OVERSIGHT OF THE PATENT AND TRADEMARK OFFICE THURSDAY, MAY 12, 1992 U.S. SENATE, COMMITTEE ON THE JUDICIARY, SUBCOMMITTEE ON PATENTS, COPYRIGHTS AND TRADEMARKS, Washington, DC. The committee met, pursuant to notice, at 10:07 a.m., in room 226, Dirksen Senate Office Building, Hon. Dennis DeConcini (chairman of the subcommittee) presiding. Also present: Senator Grassley. OPENING STATEMENT OF HON. DENNIS DeCONCINI, A U.S. SENATOR FROM THE STATE OF ARIZONA Senator DECONCINI. The Subcommittee on Patents, Copyrights and Trademarks will come to order. This morning we will do some oversight. I would like to thank the witnesses for being here today at this oversight hearing on PTO. It is one of the more important duties of this subcommittee. PTO has an annual budget of approximately $420 million, almost all of which is generated through user fees. Maintaining active oversight of this Office is needed to ensure that these fees are properly used. The issuance of patents and trademarks is of vital importance to the protection of intellectual property rights. We must support and protect the inventors of this country who keep America on the cutting edge of technology in the international marketplace. The subcommittee is pleased that Mr. Comer, Acting Commissioner of PTO, is here today. Last year considerable time and effort was spent to craft an acceptable compromise on the authorization bill with the PTO and the patent and trademark communities. We are hopeful that the fiscal year 1993 authorization bill will generate much less controversy and pass much more quickly. Several concerns were raised last year by this subcommittee and the PTO users about the significant increase in fees requested for the Office by the administration. As you all know, the 1990 Budget Reconciliation Act required the PTO to become completely user fee funded, except for some $3 million in public money. This required imposing a 69-percent surcharge on patent fees, increasing the cost of filing a patent from $370 to $630. Last year's compromise bill provided total budget authority for the PTO in fiscal year 1992 of $420 million, a $68.5 million increase over fiscal year 1991. This represented a significant increase in budget authority and should provide more than enough funding (1) for the PTO to continue its present service. In light of the 69-percent surcharge, this was a most generous increase. Public funding for the PTO is absolutely necessary. It is unfair for the PTO user to be forced to pay the costs for all functions of the Office, especially those that involve policy and international affairs. This Office is just too important in my opinion to the U.S. competitive position for it not to be supported with Federal funds. I continue to urge the administration to support public funding for this Office. I am disappointed, quite frankly, that the Office doesn't do more to encourage the administration to support Federal funding. Maybe they do, but they certainly have little or no effect. It is discouraging to see the Federal budget move away from things that promote U.S. technology and inventiveness. I recently received the administration's proposal for fiscal years 1993 through 1995. I am glad to see that the Office has not requested any fee increases above inflation. However, I am still concerned about a 3-year authorization for the Office at this time. The General Accounting Office has been conducting a thorough review of the automated patent system. I look forward to hearing about the status of their efforts. APS has been the subject of much criticism over the years. The subcommittee has an obligation to keep a close watch on the progress and costs of this system. We will also hear today from representatives of both the patent and trademark communities, who I understand are interested in discussing the possibility of PTO becoming a public corporation. In addition, an association which represents the examiners-in-chief will discuss their concerns about the appeals process at the PTO. I have served as subcommittee chairman for over 5 years now. The national and international consequences of strong and enforceable intellectual property rights are of paramount importance to this country and to me. For this and many other reasons, I believe strong oversight by the Congress of both the operations of PTO and our international negotiations on intellectual property is essential. At this point I would like to submit Senator Grassley's statement. PREPARED STATEMENT OF SENATOR CHARLES E. GRASSLEY I look forward this morning to hearing about the progress of PTO's automation efforts. I am especially interested in whether any progress has been made in the effort to make the computerized patent information available to the public. Public dissemination of patent information is an important part of PTO's mission, although it is often treated as an afterthought relative to the Office's primary function of issuing patents. The library of patents that is now encoded in computer-readable form is a valuable resource which could be tapped by our research and development community, if only it were available to them. We included in last year's authorization language creating a pilot project to demonstrate the usefulness of CD-ROM technology as a medium for public dissemination of patent information. As I understand it, this project is moving along very slowly, and I am anxious to hear about PTO's plans for making the demonstration project effective and useful. Senator DECONCINI. I want to thank all the witnesses and inform them that their full statements will be put into the record. We have asked them to summarize them in 5 minutes, if they would. We will begin with Mr. Comer, the Acting Commissioner of the U.S. Patent and Trademark Office. Mr. Comer, I want the record to show that I think you have conducted yourself in a very distinguished way as the Deputy Commissioner under Mr. Manbeck. I think you have done a good job. You may proceed. STATEMENT OF DOUGLAS B. COMER, ACTING COMMISSIONER, U.S. PATENT AND TRADEMARK OFFICE, WASHINGTON, DC, ACCOMPANIED BY BRADFORD R. HUTHER, ASSISTANT COMMISSIONER FOR FINANCE AND PLANNING Mr. COMER. Thank you, Mr. Chairman. I appreciate the opportunity to appear today to review the programs at the Patent and Trademark Office, our past performance, our future expectations, and specifically our authorization request. The gentleman sitting to my left needs no introduction, but for the record, he is Mr. Bradford Huther, our Assistant Commissioner for Finance and Planning. I have asked him to join me at the table today with the chairman's permission. Senator DECONCINI. We welcome him. Mr. COMER. As is routine for witnesses appearing before the committee, I have a lengthy prepared statement to be included for the record. At the outset, I would like to thank Harry F. Manbeck, Jr., for 2 years of outstanding leadership at the PTO. Commissioner Manbeck handled his challengers with skill. He will be missed by all the employees in the Office. We wish him well in his new endeavors in the private sector. When we came before this committee in 1991 seeing authorization of our fiscal year 1992 program, we came with the desire to maintain a first-class operation. The priorities we set before you then are the same that we have today: Maintaining current services in the face of ever-escalating costs; maintaining our world leadership position and acting upon pending patent and trademark applications in a reasonable period of time; moving steadily forward with the automation of the Patent Office's examining and administrative functions; and enhancing the quality of the work product of the Agency through a variety of measures that would strengthen the training of the examiners and improve the tools available to them. We have attempted to fulfill as much of this program as possible with the funds we were provided. In the inflation and workload category, fortunately the costs due to inflation and workload were slightly less than we expected. We experienced some reduction in the anticipated rate of increase in patent applications, although the number was up by about 5 percent. We implemented a hiring freeze in both patent and trademark cost centers as a result of the budget restraints that came about as a result of the bill last year. For that reason, patent pendency will slip to 19 months from the current standard of 18 months. Although trademark examining resources have been strained by the processing of the intent-to-use bulge of cases, we will reach 13month trademark pendency by the end of fiscal year 1993. We are already on track with regard to our first office action goal of 3 months. In the automation area, we have scaled back our efforts to complete and deploy APS to accommodate the reduction in funds, but we are fulfilling our commitment to test and deploy APS to examiners and the public by 1993. In the quality improvements area, we have instituted many of the quality improvements we proposed last year, but we have had to reduce the scope of improvements in a number of areas. For fiscal year 1993 we propose basically to continue the program this committee authorized last year. The program level we are requesting is $486 million, an increase of approximately $66 million. Most of the increases are necessary to underwrite the cost of inflation and work load to maintain the current level of services. Fee increases, as you have noted, Mr. Chairman, will be held to the increases in the Consumer Price Index as authorized in last year's legislation. We are only requesting a small increase, about $18 million, which is less than 4 percent of our total program, to continue our current deployment program and automation and to fund necessary quality improvements. I have brought with me two charts for your assistance in looking at the budget numbers. The chart on my right elucidates the dollar figures that were actual and planned in fiscal year 1992 and what we have requested in fiscal year 1993. The chart on my left demonstrates in graphic form that the bulk of the resources we are requesting will be used to maintain current services. I would now like to discuss the automation program, which is of legitimate and continuing interest to the committee. Since December 1982, we have embarked on a massive effort to fully automate the patent and trademark examining functions. It is natural that this effort has been one of our most studied and contentious initiatives in light of the cost it entails. I would like to recap some of the history to place the current debate in perspective. Our first automation plan was forwarded to the Congress in 1982. In 1984 the automated patent system basic development contract was awarded to Planning Research Corp. Because of public concerns about cost and program direction, GAO initiated a review of the program in 1986. We implemented several of their recommendations, one of which was to use outside consultants to analyze the system design and PTO's management of the project. The Department brought in the National Bureau of Standards and the Industry Review Advisory Committee, composed of outside private sector automation experts, which exhaustively surveyed the status of the project and made recommendations for improvements. There were three key recommendations. They recommended that the PTO reorganize management of the program, that we modify the system architecture design, and that we adopt state-of-the-art life cycle analysis methodology. The PTO adopted these recommendations, among others. In 1990, the Industry Review Advisory Committee reviewed the PTO's implementation of its recommendations and reported positively on its findings. After a decade of development and testing and 2.5 years of using the APS text and image systems in production line mode, we are confident that the APS is a success and that it is ready to be de |