US. Trademark Association 2 To educate business, the press and the public to the importance of trademarks in both our national and international economies; • To fulfill an active leadership role in matters of public policy concerning trademarks; • To provide a comprehensive range of services to its members that includes keeping them well-informed on current trademark developments and in touch with professional colleagues. The active pursuit of these goals is vital to promoting the interests of consumers and encouraging free and effective competition. USTA POSITION ON FISCAL YEAR 1992 U.S. PATENT AND TRADEMARK USTA believes that the current reauthorization law enacted in late 1991 presents an acceptable framework for the USPTO to discharge the original statutory objectives of the Lanham Act; satisfy the strictures of the 1988 Trademark Law Revision Act provisions, particularly those regarding ITU filings; increase its automation capabilities and efficiencies; and begin preliminary preparation for the possible U.S. adherence to the Madrid Protocol. Nevertheless, we believe that in this tight budgetary period, the USPTO will need to discover additional means of achieving its goal of running an efficient and responsive Trademark Office. Of particular importance to the trademark community is the Congressional confirmation of the statutory policy mandating the use of trademark user-fees and reserve revenues exclusively for trademark-related activities. Present trademark budget procedures were established during a period, Fiscal Years 1983-1990, when the Trademark Office was the sole USPTO component which was 100% user-fee funded. Since Trademark Office revenues continue to come from private monies rather than taxpayer subsidies, use of trademark userfees and reserve funds for non-trademark activities would deprive Trademark Office users of resources at a time when, due to current USPTO policies, practices and projected needs, every dollar received and spent is crucial to the continued viability of Trademark Office operations. CURRENT STATE OF THE TRADEMARK OFFICE In Fiscal Year 1991, the Trademark Office received in excess of 120,000 registration applications. Although this number is down from the 127,294 received in Fiscal Year 1990 and lower than initially expected in the last fiscal year, it reflects a permanent increase in registration application filings under the TLRA's ITU provisions which became effective in Fiscal Year 1990. Fiscal Year 1991 resources (including the reserve fund) generated by fees for these and other filings totaled $49,748,000 while expenses were $39,978,000. However, US. Trademark Association 3 Fiscal Year 1991 user-fees produced only slightly more than $33,000,000 in Trademark Simply raising fees to cover either short or long term costs will eventually work against the central purpose of the Trademark Office. In 1982, when Congress transferred fee-setting authority to the USPTO, the House Judiciary Committee stated: It is expected that the Commissioner will set the fees in a way that the filing fee will be kept as low as possible to foster use of the Federal registration system. (House Report 97-542). The Senate Judiciary Committee agreed, emphasizing this policy during its 1986 deliberations of USPTO reauthorization legislation which originated in the House (HR 2434). The Committee stated that "...the Office's public mandate is more important than cost recovery." USTA does not oppose those fees or fee increases that bear a reasonable correlation to trademark functions and are both consistent with and necessary to fulfill the Office's mandate. However, the Association believes that increasing fees as a quick and easy solution will instead subvert the intent of the Lanham Act. To merely augment staff or increase automation capacity without first investigating constructive alternatives will ultimately transform a system meant to be accessible to all to an unaffordable luxury available to only a few. USTA urges this Committee and the USPTO to review traditional policies and practices, some which have gone unchallenged and unchanged, since the founding of the agency. For example, although the Trademark Office must serve as an information repository, is it efficient for the Office to maintain cumbersome paper search files in an age of electronic communications and data collection? As a part of agency which receives no taxpayer subsidies, is it appropriate that it continue to pay the General Services Administration ("GSA") a fee for building services that the Office may be able to do without GSA assistance? As a major part of that review, thought should be given to increasing the responsibility of the Assistant Commissioner for Trademarks for determining the budget of those USPTO functions which relate directly to the quality of the Trademark Office's service to both the trademark community and the general public. Making the Trademark Office accountable for proper budgetary planning of trademark "off-line" functions would make it more effective in meeting the intent of the Lanham Act. It would also allow the Office greater discretion to undertake appropriate policy and procedural changes in order to keep the Trademark Register fully accessible to all. INTENT-TO-USE Upon a good faith declaration of a bona fide intent to begin using a mark, an ITU applicant may establish constructive use of a trademark for a specific period in anticipation of its US. Trademark Association actual use by filing an ITU application with the USPTO. Since ITU filings were first accepted in Fiscal Year 1990, they have constituted over 40% of all initial registration applications. Thus far, in the current fiscal year, they are approaching 48% of all registration applications accepted by the agency. Compliance with TLRA's ITU provisions results in issuance of a Notice of Allowance ("NOA"). Nearly 27,000 NOA's were issued in Fiscal Year 1991, and in Fiscal year 1992, as of February 1, 9,965 NOAs have already been granted. Not surprisingly, since beginning ITU processing, the USPTO goal of first action on new applications (both standard and ITU) within three months has not been met. In February 1, 1991, the average time to first action was 5.8 months. However, precisely one year later, because of a now "ITU smart" Examining Corps, the initial response period has fallen to 3.4 months. USTA applauds the USPTO's ability to approach its goal. The speedy but careful melding of ITU policies and procedures into traditional Trademark Office functions has, in major part, kept the ITU system from being abused. Consequently, there has been little, if any, lessening of competition in the marketplace or interference with the flow of commerce. THE MADRID PROTOCOL The Madrid Protocol, negotiated in 1989, is a free-standing treaty which creates multinational trademark protection through international registration rights established under a centralized system. It enables trademark owners to benefit from the Paris Convention priority established by their national applications without instituting separate national filings or retaining local counsel. The Protocol is administered by the World Intellectual Property Association ("WIPO") in Geneva, Switzerland. However, if Congress ratifies the Protocol, the Trademark Office would become responsible for its implementation in this country. Predicting the effect of Protocol adherence on filings with the Trademark Office is virtually impossible. There is no basis for comparison. Nevertheless, because the U.S. is a major commercial market, its adherence to the Protocol could create a significant increase in application filings. A sizable boost in the number of filings could also produce a dramatic increase in the pendency time for applications. Moreover, it is possible that examination priority would have to be given to Protocol filers: an unpalatable prospect to both U.S. trademark owners and policy makers. Additionally, since the filing date of a federal application constitutes nationwide constructive use (contingent on the issuance of the application), the USPTO may need to take appropriate measures to ensure that accurate, up-to-date trademark searches will US. Trademark Association 5 If the U.S. joins the Protocol, the Trademark Office may well need to reassess and perhaps restructure its resources in order to ensure that the Protocol becomes an enhancement of U.S. trademark law and practice. Finally, the Office must share that assessment and confer with users in order to ensure significant changes in its policies and procedures do not carry negative consequences. TRADEMARK OFFICE AUTOMATION It is the automation component which provides the Trademark Office the most obvious means to enhance its work product; its value and necessity to examination staff increases daily. However, as a user-funded agency, the USPTO is restricted in the financial resources it can extend to its automation aims. USTA remains committed to ensuring that any USPTO automation initiatives relating to federal trademark activities be clearly justified in fostering improved service to Trademark Office users. Trademark Office automation activities involve several systems: T-Search (and its replacement X-Search), used by the Examination Corps; TRAM II, which provides trademark status information for registrations and applications; and CD-ROM technology, to make registration and application status information available to the general public in the Trademark Public Search and the Patent and Trademark Depository Libraries across the nation. All of these automation endeavors play a key role in enabling the Trademark Office to respond, in a timely and effective manner, to current and anticipated Trademark Office activities. Presently, the primary focus is on the implementation of the X-Search system, the successor to the present T-Search system. X-Search's eventual use is scheduled in four phases. Phase I (Version 1.0 of X-Search) is directed, in part, to converting record images from a proprietary format and software to a standard CCITT Group IV format that will be usable by off-the-shelf image processing software. This change should result in greater efficiency by the Examination Corps as well as placing the Trademark Office on the international system used by WIPO. Without the benefits of Version 1.0, the automation resources presently available to the public would, within the relatively near future, have to be reduced so as not to impede Trademark Office examiners in the normal course of their duties. We understand that this work is nearing completion. Phase II of X-Search (Version 1.1) is principally concerned with replacing ORBIT, the present software search engine which gives the automation system its specific capabilities. The ORBIT engine, developed over 25 years ago, has become as much of a hindrance as a help in the prosecution of trademarks. For example, it is limited in the number of terminals that it can serve concurrently. This limitation means that the system starts to "degrade" if it must respond to more than 25 users simultaneously. Additionally, its inability to handle more than 60 users at any one time renders it inadequate for an Examination Corps of 180 professionals. Versions 1.0 and 1.1 are to be in place by the spring and fall of 1993, respectively. The necessary costs of implementing these two phases is expected to total slightly less than $1.5 US. Trademark Association 6 million. This figure includes the replacement of ORBIT, current work stations, communications software and a component computer for images. Providing work stations so that every examiner has access to a terminal at his or her desk could add an additional $780,000. Projected Fiscal Year 1992 outlays total approximately $510,000 of the possible $2,000,000 - $2,500,000 anticipated overall X-Search expenditures (excluding costs related to in-house personnel). Because of the obvious advantages of X-Search, USTA is concerned that no financial or administrative circumstances impede the system's implementation. Phases III and IV (Version 2.0), originally with a completion goal of late summer 1996, was to enhance X-Search by emphasizing the utilization of advanced search techniques to attain still greater efficiencies. However, the Association has been informed, that at this time, funding for Version 2.0 has been cancelled. USTA recognizes the importance of acquiring a highly efficient automation system for the Trademark Office. The Association is encouraged that the estimated total of $2,000,000 to $2,500,000 compare favorably with the $10,000,000 (in 1984 dollars) spent to effect the present T-Search system. From its beginning, T-Search has proven unsatisfactory in meeting the needs of the Trademark Office and has become an immense disappointment to the trademark community as well as the general public. Nevertheless, USTA wants to ensure that X-Search expenditures do not become prohibitive and show an indisputable relationship to the present and future needs of the trademark community. To this end, the Association is pleased that the Assistant Commissioner for Trademarks has solicited the comments of the trademark community and that the Commissioner's Office has acceded to our request for regular and frequent consultation regarding X-Search developments. We have had several mutually beneficial exchanges and more are planned. In order to prevent another costly mistake, it is essential that the USPTO remain responsive by sharing any tentative revisions in its plans and scheduling for the new system. Such disclosures must not be made after the fact if the Office is to foster the confidence and patronage of the trademark community as it works to develop a successful system from a limited budget. SUMMARY A fully funded Trademark Office presents significant and continuing challenges. Nonetheless, the Office has shown marked improvement under its current user-fee structure now in effect for a decade. The Association is aware that the Office is more than just a business; in fulfilling its public mission, it has an integral role in national and international commerce. Ironically, however, in a period in which there is no room for financial error, the Commissioner's Office must encourage the Trademark Office to think more like a business by providing it every available means for it to recognize, gauge and address the needs of its constituency. In turn, the Trademark Office must continue to seek new channels to strengthen its ties with its users. USTA is heartened by the increasingly open and candid dialogue with USPTO officials. Nonetheless, we realize that the current challenges of the Trademark Office demand that those exchanges take place on a long term basis for much |