Vermont Inventor Offers
Leahy Panel Advice On Patent Reform
(WASHINGTON, MONDAY,
APRIL 25) -- A Waitsfield inventor testified before a panel Monday
led by Senator Patrick Leahy (D-Vt.), the ranking Democratic member
of the Senate Judiciary Committee, and Sen. Orrin Hatch (R-Utah)
that is reviewing the U.S. Patent System. The Intellectual Property
Subcommittee of the Senate Judiciary Committee held a hearing, “The
Patent System Today and Tomorrow.” Leahy, who also serves as the
ranking member of the subcommittee, invited William Parker, CEO and
Director of Research for Diffraction Ltd., of Waitsfield, Vt., to
testify before the committee on challenges facing small inventors
seeking patents. Parker, a successful inventor best known for the
“plasma sphere,” an interactive plasma demonstration commonly found
in nearly every science museum in the world, has been granted 22
patents worldwide. As a successful inventor, Parker offered
recommendations to the Senate panel on making the system more user
friendly for smaller inventors. The testimony of Jon Dudas,
Undersecretary of Commerce for Intellectual Property and Director of
the U.S. Patent and Trademark Office is also below.
Statement Of Senator Patrick Leahy
Ranking Democrat, Subcommittee On Intellectual Property
“The Patent System Today And Tomorrow”
April 25, 2005
Today the Intellectual Property
Subcommittee begins its public examination of the myriad issues
faced by our patent system. As I have noted before, the spirit of
American innovation has made the United States the
world’s leader in intellectual property. Yet the expressions of
American innovation – in the form of patented goods and processes –
are only as good as the system that fosters and protects them.
I share the growing concern about our
patent system’s ability to address the many challenges it faces. I
had looked forward to hearing from Jonathan Dudas, the
Undersecretary for Intellectual Property and Director of the U.S.
Patent and Trademark Office, at a hearing last Thursday. That
hearing was cancelled at the last minute, and I am grateful that Mr.
Dudas was gracious enough to rearrange his schedule to be with us
this afternoon. We worked with Mr. Dudas to get him confirmed and
before that when he staffed Republican leadership in the House and
on the House Judiciary Committee. I look forward to continuing our
collaboration as we tackle the patent system in the 21st
century.
I am also very pleased to welcome
President Richard Levin of Yale University and Professor Mark Myers
from the Wharton School of Business. They are the authors of the
acclaimed National Academy of Sciences report on patent reform, and
I have no doubt that their continued assistance in this project will
be most useful.
The size of the project we are
undertaking seems to be reflected in the number of witnesses we have
at this hearing, and I do want to thank all the witnesses – people
who actually live with the intricacies of our patent system every
day – for appearing today. Let me draw attention to one of those
witnesses, for it is particularly fitting that in discussing
creativity and innovation we have with us someone who we know
understands both and is a Vermonter to boot. I thank Bill Parker
for traveling to Washington today to share his
thoughts with us as an inventor and a spokesperson for inventors.
He is part of our wonderful tradition of invention, exemplified by
the fact that the first U.S. patent issued, and signed by Thomas
Jefferson, was to a Vermonter.
In 2002, the House and Senate directed
the Patent and Trademark Office to develop a five-year plan, the
result of which was the PTO’s 21st
Century Strategic Plan, designed to modernize, expedite,
and improve the process by which patent applications are processed.
Parts of that plan are being implemented, and last year I supported
a compromise in the Appropriations Committee that will – for one
year – prevent PTO user fees from being diverted to other government
programs. I am interested in hearing more from our witnesses about
the implementation of the PTO’s plan, but I am also very interested
in discussing the proposals we have all been hearing that suggest
improvements to the quality of the patents the PTO is issuing.
We know that the PTO faces a Herculean
task. The volume of patent applications has increased roughly
three-fold since the 1980s. The PTO receives more than 350,000
patent applications annually, and the office approved 187,000
applications in 2004 alone. That works out to more than 500
approved patents daily.
Some say that the high number of approved patent applications is
itself a concern. When non-innovative inventions are patented, some
patent-holders fear they will spend more time litigating than they
do innovating as a result of predatory tactics. This is a real
problem, and we ought to explore ways to alter the patent
examination process in order to allow for patent challenges before
costly, highly-technical litigation is required.
In this vein, I am especially
interested in the suggestions that we find ways to allow outsiders
with prior art to present information at the examination stage and
also that we look into the need for improved post-grant review
procedures. With careful safeguards, both suggestions may help
reduce unnecessary and costly litigation.
At the same time, we are hearing calls
to reform the very ways in which these cases are being litigated.
One criticism I have heard is that the standards courts use to
determine whether a patent violation is “willful” has been applied
in a way that encourages patent holders to wear blinders to what
others invent. We have also heard about abusive litigation
practices of “patent trolls,” described to me as companies that
neither invent anything new nor produce anything at all, but simply
acquire patent rights and then push the bounds of their patents,
suing patent holders who actually do innovate. I am interested in
hearing more about these concerns, as well as proposed solutions
from our witnesses.
The concerns I mention are just a few
of the many we have heard about, and I am pleased that patent reform
ranks high on the legislative agenda of the 109th
Congress. Today marks the first hearing of this newly-formed
subcommittee and I can think of no better issue to kick off our work
this year than patent reform.
As we get started, I look forward to
working with the Chairman and other members of the Subcommittee.
Last week the House finally granted final passage to the Family
Entertainment and Copyright Act. This legislative package was
sponsored by a number of us, including Senators Hatch, Feinstein,
and Cornyn. We approved it last year and passed it, again, in
February of this year. Chairman Hatch and I worked cooperatively on
that legislative package last year with the result that it has now
been enacted by the Congress. The Family Entertainment and
Copyright Act is an example of a legislative package built through
bipartisan compromise. I look forward to additional legislative
accomplishments through this Subcommittee, as we proceed in a
bipartisan manner.
# # # #
Statement Of William
Parker
Chief Executive
Officer
Director of Research
Diffraction, Ltd
“Perspectives on
Patents”
Before the Subcommittee on Intellectual Property
Senate Judiciary Committee
April 25, 2005
Mr.
Chairman, Ranking Member Leahy, and members of the Subcommittee, my
name is Bill Parker and I am the Chief Executive Officer and
Director of Research for Diffraction LTD, a technology and
intellectual property based small business. Thank you for inviting
me to testify today on the very important topic of patent reform.
In my
testimony I hope to present some of the views of individual
inventors and other small entities on needed changes to the
United States patent
system. As evidenced by the substantial numbers of innovations and
patents that spring from small businesses around this country, and
the jobs these innovations create or maintain, even our rural
Vermont operation has a role to play in the United States economy
and its highly valued high technologies.
My
company, Diffraction LTD is not just small, it is a micro-business.
This panel’s members are by and large from large entities, so I will
try to make this presentation as focused as possible on a few issues
of patent reform as they affect individuals and small businesses.
My apologies in advance if this testimony takes on a personal
perspective, but perhaps this approach will help us to remember that
it is (still) people that do the inventing.
Introduction
Like
many small technology based businesses, our company was founded by
an inventor and patent holder, in our case it was my wife Julie.
After earning a graduate degree from MIT, and with little or no
business background, she decided to start her own company to further
develop and capitalize on her skills, talents, inventions and
discoveries. She found it was useful to have a partner in business
with some experience finding funding and navigating the complexity
of intellectual property protection - that’s where I came in. As an
inventor from childhood, with some reasonable commercial success, I
had collected a considerable range of experiences learning about the
things one did, and did not do, to capitalize on one’s creativity.
We started with nothing but a few good ideas.
In the
last 15 years our company, now employing over a dozen innovators and
a similarly sized professional support staff, has produced a number
of commercially viable developments in holography, optics,
microelectronics and nanotechnology. Some of these discoveries and
intellectual developments have been issued
United States “letters
patent”, still others are in the patenting process. We have recently
launched an effort to develop innovations that may help win the war
against terrorism, work supported with federal government contracts
as well as our own private funds. Some of our homeland defense
ideas are now in the patent process and will hopefully gain
protection as well.
It is
important to note that we believe our intellectual property in the
long term will have a greater value than our tangible output will in
the short term. Said a different way: the product of our minds
probably has more value than the things we can make with our hands.
This is a theme you will be hearing frequently in representations
that there is a need for better patent quality. If intellectual
property is not protected with high quality patents, then its value
diminishes or goes away.
When
we have done our inventing job well, and the result is a product in
demand, we may need to depend on others to take our innovation to
the market. Like other inventors that choose the licensing route
over manufacturing, we then ask for a royalty payment as a return on
our investment in the innovation. A royalty bearing license or
other payment method is used to transfer the right an inventor has
to monopolize their invention on to another party.
Ranging from a few percent and up, a royalty payment is made during
the life of the patent and sometimes longer, with terms and
conditions negotiated between the inventor (licensor) and the
manufacturer (licensee). The licensee using or selling our patented
invention wins because he has gained a protected product or process
without the expensive R&D it took to create it. Society wins
because independent innovators can think of new products, processes
or methods unfettered by limits part and parcel with the corporate
decision process or the demands of quarterly profits reporting. As
more large companies outsource innovation to companies expressly
built around the speedy generation of new processes and products,
consistent protection is to everyone’s benefit.
That
the
United States is moving
toward an economy where intellectual property (IP) is a significant
element of the GDP is undeniable. That we are doing everything we
can as a country to protect our IP is questionable. The future
world market will need new rules regarding the ownership of ideas,
rules that are fair and balanced. I would like to offer an image to
the committee of a day when all the US has to offer the world is IP,
a few raw materials and some farm produce. This is a scary
scenario if we are not prepared or able to protect our most
important assets.
As it
has since its inception in all other areas, the
United States needs to
take the ethical and legal high ground with robust, creative and
independent approaches required for a fair and equitable marketplace
for ideas. I believe that patent reform efforts now in discussion
can produce the necessary changes in a relevant time period.
I
would like to direct my remaining remarks toward recognizing a few
of the critical elements for the success of small technology based
businesses that would be affected by patent reform currently under
discussion.
Quality of Patents
The
patent process must be flawless for a patent to be above question.
And it must be above question to have any real value. Thorough
examination is all that is required, but as the art becomes more
involved and specialized it is increasingly more difficult to factor
out mistakes of omission. Better access to prior art is part of the
solution, but more is needed in the examination process to prevent a
poor outcome despite a significant amount of time and money being
spent.
When
an examination for a foreign filing uncovers prior art that neither
I nor the USPTO examiner had seen before, it leads to a very
uncomfortable feeling of “what else didn’t we know about”. I have
personally seen improvements in this area in the last few years,
hopefully due to better resources being applied to the problem.
Resources that need still more improvements, i.e. more money, as
well as some “outside the box thinking” on the problem.
Money not spent by the PTO to ensure
quality is often spent instead by the patent holders and their
challengers in legal actions – when it’s too late for anyone to
gracefully back down. Tremendous amounts of money are spent in
challenges when a fraction of that could have often prevented the
problem at its source. This leads to the appreciation that for many
inventors a patent is seen as nothing more than a “license to
litigate.” We need to do everything we can to dispel that
appreciation.
If it is true that other counties tend
to have better prior art examinations than in the US,
then perhaps we can determine why. This may be an effect of timing,
as our examination may be concluded prior to the commencement of a
foreign one, but it may also be that they know how to do better
examinations. This should be investigated and if we can learn some
new tricks, then let’s do it.
There is a need for skilled examiners
in emerging technology areas – keep in mind that experts in their
specific art are their customers. From biotechnology to
nanotechnology, in software and microelectronics as well as other
cutting edge fields, the experts are the ones making the inventions
– not the ones determining if they are in fact inventions. It is
not easy for an examiner to know enough about an emerging field of
science, and in particular a specialty area of scientific or
technical endeavor, to see the full breadth of a filing’s impact or
the value of a particular claim.
Regardless of what it takes, in
manpower or money, the patent examination process needs to be up to
the task. Entrepreneurs depend on a filed patent to interest
investors, and if the invention succeeds to the point of a patent
but is in fact easily challenged, both sides have wasted time and
money that could have been better spent. Patent filings are
routinely used by entrepreneurs to protect themselves from
confidants that might just as easily become competitors as
customers. Everyone benefits if the product of an examination is
beyond question.
A post grant review process
undoubtedly could improve the quality of the patents issued.
Despite the fact that it is a good idea, how does the owner best
deal with the wait time in a commercial sense. A patent in limbo
for a year is a scary thing from a commercial perspective, but far
better that a patent in limbo for its entire life. It would be
great to have a system that erased the worry – will the patent that
you are building your business on ever be a sure thing?
First to Invent vs.
First to File
You
will hear much about why we should move to a First to file
approach. It sounds like a good approach in many ways for
individual inventors, and for the system in general, but in fact it
poses a few big problems for small entities.
Due to
the high cost of building prototypes or laboratory work, it takes a
small inventor longer to go from idea to reduction to practice, and
without a sufficient test of reality a patent filing is more
difficult to put through the PTO and more suspect when it is. A
one year “grace” period following a provisional patent filing is the
best protection afforded a small entity - unless it takes over a
year to assemble the required funding and then verify the invention,
as it often does.
Perhaps there are ways to optimize the first to file approach that
levels the playing field with bigger entities. Different rules are
already in play for filing costs, why not extend those benefits in
other ways as well. A number of efforts are in place to help small
entities short circuit this issue of costs to reduce ideas to
practice, such as the Small Business Innovative Research (SBIR)
program, but even then only a small fraction of innovative ideas
obtains support toward a reduction to practice.
International Protection for Small
Entities
We
should always be looking for additional ways to encourage the
creativity and capabilities of the country’s small inventor
entities, reduce their costs in obtaining patents, and give them
enough extra protection in the world market to keep them, and us,
competitive. When our best ideas are being copied wholesale
overseas it does nothing to reinforce the inventor’s or the public’s
belief in and support of the patent system.
An
issue I hear frequently from independent inventors is how they can
do nothing to stop overseas copying of their inventions. When I ask
them how they know they are being infringed, they tell me they see
their inventions in big chain stores here in the
US. What may be
needed is both a better understanding of the rights of an inventor
to compel a seller of their invention to cease and a less expensive
and more responsive means in the courts to enforce this right.
Need for Injunctive
Relief
Not
all inventors are opportunists or patent predators. A lot of talk
is aimed at protecting big businesses from the actions of a few
opportunists that would try to use the system in ways it was not
meant to be used. If a court reads a situation such that in its
estimation harm is coming to the patent holder by way of an
infringement, then injunctive relief should be available to the
plaintiff. Some would say that the use of a permanent injunction
is excessive, particularly if the patentee does not intend to
manufacture the invention themselves. In some ways this is exactly
counter to the purpose of a patent as a means to bring new products
or processes into commerce.
There
is, however, a need to recognize and protect the value independent
inventors and other small entities bring to the commercialization
“party”. But how best to accomplish this, when there is such a
large range of ways patents can be used – and misused? A patentee’s
ability to operate in the commercial sense is in part determined by
how well they are able to control their intellectual property – with
whom they do a deal and under what terms. If their invention has
been infringed, willfully or otherwise, and the infringer is not
compelled to cease, then not only has the inventor’s rights been
abridged, but so has their earning power. Another deal, with
another manufacturer at a higher royalty rate and with a larger
commercial value could have been the outcome of a clean, preferably
exclusive, licensing relationship. Because an infringer is willing
to pay a royalty, it is not an indication that they are willing to
respect the rights of the patentee in the broader sense. In these
cases commerce in general suffers, and the full potential of the
patent is in question.
Conclusion
I
speak for many of my small entity colleagues when I thank the
Committee for this opportunity to be at the table during this
hearing. We only ask for more chances to provide views to Congress
on this important topic and for more presence on advisory boards
during the patent reform debate.
I
personally thank you for the opportunity to appear before you today,
Mr. Chairman, and I offer my continuing efforts to find, or invent,
ways to make our patent system work for the 21st century
and beyond.
Statement Of The Honorable Jon
W. Dudas
Under Secretary Of Commerce For Intellectual Property And
Director Of The United States Patent And Trademark Office
Before The Subcommittee On Intellectual Property
Committee On The Judiciary
United States Senate
"The Patent System: Today And Tomorrow"
April 21, 2005
Introduction
Chairman Hatch, Ranking
Member Leahy, and Members of the Subcommittee:
Thank you very much for
inviting me to testify today. I commend you for holding this hearing
appropriately named the “Patent System: Today and Tomorrow.” This is
a particularly appropriate time to reflect upon the incredible
success of innovation and of our patent system in the
United States. It was
215 years ago this month that our young nation adopted its first
patent statute. On April 5, 1790, your predecessors in the Senate
passed the final version of the statute, and President George
Washington signed it into law on April 10.
The benefits of our
patent system have always been obvious to Americans. You are
familiar with Article 1, Section 8, Clause 8 of the U.S.
Constitution, granting Congress the power “to promote the progress
of science and the useful arts, by securing for limited times to
authors and inventors the exclusive right to their respective
writings and discoveries.” James Madison wrote in one of the
Federalist Papers, “The utility of this power will scarcely be
questioned.” He was right. That clause was adopted into the
Constitution without a dissenting vote -- without even any recorded
debate.
The need for a statutory
system to examine and grant patents was just as obvious. President
Washington signed the first patent statute 215 years ago -- before
our nation even had its 13th state. History has repeatedly affirmed
the wisdom of this decision of our Nation’s founders. The tremendous
ingenuity of American inventors, coupled with an
intellectual property system that encourages and rewards innovation,
has propelled our nation from a small agrarian society to the
world’s preeminent technological and economic superpower.
The flexibility and strength of our patent system have helped entire
industries flourish, rather than perish. Everyone has benefited from
the innovative products encouraged by this system. And all of the
technology encouraged by the patent system finds its way to the
public domain within 20 years -- freely available to any and all.
The success of the patent system is not limited to the
United States. It is the basis for economic development in
nations throughout the world. Unfortunately, a growing chorus of
critics is asking if the fundamental patent system that has been so
critical to the growth of innovation and economic success in the
United States and other nations will enhance or hinder development
in their nations.
Today, many of the nations questioning the efficacy of an
intellectual property system have become hotbeds for the manufacture
and export of counterfeit goods. Unsurprisingly, some of the nations
that allow their citizens to counterfeit and pirate others’
intellectual property are the very ones questioning a system that
encourages and rewards innovation, and discourages copying and free
riding.
The USPTO Today and
Prominent Issues
In the last several years,
intellectual property (IP) assets have become an ever more essential
ingredient of economic vitality. In the past, raw materials and
other tangible goods were the main drivers of an economy. Today,
economic success depends increasingly on intangible,
information-based assets, such as the creativity of employees and
the knowledge gained from research. As a result, intellectual
property-based industries, such as biotechnology and entertainment,
now represent the largest single sector of the U.S.
economy. In fact, IP industries export more American value to the
world than the automobile, automobile parts, agricultural, and
aircraft industries combined.
As the clearinghouse for
U.S. intellectual property rights, the USPTO is an important
catalyst for U.S. economic growth. Through the grant of patents and
the registration of trademarks, the USPTO promotes the economic
vitality of businesses and entrepreneurs, paving the way for
investment capital, research and scientific development.
We are proud of our 200 year-old
legacy of partnership with America, providing the
tools for our nation to become a technological and economic giant.
To continue this partnership, we must remain the best
patent-examination system in the world. To ensure on-going success,
the USPTO must focus on improved quality and productivity. To ensure
timely grant of rights, we must reduce our backlog of patent
applications by increasing our efficiency and taking advantage of
our automation efforts.
Intellectual
Property: Increasing Importance and Complexity
Globally, intellectual property
protection is more relevant than ever. Worldwide, 12 million patent
applications are pending –in the European Patent Office, the Japan
Patent Office, and various national patent offices. Without
question, the growing importance of intellectual property protection
has a direct impact on the USPTO. Patent applications in the
United States have more than doubled since 1992. In the last
five years alone, biotechnology-related patent filings at the USPTO
increased 46 percent, while pharmaceutical and chemical-related
filings climbed 42 percent. As a result, the USPTO issued more
patents last year alone (173,000) than it did during the first 40
years of its existence.
While the sheer volume of applications
is staggering, the technical complexity of patent applications is
escalating rapidly. In 1905, more than one-third of
U.S. patent filings were bicycle-related. Today, the USPTO routinely
examines patent applications in areas such as nanotechnology,
bio-informatics, and combinatorial chemistry - - art areas that
didn’t even exist one hundred years ago. Some patent applications
are received on CD-ROMs, containing literally the equivalent of
millions of pages of data on paper.
The Patent
Applications Backlog
The dual trends of increased volume
and complexity of patent applications filed pose significant
challenges for the USPTO. While the volume and technical complexity
of patent applications have increased significantly, our capacity to
examine patent applications has not risen at the same rate. The
result is a pending-application backlog of historic proportions. In
essence, we face a unique historical challenge: how to handle record
levels of complex work in an efficient manner, without the benefit
of a precise role model.
Patent pendency (the amount of time a
patent application is pending before a patent is issued) now
averages more than two years. In more complex art areas such as
data-processing technologies, average pendency stands at more than
three years. Without fundamental changes in the way USPTO operates,
average pendency in these areas could double by 2008. Moreover,
without intervention, the backlog of applications awaiting a first
review by an examiner could grow from its current level of
approximately 500,000, to over 1,000,000 by 2010.
To put these pendency numbers in
perspective, in 1981 when the U.S. patent system was
faced with a workload crunch, U.S. News & World Report published an
article on the situation entitled "Patent System a Drag on
Innovation." At that time, average patent pendency was 22 months and
the backlog of unexamined cases was 190,000. Today, as the numbers
above show, the pendency predicament is far more dramatic.
The problem arises because both the
nature of technology and the nature of the marketplace make long
processing delays unacceptable -- and unsustainable.
If intellectual property protection is
to continue to serve its purpose as a catalyst for technological
innovation and economic growth, the USPTO must fundamentally break
with the status quo. If we are to issue quality patents and register
quality trademarks in a timely manner, we must fundamentally reform
the way we do business. Fortunately, Mr. Chairman, thanks to the
leadership you and many of your colleagues in the House have shown,
the USPTO has been appropriated the funds we need to face these
challenges. We know, however, that simply using appropriated
resources will not alone do the job. We must be prudent in
developing the processes that will make the patent system more
effectively serve its purposes.
Summary of Critical
Issues
Due to the record growth that began in
the 1990s and continues today, the USPTO is facing a record workload
crisis. The rate of growth of patent applications has slowed, but we
continue to receive record numbers of applications every year.
Unless the bold new actions described below are taken, progress on
our quality enhancement and electronic government initiatives will
be in jeopardy, the backlog of unexamined patent applications will
skyrocket, and average patent pendency will dramatically increase.
USPTO: Working to
Improve our Patent System
Given our workload challenges, we are considering a variety of
internal reforms that will continue to enhance patent quality and
address our increasing pendency challenges. It is our responsibility
not only to do everything we can to perfect the patent system in the
United States -- something you too are doing by holding this
hearing. We must actively educate the world that it is fundamentally
the best patent system.
The right fundamentals alone though are not enough. I am the first
to acknowledge that even the best system in the world can and must
improve. Today, we are implementing a range of improvements and are
building on existing initiatives. We are also working on a series of
potential legislative improvements to the system. The future
requires that we work both domestically and with our international
counterparts to develop the best patent system – in terms of patent
quality and performance - for inventors both here at home and
abroad.
We applaud the Committee for examining
our patent system with an eye to improvements that it can make. We
are also looking internally at the improvements that the USPTO can
make through the authority that Congress has given it.
Making commitments and keeping them
has led to some successes throughout the USPTO organization,
including the implementation of the President’s Management Agenda
and the 21st Century Strategic Plan. The USPTO is now
better equipped to handle the many important challenges that face
our nation and our IP system at home and abroad.
Earlier this year, the USPTO announced
additional initiatives that will improve quality and
efficiency—increasing transparency, internally improving ex parte
reexamination, and saving applicants tens of millions of dollars by
revamping our process concerning the submission of appeal briefs by
applicants during the examination process. We continue to make
commitments, and we will continue to keep them.
Improving
Transparency and Enhancing Quality
As a measure to enhance quality and
public confidence in our office, I have committed the USPTO to
provide improved transparency in our operations. The USPTO will
continue to report to the public more information, better
information, and more meaningful information about our office and
its performance. You will see us measure ourselves more often, more
intensely, and with more useful data -- data that will not only
report quality and pendency statistics at the USPTO, but will
present a basis for improvement.
While implementing electronic tools to
assist employees of the USPTO in doing their jobs, the USPTO has
also provided Public PAIR -- the Patent Application Information
Retrieval system -- to assist and benefit the public. Public PAIR
allows anyone access to the entire file history of an application,
including access to images of every paper of record for every
published application in our database. With the click of a mouse,
Public PAIR provides innovators information that is critical to
understanding how a technology is evolving. This will help American
industry better target its research and development investments, and
be more responsive to the demands of the national and global
marketplaces. Its counterpart for unpublished applications --
Private PAIR -- lets applicants access the entire file history of
their applications in our Image File Wrapper (“IFW”) database,
saving time for both applicants and examiners. These systems are
truly milestones of achievement for the agency.
In the past, our pre-grant sampling of
allowed patent applications showed an error rate that fluctuated
between 3 percent and 7 percent. Our metrics were not as effective
as they could have been in helping us evaluate and train our
examiners about what went wrong and how to avoid that type of error
in the future. Starting with the 21st Century Strategic
Plan, we re-assessed ourselves. Today, we conduct more general
reviews and more in-process reviews. We now have meaningful data
from which to calculate quality baselines. We use that information
to identify points of error, and thereby to adjust training and
interactions with examiners to improve our processes and our
examination.
We now review more work, and we review
it in a smarter way. In some areas, we have tripled our number of
reviews. We are looking at our error rates more deeply, and
dissecting the issues causing errors. We can and are developing
specialized training for examiners based on results from in-process
reviews of our examiner’s work. And, as an enhanced quality measure,
we have expanded a “second-pair-of-eyes” review in certain
technology areas.
Finally, until recently, our pendency
measures were not meaningful enough from the perspective of managing
an office. Old ways of measuring pendency did not illuminate all
issues and could be misleading. As noted above, precise information
regarding both pendency and our backlog is critical to informed
management decisions. I have directed that our pendency statistics
be supplemented by additional measures that more fully reflect the
current state of affairs in the USPTO, with the goal of identifying
specific ways in which we can improve.
Our users will now know more of what
we know. Provided with better information, our customers can have
enhanced insight to the patent-examination process and will be
encouraged to offer constructive recommendations for systemic
improvement.
Improving the Reexamination Process
Many of the quality issues raised and
debated today in the patent system are within our reexamination
system. Without entering the debate on the limitations of inter
partes reexamination, legislative improvements, or even post-grant
review, there is no question that the USPTO can do much to improve
the reexamination process.
By way of background, we are focused
on improving the reexamination process because it is an opportunity
for the public to assess patentability without resorting to costly
litigation. An ex parte reexamination proceeding is conducted within
the USPTO when any person, including the patentee, submits a
substantial new question as to the patentability of the subject
matter of an issued patent. The statute authorizing reexamination
proceedings requires the USPTO to conduct this process with “special
dispatch.” Frequently, these proceedings require more than 100 hours
of examiner time to complete. And today, a large number of
reexamination proceedings have been pending before the USPTO for
more than four years without resolution. We are just as dissatisfied
with these results as are the stakeholders in the system.
As I mentioned earlier, reexamination
proceedings are important to patent owners and to the public as a
means of resolving the issue of patentability without resorting to
the high-cost option of litigation. In these proceedings, both
timeliness and correctness of the decision are important to all
parties to provide certainty of intellectual property rights.
Therefore, we have an especially important duty to get it right here
with special dispatch. However, many reexams are complex and
time-consuming. Sometimes there is intentional delay on the part of
those outside the USPTO, which can add to the time it takes us to
process reexams.
Proposed Reexamination Improvements
To address issues of timeliness and
correctness of the decision, the USPTO will implement a new process
for handling reexamination proceedings. Our goal is that, by the end
of FY 2005, we will have resolved all instances of ex parte
reexamination proceedings that have been pending with an examiner
for more than two years. Specifically, of the current 1,200 pending
ex parte reexamination proceedings, we hope to resolve 420, or over
one-third of our current reexamination workload. If we had not
undertaken this challenge, the total number of reexaminations
pending for more than two years would have risen to 600 by the end
of this year. An additional commitment is that, by the end of FY
2005, the USPTO will set a defined time period for all future ex
parte reexamination proceedings to be completed before the examiner,
and the period will be less than the two years achieved in fiscal
year 2005.
A similar clean-up effort is being
conducted for all inter partes reexamination proceedings now pending
before the USPTO. To address the issue of the correctness of the
decision, the USPTO will require supervisory review of all USPTO
decisions in any reexamination proceeding. It is expected that this
process will employ a panel of least three supervisors and senior
patent examiners. Further, by the end of this fiscal year, the USPTO
will establish firm processing time periods for all reexamination
proceedings ordered (after the Office order for reexamination) on or
after October 1, 2005, for both ex parte and inter partes
reexamination proceedings.
Making Pre-Brief
Appeal Conferences More Citizen-Centered
Pre-Brief Appeal Conferences are
another area where we are implementing the President's Management
Agenda mandate that government be citizen-centered (not
bureaucracy-centered) and results-oriented, by eliminating certain
patent processing costs for citizens.
Today, when an applicant wants to
appeal a patent rejection with the Board of Patent Appeals and
Interferences (BPAI), the applicant must file a Notice of Appeal and
an Appeal Brief outlining why the examiner's position is in error.
The next step is an Appeal Conference with the examiner who decided
the claims were not patentable, joined by the examiner's supervisor
and another experienced examiner or supervisor. Only after this
conference does the examiner prepare an Examiner's Answer explaining
why the application is not allowable.
Currently, after the Appeal
Conference, approximately 60 percent of cases are not
forwarded to the BPAI for a decision. A conservative estimate of
costs to applicants for preparing and filing the 60 percent of the
Appeal Briefs that are never forwarded to the BPAI is $30,000,000.
To save applicants at least $30,000,000 annually, the USPTO will
implement a program in the third quarter of FY 2005 that allows
applicants to request an Appeal Conference before preparing
an Appeal Brief.
For a Pre-Appeal Brief Conference, it
is not necessary for the members of the Appeal Conference to review
the full Appeal Brief to determine whether the examiner's action on
that particular application was proper and should proceed to appeal.
If the Appeal Conference determines that the examiner's decision was
not proper, the applicant will be notified that an appeal to the
BPAI is not necessary at this time, thereby saving the applicant the
cost of preparing and filing an Appeal Brief. If the Appeal
Conference determines that examiner's decision was proper, the
applicant will be notified to file an Appeal Brief in order for the
application to go forward to the BPAI for a judicial decision. To
assist in this evaluation, the USPTO has this month (April 2005)
initiated a new pilot program to create a corps of appeal conference
specialists, who will be trained in the way that the BPAI judges
would review an appeal once it reached the Board.
Post-Grant Review
As part of our 21st Century
Strategic Plan, we proposed a legislative initiative – Post-Grant
Review – to address patent quality, as well as the badly needed
patent litigation reform that is being advocated in many quarters.
Post-Grant Review has great support among all major patent interest
groups, including the bar, technology companies, academicians, and
others seeking patent reform. Simply put, “post-grant review” will
give the public another vehicle for reviewing the quality of issued
patents. We believe our proposal promotes innovation by ensuring
that the patent system is fair to all. By “fairness,” we mean it
promotes a patent system where flaws in issued patents can be
quickly and expertly revealed, without exposing a patent holder to
frivolous or even mischievous review and uncertainty. We look
forward to working with the Committee in helping it design the most
effective and fair post-grant review process.
Other Reform
Initiatives
We have increasingly recognized that,
when the USPTO receives 375,000 patent applications a year, the task
of maintaining and improving a sound patent system must be shared by
patent applicants and their representatives, as well as by the USPTO.
One aspect of the Strategic Plan addressed the concept of shared
responsibility through a proposal for mandatory continuing legal
education for registered patent practitioners with respect to laws
affecting practice before the USPTO. We are currently developing the
means for making such education equally available to all
practitioners via the Internet and through Continuing Legal
Education (CLE) providers.
As an agency, we are focusing our
operational improvement initiatives on our examiners and other
employees who are keys to the success of the patent system. We are
using a better training process, and are updating our employees’
skills throughout their careers.
I do not purport to have all the
answers to address all the challenges faced by the patent system.
However, I can assure you that we are reviewing the USPTO’s role as
part of the system, and we will welcome the opportunity to share
what we learn with you and how we believe we can appropriately
address the issue of application quality.
I certainly will not shy away from
focusing on how we can improve processes at the USPTO. As you know,
we have spent the last three years doing just that, and I am
thankful that you passed legislation that will give us many of the
tools we need to make the necessary improvements. I fully appreciate
that you will hold the USPTO agency accountable for addressing
shortcomings and am confident that we will deliver results on issues
of concern.
Over Two Full
Centuries of Partnership With Customers
Our system continues to prove its
strength through the new inventions described in patent applications
we see every day, the growth of investment, and the fact that the
Office receives record numbers of applications each year (i.e.,
375,000 new patent applications last year alone). We encourage new
applications. Unfortunately, many of the applications we are
examining are not new. In fact, an important exacerbating factor
with respect to the tremendous volume of the workload is the amount
of rework cases we see in the form of “continuation” applications.
While there may have been a time where the system could afford
duplication and redundancy, that time has passed.
We have an incredibly dedicated core
of patent examiners and technical support staff. I have met with
hundreds of examiners individually, collectively, in tech center
meetings, at union meetings, at retirement parties, and just walking
the halls. Those who stay and make a career at the USPTO are
dedicated, engaged, and knowledgeable. They not only know their art,
but also are keenly aware of the outside pressures on our office.
Interestingly, the number-one
challenge I hear from examiners is that of problems with incoming
application quality! The comments from our examiners emphasize to
me, possibly more than anything else, how much of a shared
responsibility patent quality is and improvement to the patent
system.
The Impact of “Continuations” on the
USPTO
Last year, more than 100,000 of the
355,000 applications filed with the USPTO were iterations of
applications that had previously been reviewed by an examiner. That
is, more than one-third of the applications received last year were
not, strictly speaking, “new.” Rather, they represented a form of
re-work. This rework is a significant challenge for reaching new
applications, because so-called continuations represent additional
work on subject matter that has already been reviewed in examination
and – in some instances – even issued as a patent. Continuations, or
“re-work,” can take a variety of forms. A “continuation,” per se, is
a second application for the same invention claimed in a prior
nonprovisional application and filed before the original prior
application becomes abandoned or patented. A “divisional
application” is a later-filed application for an independent or
distinct invention, carved out of a pending application and
disclosing and claiming only subject matter disclosed in the earlier
or parent application. An “RCE” (request for continued examination)
is available in an application where prosecution is closed, at the
request of the applicant. Given the ever-increasing workloads we
face, it is necessary and appropriate for all to consider whether
some restrictions should be placed upon so-called “continuation”
practices.
Patent Applications and the Number of
Claims
Patent applicants include, as part of
their application, patent claims that ultimately define the legal
metes and bounds of the protection when a patent is granted. Thanks
to your efforts last year, the USPTO now receives additional funding
to support our examination function through fees based upon the
number of claims presented for examination. Tying increased fees to
increased numbers of claims inserts the right monetary incentives in
the system. What is not immediately evident is that even a
relatively small number of applications containing a large number of
claims present efficiency challenges. Complexity of analysis is
directly related to the number of claims presented, and large
numbers of claims immediately affect our examiners’ ability to
conduct the high-quality examination we all expect from our patent
system. It is not solely a question of time. Large numbers of claims
may involve numerous interactions with possibilities not envisioned
by even the applicant. Accordingly, the burden imposed by such
large-claim applications – even when received in relatively small
numbers -- can impede our ability promptly to examine applications
relating to other inventions. At the same time, we must certainly
recognize the legitimate need for applicants to present large
numbers of claims in some applications.
What we must do is find the right
balance. We must find ways in which inventors can submit large
numbers of claims when needed, while making it feasible for
examiners to effectively analyze a plethora of claims. Currently,
about 7 percent of applications present about 25 percent of the
patent claims we examine. That is, a minority of applicants (7%)
creates more than 25% of the claims-review work. We are considering
the possibility of requiring applicants who file these so-called
“super-sized” applications to help us by identifying the relevant
issues.
Increased Applicant Responsibility
We are also considering additional
rules changes that would require those applicants who place
relatively greater stresses on the system to assist the USPTO with
efficient processing of applications. For example, applications
filed with large numbers of claims represent challenges to timely
processing, particularly for examination. Applications filed with
large numbers of prior art references, without any guidance as to
which references the applicants believes to be most relevant, have
an impact on efficient examination. We believe that the patent
system as a whole is better served where applicants work in
partnership with the USPTO to take responsibility for efficient
processing of applications. We want a patent examination system that
“gets it right” the first time. Concentrating our review on the most
pertinent information relevant to patentability is an efficient
means to “get it right” the first time. For applicants, quick,
accurate focus on relevant prior art means their applications are
properly assessed, and amendments or changes to the patent
application and claims can be suggested with confidence. Ensuring
such a focused examination is a joint responsibility of the examiner
and the applicant. By working to improve the ways that the best,
most relevant information comes before the examiner, we will best
achieve the goal we all share of high-quality patent grants that
have the respect and trust of the entire patent community, both
domestically and internationally.
The USPTO and
Tomorrow
The USPTO is a team of 7,000 people, including scientists,
engineers, and PhDs, many of whom spend their time considering how
we might improve our patent system. A multitude of others outside of
the USPTO also are reflecting upon our system, and are likely to
approach you with suggested changes.
While we have much to be proud about in our system, there is much
talk about whether our patent system should be reformed. Two recent
reports by the Federal Trade Commission and the National Academies
of Sciences call for a variety of patent system reforms. While such
studies have earned enormous attention from the media, it is
important to underscore that much of what they discuss is not new.
In fact, several of the proposals suggested reflect ideas that were
first developed and discussed by the USPTO.
At the USPTO, we have had experts working on patent-reform issues
for decades. We welcome the discussion of many of these initiatives
as part of a legislative package that you may introduce later this
year. We presently are hearing of legislative proposals in three
general categories: operational issues; litigation reform; and
convergence of international laws and best practices. In my view,
each of these discussions must center on how the patent system
encourages innovation, and how well it serves the public at large.
In my capacity as the Under Secretary
of Commerce for Intellectual Property and the Director of the Office
that must examine these applications, I am pleased to work with you
on patent reform on behalf of the Administration. We are grateful
for your support and enactment of the revised fee schedule last
November that will help fund the Plan. Since the bill that passed
was different from the Administration’s original submission, we are
working to ensure that the USPTO’s strategic goals can be met,
consistent with the parameters of the modified fee schedule in place
for two years. We need to work creatively to achieve the gains in
light of the record workload that patent system faces today.
Like you, we are tasked with looking
at patent issues from every angle. We must look at them from the
perspective of the independent inventor, who may be the next Thomas
Edison, to the perspective of a large, successful company that
believes its innovations are being frivolously undermined by
unnecessary legal obstacles. We must look at these proposals from
the perspective of an economic superpower negotiating treaties to
create a better intellectual property system internationally, to the
perspective of the American consumer who may not care about patents
but is affected greatly by the effects of our patent system.
The increasing importance of trade in
IP industries to the world economy has also increased calls for
substantive harmonization and cooperation among intellectual
property offices. At the same time, it has put pressure on the
international organizations concerned with intellectual property. As
we at the USPTO are working internally to improve our systems, we
are also working with our trading partners to ensure that the world
IP system becomes more effective.
Developments in
International Patent Law
A strong U.S. patent system is not
enough for American innovators, whether in established businesses,
independent entrepreneurs and start-ups, or non-profits. While
patent rights are territorial, the opportunities and challenges in
the international arena are incredible, both in the near- and long-
term. Critics have observed that there is growing anti-IP sentiment
internationally – and in some domestic circles. This sentiment has
even, in some instances, spilled into the World Intellectual
Property Organization (WIPO). The simplest patent harmonization
efforts recently have been met with obstruction and procedural
tactics. We must work hard to achieve a consensus at WIPO, and
ideally, we should have every nation agree on intellectual property
reforms. We cannot have a few nations obstructing the process on
reforms that will benefit them and the rest of the world.
The USPTO has been successful in
launching a process to bring together interested international
parties to establish a work plan for progress on substantive patent
law harmonization. In February 2005, we held an inaugural meeting in
the United States, which was attended by 20 nations, the European
Union, and the European Patent Office. This meeting resulted in the
unanimous decision to establish a technical working group for the
express purpose of discussing certain areas of patent law
harmonization. 1
Building on this momentum, subsequent
WIPO-sponsored consultations resulted in a general statement
regarding a suitable work plan for proceeding with patent law
harmonization within WIPO. 2 Continuing work on these
parallel tracks will lead us closer to immediate benefits that will
inure to the patent community and patent offices worldwide. This
dual approach will be encouraged for other IP-related issues as
well.
However, a challenge we face is the
use of Patent Cooperation Treaty (PCT) fees paid to WIPO. At WIPO,
less than $1 out of every $3 goes to the Office of the Patent
Cooperation Treaty (PCT). As a result, the United States and a
handful of other developed nations effectively are the net donors to
the WIPO, while the remaining 174 nations are net receivers. These
net receivers are the beneficiaries of the fees Americans pay, which
do not go to PCT operations.
I am happy to say we were successful
in protecting against further PCT fee increases last year at WIPO.
We staunchly opposed a proposal and then stopped a provision that
would have raised fees another 12.7 percent more than the previous
year’s. This saved U.S. applicants more than $20 million annually.
We must keep in mind that proposals
exist to fundamentally change the WIPO charter and philosophy --
from one that promotes intellectual property and its protection to a
more amorphous charter of “balancing” intellectual property rights.
We have no quarrels with “balance,” -- in fact, we believe our
current system and international norms are properly balanced. But
simply put, this new “balancing act” is a strategy to water down
intellectual property protection, and the U.S. will fight this.
Clearly, our future efforts around the world on IP issues hold even
greater opportunities and challenges as we continue to promote
strong, global IP protection that keeps pace with technological
development.
Conclusion
I take this opportunity to reiterate
to you, the Members of the Subcommittee, our commitment to ensuring
that USPTO’s practices and policies promote the innovation and
dissemination of new technologies. While we work to improve our
system by internal reform of USPTO operations, we realize that
additional measures within the domain of Congress can also make
invaluable contributions.
The overwhelming evidence of the history of the U.S. patent system
suggests that strong intellectual property protection supports,
rather than impedes, innovation. Indeed, for more than 200 years,
our patent system has helped American industry flourish, creating
countless jobs for our citizens. Advanced technologies have been --
and continue to be -- nurtured and developed in our nation to a
degree that is unmatched in the rest of the world. In many
instances, the availability of patent protection has been integral
to these advancements.
In this regard, the USPTO and the Administration look forward to
continuing to work with you and the Members of the Subcommittee as
you develop reform legislation to ensure that the U.S. patent system
remains the envy of the world.
Thank you, Mr. Chairman.
Notes
1 Statement and Participants of the Exploratory Meeting of
Interested Parties Concerning the Future of Substantive Patent Law
Harmonization, held February 3-4, 2005, in Alexandria, Virginia
The Participants of the Exploratory Meeting of Interested Parties
Concerning the Future of Substantive Patent Law Harmonization, held
February 3-4, 2005 in Alexandria, Virginia, wishing to promote and
facilitate progress on certain key issues under consideration in the
World Intellectual Property Organization (WIPO), agree to convene
future meetings to consider:
o substantive patent law harmonization issues, notably the
Trilateral "first package," as developed by the United States Patent
and Trademark Office, the European Patent Office and the Japan
Patent Office and set forth in WIPO Document WO/GA/31/10; and o
issues with regard to intellectual property and development,
including proposals for a WIPO Development Agenda and proposals
relating to genetic resources, with a view to seeking a common basis
for further discussions in WIPO.
* The Participants agree that the following parties will be invited
to participate in the future meetings: all Members of WIPO Group B,
Member States of the European Union, the European Commission, Member
States of the European Patent Organization, and the European Patent
Office. * The Participants further agree to have regular,
intersessional meetings of subgroups to address the issues reference
in Paragraph 1.
Participants were Australia, Belgium, Canada, Czech Republic,
Denmark, Germany, France, Hungary, Ireland, Italy, Japan, Lithuania,
Luxembourg, Netherlands, Portugal, Romania, Slovak Republic, Spain,
Sweden, Switzerland, United Kingdom, and the United States.
2 Statement and Participants of Informal Consultations in
Casablanca on February 16, 2005
Statement Adopted at the End of Informal Consultations in Casablanca
on February 16, 2005 1. Following the mandate given to him by the
WIPO General Assembly in September 2004, the Director General of
WIPO convened informal consultations concerning future sessions of
the Standing Committee of Patents (SCP) in Casablanca, Morocco, on
February 16, 2005.
The consultations were attended by delegates from Brazil, Chile,
China, France, Germany, India, Italy, Japan, Malaysia, Mexico,
Morocco, Russian Federation, Switzerland, United Kingdom, United
States of America, African Regional Industrial Property Organization
(ARIPO), Eurasian Patent Office (EAPO), European Patent Office (EPO),
African Intellectual Property Organization (OAPI) and the European
Union. Dr. R.A. Mashelkar, Director General of the Council of
Scientific and Industrial Research (CSIR) and Secretary of the
Department of Scientific and Industrial Research in India, chaired
the consultations. 2. The consultations were held in a positive
spirit. The delegates strongly endorsed the importance of
multilateralism, in particular, in WIPO. The consultations resulted
in the development of a proposed action plan for the near future.
3. There was broad agreement that the objectives of the future work
program of the SCP should be to address issues with a view to
improving the quality of granted patents, thus avoiding unwarranted
encroachments on the public domain, and to reducing unnecessary
duplication of work among Patent Offices, which should produce
benefits by making the patent system more accessible and
cost-effective. 4. In order to achieve these objectives, the meeting
agreed that the following six issues should be addressed in an
accelerated manner within WIPO with a view to progressive
development and codification of international intellectual property
law: prior art, grace period, novelty, inventive step, sufficiency
of disclosure and genetic resources. These issues should be
addressed in parallel, accelerated processes, the first four issues
(prior art, grace period, novelty and inventive step) in the SCP and
the other two issues (sufficiency of disclosure and genetic
resources) in the Intergovernmental Committee on Intellectual
Property and Genetic Resources, Traditional Knowledge and Folklore (IGC).
Each of the SCP and the IGC should agree on a timetable and report
progress on the development of their discussions of the issues to
the other. 5. The meeting underlined the importance of the continued
active pursuit of discussions and work within WIPO on issues related
to development and intellectual property so that a robust, effective
and actionable WIPO Development Agenda could emerge. 6. The meeting
recommended to the Director General of WIPO (a) to call on Member
States for proposals on the International Development Agenda for
discussion at the April 2005 session of the Intersessional
Intergovernmental Meeting (IIM), (b) to convene the next session of
the SCP in May 2005 to consider and endorse the objectives and work
program set out above, (c) to convene the next session of the IGC in
June 2005 to consider and endorse the objectives and work program
set out above, and (d) to transmit the decisions of the above
meetings to the General Assembly in September 2005 for its
consideration, including a time frame for the conclusion of these
issues within WIPO. 7. The meeting expressed its warm thanks and
gratitude to the authorities of the Kingdom of Morocco for hosting
the consultations. The delegate of Brazil did not associate himself
with the foregoing text.
