor, James E. Rogan, and is based on President George W. Bush's management agenda. The plan laid out a set of commitments, the most important of which was to make quality our number one priority. The USPTO also pledged to make patent processing fully electronic by 2004, to protect the United States' intellectual property system internationally, and to reaffirm the agency's credibility with Congress and the executive branch. I am pleased to report that we have delivered on all of those commitments.

Quality

During the past year, we have implemented a number of quality initiatives focused on getting the right people and ensuring that they stay current with practice, procedures, and case law so they will issue high quality patents and better serve our customers. These significant quality initiatives include a requirement that examiners pass a certification exam to demonstrate their knowledge of practice and procedures prior to promotion to an independent level. Also, primary examiners undergo “recertification” once every three years with increased work product review and mandatory continuing education classes. We have also instituted quizzes following training to ensure mastery of the principles taught. Additionally, before candidates for examiner positions are appointed, we assess their communication skills.

As the result of another quality initiative, we now review more work, and review it throughout prosecution. From these in-process reviews we have been gathering much useful information that we are providing as feedback to the examiners. Also as a part of this feedback loop we are utilizing the identified trends in developing focused training for examiners. Finally, in another measure designed to enhance quality, we have expanded the “second-pair-of-eyes” review in our technology centers.

We have taken these steps to increase quality because we understand that quality enhances certainty and that quality is the most important element of the system for our customers. We will continue to build on the quality initiatives implemented this year. They will help us better identify and solve quality concerns and enhance the evaluation of our processes.

Electronic Processing

The electronic processing of patent applications is now a reality. The Image File Wrapper (IFW) was fully implemented, and private and public Patent Application Information Retrieval systems (PAIR) were enhanced with the inclusion of IFW data. With the click of a mouse, the private PAIR system allows applicants access to the entire file history of their applications, including the images of every paper of record if the application is in the IFW database. Additionally, the public PAIR system allows anyone, anywhere in the world, access to the entire file history (except for non-patent literature) and application images, if available in IFW, of an application not covered by confidentiality laws.

The Trademark Electronic Application System (TEAS), which allows trademark applications to be filed electronically, has continued to enjoy great success. This year, 73% of trademark applications were filed electronically.

The patent examination process has now been entirely automated with the implementation of the IFW. More than 6,000 USPTO employees have been trained to use the IFW system, which not only helps us do our job, but also helps our customers by providing transparency to the process.

In 2004, the USPTO received the prestigious “Pioneer” award from the Government Solutions Center, in recognition of the significant implementation of our IFW system. The Pioneer award recognizes innovative best practices in delivery of essential e-Government services to citizens, businesses, and other public sector organizations.

The USPTO's IFW initiative was also recognized when our agency received the Government Computer News award, a distinct honor for the USPTO. The USPTO was selected from 116 nominations by a panel of editors from Government Computer News and Washington Technology. Agencies are recognized for their technology innovations, support of program or policy requirements, and improvement of service delivery.

The successful implementation in 2004 of key e-Government initiatives of the 21st Century Strategic Plan will clearly be noted as a major milestone in the transformation of an operation based on paper processing to a more efficient, customer friendly, electronic processing system.

Modernization

Another important milestone occurred this year when President Bush proposed a budget that provides the USPTO with access to all of the fees collected. This action by the President is the most recent expression of the Administration's support for the USPTO and America's intellectual property system. The Administration's support for full funding results from the realization that the agency cannot improve quality and reduce pendency without appropriate funding. The proposed modernization legislation currently before Congress is key to this effort. The bill moved through the House last fiscal year with 379 ayes and only 28 dissenting votes, and was approved unanimously by the Senate Judiciary Committee. We believe this Congressional support clearly reflects the fact that we have a credible plan for improving our operations. Thus, we are hopeful that the modernization legislation will be enacted soon.

International

On the international front, we have faced many challenges. Regrettably, there is growing anti-IP sentiment in the world. This sentiment has been reflected by a number of member states at meetings conducted by the World Intellectual Property Organization (WIPO). We will continue to work with other countries to build consensus and protect America's IP community. We have had successes this past year including defeating efforts to increase Patent Cooperation Treaty (PCT) fees. In the process we will save U.S. filers more than $6 million in calendar year 2005.

Piracy and counterfeiting continued as major concerns during the past year and we have worked closely with the State Department, the Office of the United States Trade Representative, our colleagues at the Department of Commerce and others on these vital issues. We have continued enforcement-training activities for government officials from a wide range of countries around the world. In addition, the USPTO appointed an attorney-advisor in our Office of Enforcement to be an intellectual property attaché to the U.S. Embassy in China. This is the first time the USPTO has placed an official overseas for the purpose of improving intellectual property protection in a specific country. We believe this assignment will advance the Administration's work in the region, particularly in addressing the widespread counterfeiting and piracy that cost U.S. businesses billions of dollars in lost revenue and tens of thousands of U.S. jobs.

Conclusion

I am often asked what is my vision for the United States Patent and Trademark Office. My answer is simple. I want to be the head of a constantly improving agency that builds on the successes we have had. I not only want the USPTO to be the best intellectual-property office in the world, and it is, but to be the clear leader and trendsetter in every aspect of intellectual property protection. While tremendous challenges lie ahead, the successes we have had this past year keep us on a path toward the realization of that vision.

This Performance and Accountability Report summarizes the USPTO's achievements and challenges for fiscal year 2004. I am pleased to certify our agency's systems of management control, taken as a whole, comply with Section 2 of the Federal Managers' Financial Integrity Act (FMFIA) of 1982. Our agency is also in substantial compliance with applicable Federal accounting standards and the United States General Ledger at the transaction level and with Federal financial system requirements. Accordingly, our agency fully complies with Section 4 of the FMFIA, with no material nonconformances. In addition, we are confident that the USPTO's financial and performance data is reliable, accurate, and consistent, as we improve our ability to measure progress toward performance objectives.

For the 12th consecutive year, we received an unqualified audit opinion on our annual financial statements. In addition, the independent auditors' report did not identify any material weaknesses, reportable conditions, or instances of noncompliance.

Jon W. Dudas
Under Secretary of Commerce for Intellectual Property and
Director of the United States Patent and Trademark Office

November 8, 2004