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Senator DECONCINI. Dr. Stillman, do you concur that it is very possible that the technology has so changed in a handful of years that this kind of savings is probably there?

Ms. STILLMAN. I really can't address the numbers, but 10 years in current technology is a lifetime. Enormous changes have occurred. I can't correlate it to specific numbers at this point, but we will try to do that for you in our work.

Senator DECONCINI. I don't want to give you a lot of work, I would just like a verification as to whether it has really come down from $45,000 to $4,000 or $5,000.

I again want to thank you very much for the time you have put into this effort. You are very helpful to this committee and to the PTO as well. I don't want to rush you, but I hope you move as quickly as you can. I appreciate your commitment to do that.

MS. HECKER. Thank you very much, Mr. Chairman.

Senator DECONCINI. Next we will have a panel of intellectual property community individuals: Mr. G. Jerry Shaw, general counsel, Senior Executives Association, Washington, DC; Mr. Donald W. Banner, president, Intellectual Property Owners, Inc., Washington, DC; Mr. John J. Cummins, president, U.S. Trademark Association, New York, NY; and Mr. Robert A. Armitage, second vice president, American Intellectual Property Law Association, Washington, DC. Thank you, gentlemen, for being with us today and waiting for your time here. Your testimony is extremely important to us.

We will start with Mr. Shaw. I can assure you that your full statements will be printed in the record. We would ask that you summarize them in 5 minutes of less.

Mr. Shaw.


Mr. SHAW. Thank you, Mr. Chairman.

I am Jerry Shaw, general counsel to the Senior Executives Association. SEA is a professional association which represents the interests of career members of the senior executive service and equivalent pay systems.

Since passage of the Federal Employees Pay Comparability Act of 1990, SEA has monitored how pay reform is being implemented for senior level and senior technical employees. The Patent Office examiners-in-chief were affected by FEPCA since section 3(c) referred to the pay rate GS-17, which was abolished by FEPCA, and replaced by the new higher than a GS-15 pay range for senior level/senior technical employees.

The performance appraisal plans of examiners-in-chief indicate that the independence of the examiners has been recognized by the Patent Office. For example, item one of the current performance appraisal plan for examiners-in-chief states,

As required by 35 USC section 7, an examiner in chief demonstrates competent legal knowledge and scientific ability in the exercise of independent judgment in all matters before him or her.

Prior to FEPCA, the examiners-in-chief were paid at the annual rate not in excess of the rate for GS-17. Due to the cap in pay on GS-17, all examiners-in-chief were therefore paid at the same rate. When that cap was lifted in January 1991, the Patent Office as

signed examiners-in-chief to one of five steps within the GS-17 pay grade.

Subsequently, the pay plan created by the Department of Commerce and the Patent Office in May 1991 to implement the Pay Comparability Act significantly changed how the pay for each examiner in chief is determined. Instead of the five steps within GS17, the new pay plan has seven steps and advancement through those steps is based solely on examiners-in-chief performance appraisals. For example, it takes a fully successful performance rating in 2 years of an examiner-in-chief to advance one step. And for the top two steps of the pay range, examiners-in-chief must receive outstanding performance ratings for 2 years, and so forth.

In 1986, for the first time the Department of Commerce and the PTO imposed opinion writing quotas on the examiners-in-chief. Even though quality standards are mentioned in the plan, a performance evaluation under this plan apparently amounts to counting the number of opinions written by an examiner-in-chief during a rating period and comparing that number with the quota set forth in the standard.

Since certain performance ratings must be received in order to advance to the pay steps in a quicker fashion or to achieve steps six or seven, and subjective judgment is used in crediting mitigating factors other than a mere count of opinions written, the management officials have great latitude in determining the performance rating, and consequently the pay level, for an individual examiner-in-chief will be.

In order to determine how the pay and performance plans for the examiners-in-chief affect their ability to judge the matters before them, the subcommittee on March 30 asked SEA to survey the examiners-in-chief. Mr. Chairman, 36 of the 43 examiners-in-chief returned their surveys, or an 84 percent return rate.

The survey shows that the power the Chairman and Vice Chairman of the Patent Appeals Board-who are both SES employees and not senior level employees have over each examiners' pay and performance appraisal affects the ability of the examiners-in-chief to judge the issues before them. Since the examiners-in-chief are rated by these officials, the present system creates tremendous incentives for the individual examiners-in-chief to vote the way they perceive the Chairman and/or Vice Chairman desires instead of the way their independent judgment would demand. The survey results indicate that such behavior has occurred on individual cases.

Mr. Chairman, 92 percent of the examiners-in-chief believe that the quota system influences the appeal process and affects the Board's decisions. The system pushes examiners-in-chief to decide cases in order to meet their opinion writing quota for that month or fiscal year instead of working to reach the best decision.

The effects of the quota system on the decisionmaking process are even more telling with regard to examiners-in-chief who serve on the panel but who do not write the opinion. Since these individuals do not receive any credit for serving as a panel member, the quota system mandates that if they are not writing the decision, time is not well spent in reaching a decision on that case. Rather, their time should be devoted to a case from which credit will be received.

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A Board decision the examiners-in-chief believe is the final agency determination on the issues involved and can only be appealed to the courts. However, cases which involve those areas that are considered technical, legal, and/or of political importance are being intercepted and decided along predetermined lines according to the survey results.

A recent exchange of memos between 33 of the Board members and former Commissioner Manbeck underscores this issue. In those memos, the Board members complained of undue influences by the management officials in their decisionmaking processes. Commissioner Manbeck responded that the Board had no independent authority and that the Commissioner is free to manipulate the Board by designating any examiner he chooses to be on a panel, by disregarding a panel's decision, by appointing a new panel or adding panel members in order to ensure that the panel reaches a decision he has predetermined, and by disregarding the technical expertise required to judge a particular appeal and appointing an examinersin-chief unqualified in that particular area if he chooses.

The survey results indicate that 44 percent of the examiners have served on panels which reached a decision only to have the panel subsequently expanded.

The Commissioner recently undesignated a panel that reached and signed but did not mail a decision, replacing that panel with one that exclusively contained management officials. Since the signed but not mailed decision was apparently deemed incorrect by the Commissioner, it was discarded, and the new panel reached the opposite decision. The panel members who were originally designated to decide the case were not retained on the second panel, and thus were unable to author a dissenting opinion.

These interpretations of the Commissioner's authority to designate panels should receive attention so that a determination can be made as to whether this is how Congress intended the appeals process in the PTO to be conducted. In so doing, it must be kept in mind that the Board is reviewing the decision of the Commissioner's designee, the patent examiner, to deny an applicant a patent on his or her invention. Thus, when the Commissioner sits on a panel, as he is entitled under the statute, he is in effect reviewing his own delegate's decision.

The survey raises another issue concerning the influence of the solicitor of the PTO as arbiter of which Board decisions which are appealed to the courts are correctly decided and which decisions are to be published. The solicitor apparently sometimes challenges the Board's decision or a panel's decision as they are pending before the court and requires that they be further justified.

Board members believe this usurps their decisionmaking authority. The fact that appellants are excluded from these ex parte contacts raises further issues that should receive consideration. Our proposals are as follows:

If Congress intends the position of examiner in chief to be one requiring some judicial independence as the examiners-in-chief believe has been the case for many, many years-then changes to the pay and performance evaluation procedures of examiners-inchief should be made. The pay for examiners-in-chief should be fixed by statute so that the independent judgment of these quasi

judicial officials will be ensured. The manner in which the pay for members of the Board of Contract Appeals was adjusted and set in the FEPCA provides an appropriate model for this purpose.

Prior to FEPCA, the members of the Board of Contract Appeals were paid at an annual rate of GS-16. FEPCA substituted 94 percent of executive level IV as the new pay level. Mr. Chairman, 35 U.S.C. section 3(c) should be changed to set the pay for examinersin-chief at 96 percent of executive level IV. This amount reflects the fact that the examiners-in-chief were paid at an annual rate of GS-17, higher than the Board of Contract Appeals, prior to FEPCA and the statutory requirement that they have scientific ability.

The subcommittee should review the statutory status of the Chairman and Vice Chairman. One solution may be to amend 35 U.S.C. section 7(a) to provide that two of the examiners-in-chief be designated to serve respectively as the Chairman and Vice Chairman. Such an amendment would make clear that these individuals are examiners-in-chief with additional administrative duties rather than management officials. If this suggestion is adopted, 35 U.S.C. section 3 should be amended to set fixed statutory pay rates for these positions.

If Congress determines that examiners-in-chief positions are quasi-judicial positions with decisional independence, then inclusion of the examiners-in-chief in the performance appraisal system under 5 U.S.C. sections 4301 and 4302 is inappropriate. Appraising the quality of decisions by simply counting numbers clearly has a chilling effect on the independent judgment of quasi-judicial officials. The imposition of opinion writing quotas is especially unsuitable when decisions are reached by panels of at least three examiners-in-chief.

We suggest that 5 U.S.C. section 4301 be amended so that part (2)(D) lists examiners-in-chief appointed under 35 U.S.C. section 7 as not being included in the definition of employee subject to the performance appraisal requirements.

The issue before this subcommittee and Congress is clearly identified by the April exchange of memos between the examiners-inchief and the Commissioner. Does Congress intend examiners-inchief to exercise independent decisionmaking authority of a quasijudicial nature, or does it intend that they serve only as agents of the Commissioner to review decisions of patent examiners and ensure that such decisions are in line with the Commissioner's wishes and current policy?

If the answer is judicial independence, then the law needs to be amended to allow the free exercise of judgment by examiners-inchief.

Thank you, Mr. Chairman. I would be happy to answer any questions.

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In preparation for the oversight hearing on the Patent and Trademark Office, the Subcommittee on Patents requested the Senior Executives Association to survey the Examiners-in-Chief regarding their pay, the relationship of their pay to quotas contained in performance standards, and their overall decisionmaking responsibilities. The survey was mailed to all 43 Examiners-in-Chief and was returned by 36 Examiners (84%).

The primary issue addressed by the survey questions is the ability of the Examiners-in-Chief to independently decide appeals brought to them by applicants denied patents. Since the survey was completed, thirty-three Examiners-in-Chief exchanged memos with Commissioner Mansbeck regarding the independence of the Board of Patent Appeals and Interferences. The Board members complained of undue influences from the management officials into the Board's decision-making process. Commissioner Manbeck responded that the Board had no independent authority and that the Commissioner is free to manipulate the Board by designating any Examiner to be on a panel, by disregarding a panel's decision, by appointing a new panel and by disregarding the technical expertise necessary to judge a particular appeal.




The survey results highlight conflicting views of the Board:

92% of the Examiners believe that the existing opinion
writing quota system influences the judicial process and
adversely affects the Board's decisions.

70% of the Examiners say that the fact that the Chairman and
Vice Chairman are responsible for their performance
appraisals and their pay affect Examiners' independent

64% of the Examiners have been told directly or indirectly
by management officials how a case should be decided.

44% of the Examiners have served on panels which reached
decisions, only to have the panel expanded.

86% of the Examiners believe that the quotas cause members
of a panel not responsible for writing the opinion to give
less than full consideration to the issues in the case.
81% of the Examiners have felt constrained not to prepare a
dissent or concurrence because the quota gives no credit for
such opinions.

The issue confronting Congress is whether Congress intends Examiners-in-Chief to exercise independent decision-making authority or does it intend that they serve only as agents of the Commissioner and issue decisions in line with the Commissioner's wishes? If Congress intended the Board to exercise independent authority, SEA has suggestions to ensure such independence.

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